If a taxpayer regularly makes real estate loans from their personal accounts, they would be entitled to a bad debt deduction for loans that are not repaid. But what if they venture beyond real estate loans and make a single non-real estate loan? If the non-real estate loan goes bad, can they deduct the bad… Continue reading Bad Debt Deduction for Real Estate Lender for Non-Real Estate Loan
Tax Articles
Court Addresses Tax Losses from Short-Term Rentals
Short-term rental properties are more popular than ever. Online services like Airbnb have made this possible. But how are tax losses from short-term rentals handled? Can the taxpayer use the rental losses to offset their non-rental income for tax purposes? The court addresses one aspect of these rules in Eger v. United States, 18-cv-00199-DMR (N.D.… Continue reading Court Addresses Tax Losses from Short-Term Rentals
Court’s Take on How to Avoid the Interest Expense Limitation
Interest one pays is generally deductible for income tax purposes. For real estate owners who borrow against the value of their properties, the interest expense deduction is often one of their largest tax deductions. This tax deduction can be limited. The court in Lipnick v. Commissioner, 153 T.C. 1 highlights how one might avoid this… Continue reading Court’s Take on How to Avoid the Interest Expense Limitation
The Importance of Accounting for C Corporation Expenses
It is important to keep accurate books and records. Accurate books and records can result in significant tax savings. This is particularly true for entrepreneurs who own more than one business. When one or more of these businesses are taxed as a C corporation, the stakes can be even higher. The Nzedu v. Commissioner, T.C.… Continue reading The Importance of Accounting for C Corporation Expenses
IRS & the Burden to Prove Constructive Dividends
When a C corporation pays expenses for its shareholder, the payment can be subject to income tax for the shareholder as a constructive dividend. One defense is that the expenses for the C corporation were legitimate. Does the taxpayer have to prove the amount of the expenses or does the IRS? The Combs v. Commissioner,… Continue reading IRS & the Burden to Prove Constructive Dividends
Is a Taxpayer Liable for Interest if the IRS Delays an Audit?
Can the IRS fail to audit a taxpayer for several years and then, once it actually opens the audit, drag its feet for years and then charge the taxpayer interest retroactively back to the date the tax return was filed? What if that period of time happens to be, say, fourteen years? The court considers… Continue reading Is a Taxpayer Liable for Interest if the IRS Delays an Audit?
Reasonable Cause: Proving Reliance on a Tax Advisor
If you hire a competent tax advisor and end up having a late filed return, you may be able to avoid penalties for the late filing. But this is a defense. It is something that you, the taxpayer, have to prove. So how does a taxpayer prove that they relied on a tax advsior? The… Continue reading Reasonable Cause: Proving Reliance on a Tax Advisor
Is Reliance on a CPA Sufficient for a Late Filed Tax Form?
The IRS often turns a deaf ear to taxpayers who miss a filing deadline due to some action or inaction by their CPA or tax preparer. This is the case for late filing tax penalties. But what about a late filed accounting method change? Is reliance on a CPA or tax preparer sufficient for a… Continue reading Is Reliance on a CPA Sufficient for a Late Filed Tax Form?
Taxpayer Cannot Recoup Attorney Travel Costs
If the IRS wrongfully denies your refund claim and you are successful in litigating the matter in court, you are entitled to recoup some of your court costs. But what about the taxpayer’s tax attorney’s travel costs? And what if the travel costs were necessary as the tax issue was complex and a tax attorney… Continue reading Taxpayer Cannot Recoup Attorney Travel Costs
Cashing a Tax Refund Check for a False Return is a Crime
Cashing a tax refund check that was triggered by filing a false tax return is a crime. It is theft of government money. Theft of government money is different than tax evasion. The recent United States v. Box, No. 18-13935 (11th Cir. 2019) court case provides an opportunity to consider the crime of theft of… Continue reading Cashing a Tax Refund Check for a False Return is a Crime