Taxpayers often establish Subchapter S corporations to avoid Social Security and Medicare taxes on a portion of their earnings. This is a very common arrangement. The Fleischer v. Commissioner, T.C. Memo. 2016-238, court case provides an example of how the Subchapter S corporation must be structured to avoid these taxes. Facts & Procedural History In Fleisher, the… Continue reading S Corporation Owner Subject to Self-Employment Tax
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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Using IRA Funds to Settle a Probate Dispute
Inherited IRAs can present a number of challenges. In Ozimkoski v. Commissioner, T.C. Memo. 2016-228, the court considered the tax implications of a withdraw from an inherited IRA that was used to settle a probate dispute with the couple’s son. The case shows what not to do when using IRA funds to settle a probate… Continue reading Using IRA Funds to Settle a Probate Dispute
Tax Court Expands Innocent Spouse Relief for Divorced Taxpayers
Innocent spouse relief can allow a taxpayer to avoid joint liability for taxes that arose during the marriage. There is an exception for the would-be innocent spouse if they had actual knowledge of the item that resulted in the tax. The U.S. Tax Court addressed this limitation in McDonald v. Commissioner, T.C. Summary Opinion 2016-79,… Continue reading Tax Court Expands Innocent Spouse Relief for Divorced Taxpayers
Court Considers Whether Moneygram is a Bank that Makes Loans
There are tax laws that provide significant tax advantages to banks. One of these laws allows banks to deduct capital losses against ordinary income. This allows banks to deduct losses immediately when others might have to carryover the loss to other tax years. There are other tax laws that are specific to banks. These laws… Continue reading Court Considers Whether Moneygram is a Bank that Makes Loans
Does Changing Roof Mean No Facade Easement Deduction?
Donating the rights to change the facade of a building can qualify for a charitable tax deduction. The donation helps ensure that the historical significance of the building is not compromised. But what if you retain the right to change the roof to the building? Can you still qualify for a facade easement deduction? The… Continue reading Does Changing Roof Mean No Facade Easement Deduction?
Can Lump Sum Cash Payment Qualify as Alimony?
For taxpayers who pay alimony to an ex-spouse, the tax deduction for the alimony payment is usually quite large. It can significantly reduce their tax. But can a lump sum payment made in cash qualify for tax-deductible alimony? The court addressed this in Muñiz v. Commissioner, No. 15-14478 (11th Cir. 2016). Facts & Procedural History Muñiz… Continue reading Can Lump Sum Cash Payment Qualify as Alimony?
IRS Will Not Follow Court’s Holding for Customer Rewards Program
The IRS issued AOD 2016-03 to indicate that it will not follow the Third Circuit Court of Appeals decision in Giant Eagle, Inc. v. Commissioner, 822 F.3d 666 (3rd Cir. 2016), rev’g T.C. Memo 2014-146. The issue is whether costs for a rewards program are deductible in the year the rewards are earned by the… Continue reading IRS Will Not Follow Court’s Holding for Customer Rewards Program
Is a Lawsuit Award Payment Taxable?
If you receive payments from a lawsuit settlement award, are the payments excluded from Federal income tax? What if the payments are for claims of emotional distress or physical sickness? The Tishkoff v. Commissioner, T.C. Summary Opinion 2016-65, case provides an opportunity to consider these rules. Facts & Procedural History The taxpayer worked for Wells Fargo… Continue reading Is a Lawsuit Award Payment Taxable?
The Impact of Filing a CPA Malpractice Case
The YA Global Investments, L.P. v. RSM McGladrey, Inc.Docket No. A-2152-15T3 (2016), case addresses the difficult situation whereby a taxpayer sues their CPA firm in state court for incorrect tax advice, while at the same time arguing that the tax advice and position is correct in the U.S. Tax Court. This situation arises given the… Continue reading The Impact of Filing a CPA Malpractice Case
Charitable Deduction With a Defective Valuation
There are a number of cases where taxpayers have had to pay more tax than they should due to technical foot faults. These cases often come up when the IRS auditors believe that their job is to look for strict compliance (100%) rather than substantial compliance (something more akin to 80%). This brings us to… Continue reading Charitable Deduction With a Defective Valuation