Can one spouse prevent the other spouse from obtaining innocent spouse relief by filing bankruptcy? The court addressed this question in Kovitch v. Commissioner, 128 T.C. 9 (2007). The Facts & Procedural History The Kovitch’s were divorced. The IRS then issued a notice of deficiency to both spouses for their joint tax liability. Only the wife… Continue reading Bankruptcy Filing Does Not Prevent Innocent Spouse Relief
Category: Tax
IRS Says When a Grape is No Longer a Grape
We all know that (most) wines come from grapes, but many of us might not know exactly when grapes turn into wine for federal income tax purposes. According to the IRS (in Chief Counsel Advice Memorandum 200713023), grapes turn into wine when a taxpayer begins crushing the grapes. This IRS Memorandum highlights a few of… Continue reading IRS Says When a Grape is No Longer a Grape
Yet Another Lottery-Related Tax Question
Here is yet another lottery-related tax question: Does a state lottery have to withhold tax from lotto winnings if a single taxpayer wins more than one lottery prize from the same lotto ticket where the total winnings exceed $5,000, but the individual winnings do not exceed $5,000? In PLR 132947-06-2007, the IRS recently held that… Continue reading Yet Another Lottery-Related Tax Question
Sale of Lottery Payments, Capital or Ordinary?
While lottery winnings may be subject to tax at ordinary tax rates, what about the sale of the right to receive annual lottery payouts? The court addressed this in Prebola v. Commissioner, T.C. Memo 2006-240. Facts & Procedural History The taxpayer won $17.5 million from the lottery. She selected the annual installment option, which would pay out… Continue reading Sale of Lottery Payments, Capital or Ordinary?
Section 104 Survives Non-Murphy Constitutional Challenge
The now famous Murphy decision has left some uncertainties with regard to whether compensation for a personal injuries that are unrelated to lost wages or earnings are taxable. There can be little doubt that the IRS will ask the Supreme Court to settle the issue if the IRS is not successful in the coming Murphy… Continue reading Section 104 Survives Non-Murphy Constitutional Challenge
IRS Estate Tax Liens: Helpful or Harmful?
It can take years, if not decades, to resolve property disputes resulting after someone dies. The IRS is often not a direct party to these disputes, but it usually has an interest in what happens to the property. The IRS uses the general unfiled estate tax lien to protect its interest in a decedent’s assets. While… Continue reading IRS Estate Tax Liens: Helpful or Harmful?
Civil Restitution Tax Assessment Satisfied by Criminal Restitution Payment
According to the IRS’ tax attorneys, the “The court misconstrued the facts of the case.” That is the conclusion reached by the IRS Office of Chief Counsel in Chief Counsel Notice 2007-008. The case that the IRS attorney refers to is Creel v. Commissioner, 419 F.3d 1135 (2005). The Creel Case In the Creel case… Continue reading Civil Restitution Tax Assessment Satisfied by Criminal Restitution Payment
Referrals/Leads Group is Not a Tax Exempt Entity
In Private Letter Ruling 200709070 the IRS recently held that Exceptional Organizations, a standard referrals/leads group, did not qualify as a tax-exempt “business league.” This ruling presents a good opportunity to review a few of the requirements to qualify as a tax-exempt “business league.” What is a Tax Exempt Business Leage? A “business league” is… Continue reading Referrals/Leads Group is Not a Tax Exempt Entity
Health Reimbursement Arrangements: Employer-Provided Medical Coverage
The business enterprise presents taxpayers with numerous tax planning opportunities. Many of these tax planning opportunities include pulling money out of the entity in a way that benefits both the business and its owners and employees on an after-tax basis. As with employer-provided education benefits, employers may be able to minimize their tax obligations by… Continue reading Health Reimbursement Arrangements: Employer-Provided Medical Coverage
Tournament Poker Accorded Same Tax Treatment as Live-Action Poker
Today, in Tschetschot v. Commissioner, the tax court ruled that taxpayers where not entitled to treat tax losses from tournament poker different than tax losses from live-action poker. Facts & Procedural History In Tschetschot, the taxpayer had earned $49 thousand dollars from her day job and $11 thousand dollars from gambling. The taxpayer claimed a… Continue reading Tournament Poker Accorded Same Tax Treatment as Live-Action Poker