Tax losses for worthless securities are often challenged by the IRS. It particularly important to document the loss. There are several elements taxpayers have to establish to secure the benefit of tax losses for worthless securities. The recent Giunta v. Commissioner, T.C. Memo. 2018-180, case provides an opportunity to consider these elements. Facts & Procedural History The… Continue reading Documenting Tax Losses for Worthless Securities
Category: Federal Income Tax
Federal income tax advice, articles, tips, & more.
The Federal income tax is the largest expenditure for most individuals and businesses. It dwarfs the costs for insurance and basic necessities. This is only going to increase in the future. Tax planning is needed.
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Court May Explain How to Allocate Tax Basis to Intangible Assets
If the U.S. government allows a taxpayer to call a liability an asset and then acts to make the asset worthless, can the taxpayer take a tax loss for the loss of the so-called asset? The Citigroup, Inc. v. United States, No. 15-953T (Ct. Cl. 2018) court case addresses this fact pattern. The case gets to one… Continue reading Court May Explain How to Allocate Tax Basis to Intangible Assets
Donations to Pastor are Taxable Income, Not Gifts
The distinction between taxable compensation and non-taxable gifts comes up in a number of contexts and has led to a number of tax disputes. Severance payments made to workers are an example. The recent Felton v. Commissioner, T.C. Memo. 2018-168, court case addressed this issue in the context of segregated donations made by a congregation… Continue reading Donations to Pastor are Taxable Income, Not Gifts
Planning for Start-Up Businesses, Yacht Rental Example
New businesses may not be immediately profitable. To help mitigate the financial risk, many businesses are started by workers who have a day job. If the business is not immediately profitable it can help the owner finance the business if the owner is able to use the tax losses from the business to offset the… Continue reading Planning for Start-Up Businesses, Yacht Rental Example
Income Earned by Child Taxed to Parent
If a minor child earns income, is the income taxable to the parent or the child? There have been quite a few tax disputes involving this question. The Ray v. Commissioner, T.C. Memo. 2018-160 court case provides an opportunity to consider these rules. The Facts & Procedural History Mr. Ray the financial officer for a non-profit… Continue reading Income Earned by Child Taxed to Parent
Conservation Easement Denied for Private Golf Course
Tax benefits can cause investors to put money were they otherwise would not. The conservation easement is one example. Conservation easements reward investors with charitable contribution tax deductions for putting money into projects that conserve real property. The charitable deductions can be very large in relation to the amount invested. The recent Champions Retreat Golf Founders,… Continue reading Conservation Easement Denied for Private Golf Course
Line of Credit Standby Fees, to Deduct or to Capitalize?
Many businesses rely on a standby line of credit to cover their expenses, to weather downturns, and to grow. But this credit can be expensive in terms of interest and fees. The fees can be problematic as they may not be deductible for federal income tax purposes at the time they are paid. The IRS… Continue reading Line of Credit Standby Fees, to Deduct or to Capitalize?
Court Says Partnership is Worth Less, Not Entirely Worthless
The IRS often challenges tax loss deductions. In many cases, it does so by challenging the year in which the loss is allowable. It can be difficult to determine which year the loss should be taken. When an asset is losing value over time, there is a time when the asset is worth less than… Continue reading Court Says Partnership is Worth Less, Not Entirely Worthless
Intercompany Fee Arrangement Lacks Economic Substance
If the employees and owners of a profitable C corporation set up a related entity and lease the employee-owner’s services back to the C corporation, can the C corporation deduct the payments? Taking it a step further, what if the related entity is owned by a retirement plan so that most of the payments by… Continue reading Intercompany Fee Arrangement Lacks Economic Substance
The Trade or Business Requirement for the Sec. 199A Deduction
The new Sec. 199A deduction that provides a 20 percent benefit for flow through entities has been in the news as of late. The Yaryan v. Commissioner, T.C. Memo. 2018-129, case provides an opportunity to consider one aspect of this new Sec. 199A deduction. Specifically, the Treasury released regulations that adopt a “trade or business” standard… Continue reading The Trade or Business Requirement for the Sec. 199A Deduction