Ordinary and necessary expenses incurred in operating a business are deductible against Federal income tax. This is even true for side gigs or moonlighting work. The IRS frequently challenges these deductions if the activity does not produce a profit. The recent Jones v. Commissioner, T.C. Summary Opinion 2007-21, court case provides an opportunity to consider these rules.… Continue reading The Hobby Loss Rules: Planning for Unprofitable Businesses
Tax Articles
Tax Basis Planning for Inherited Property
The gain from the sale property is subject to income tax. Gain is generally the sales price minus tax basis, and tax basis is generally the cost or investment into the property. When a person owns property at death and the property passes to the heirs, the heirs get a tax basis equal to the… Continue reading Tax Basis Planning for Inherited Property
Reconsidering Murphy: Restorative Payments vs. Return of Human Capital
Last year’s Murphy v. United States decision was one of the most controversial tax cases in recent history. Unlike many other tax attorneys, I am not sure that I agree that the Murphy case was wrongly decided. One reason for this is that, in thinking about Murphy, I find it difficult to reconcile why “restorative… Continue reading Reconsidering Murphy: Restorative Payments vs. Return of Human Capital
IRS Clarifies Real Estate Broker Filing Requirement – Again
The IRS has released Revenue Procedure 2007-12, which clarifies what “assurances” real estate brokers must obtain from persons who sell their principal residence. Real estate brokers are generally required to provide a Form 1099-S to a person selling or exchanging real estate. This form helps the IRS track the seller’s proceeds from the sale, to… Continue reading IRS Clarifies Real Estate Broker Filing Requirement – Again
Tax Court Judge Can Rewrite Facts of Case That He/She Did Not Hear
The tax court released a 400+ page opinion involving the Supreme Court’s ruling in the Ballard v. Commissioner case today. This case continues the Ballard dispute saga that casts a shadow on whether the U.S. Tax Court is an impartial judicial forum. The Ballard Dispute The readers of this blog will recall the Ballard case… Continue reading Tax Court Judge Can Rewrite Facts of Case That He/She Did Not Hear
Tax Free IRA Rollovers as Short-Term Loans: Two Examples of What Not to Do
Taxpayers often withdraw funds from their IRAs to cover short-term expenses with the hope that they can put the funds back in their IRA within the 60 day window for making a tax-free IRA rollover. When taxpayers miss this 60 day window, they are forced to ask the IRS to waive the 60 day time… Continue reading Tax Free IRA Rollovers as Short-Term Loans: Two Examples of What Not to Do
Tax Attorney Gets Taxpayer Favorable Sentence, Court Says Not So Fast
Tax fraud often results in harsh criminal tax penalties; however, you really never know what a particular tax crime sentence will be until you have your day in court, then the appeals for that sentence, and then possibly the appeals for those appeals. Take for example the case of United States v. Trupin. According to… Continue reading Tax Attorney Gets Taxpayer Favorable Sentence, Court Says Not So Fast
What is a “Foreign Country” for Income Tax Purposes?
Our tax laws allow individual taxpayers to exclude income earned in certain foreign countries. This begs the question as to whether a taxpayer working outside of the U.S. is in a foreign country if he is working in an area that is not governed by the equivalent of what we think of as a government. … Continue reading What is a “Foreign Country” for Income Tax Purposes?
U.S. Tax Court Petition Date is Absolute
Some dates are absolute. You miss them, you are out of luck. The deadline for filing a petition with the U.S. Tax Court is one of these dates. Today’s Austin v. Commissioner, T.C. Memo. 2007-11, case provides an example. Facts & Procedural History Austin failed to timely file federal tax returns. The IRS imposed failure… Continue reading U.S. Tax Court Petition Date is Absolute
Prisoners Filing False Tax Returns
There are serious consequences for filing false tax returns. This can include civil and criminal penalties. These penalties may not be all that effective of a deterrent for someone who is currently incarcerated, which is evidenced by cases like United States v. Wardell, 05-1492 (10th Cir. 2007). Facts & Procedural History Wardell is a prisoner incarcerated… Continue reading Prisoners Filing False Tax Returns