In CGG Americas, Inc. v. Commissioner, 147 T.C. 2, the U.S. Tax Court concluded that a seismic surveyor is entitled to geological and geophysical (G&G) expenses deductions even though they merely gathered data for license to third parties and did not engage in exploration or development work. Facts & Procedural History The taxpayer was in… Continue reading Seismic Surveyor Entitled to G&G Expense Deductions
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.
This page provides timely and thorough coverage of various Federal income tax law questions, court cases, and rulings.
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IRS Allowed Interest for Unpaid Taxes Despite Waiver
The IRS often does not act to collect unpaid taxes. When it does, it usually does so after several years have passed since the tax was due. Even though interest rates remain at historically low levels, it is not unheard of for the interest incurred on unpaid taxes to be more than the original tax… Continue reading IRS Allowed Interest for Unpaid Taxes Despite Waiver
Tax Deductions for Hobby Survives IRS Scrutiny
There are quite a few cases where the IRS disallowed loss deductions for “hobbies.” There are also quite a few cases where the courts have upheld the IRS’s position. These cases are decided based on the facts and how the courts interpret these facts. The facts in Main v. Commissioner, T.C. Memo. 2016-127, provide a… Continue reading Tax Deductions for Hobby Survives IRS Scrutiny
Fines or Sanctions Paid to FINRA Are Not Deductible
In CCA 201623006 the IRS concluded that the payment of a fine or similar penalty to the Financial Industry Regulatory Authority (FINRA), a non-government entity, is not deductible as an ordinary and necessary business expense. Fines & Penalties Non-Deductible ..WHY?? The law is clear that fines and penalties paid to government entities for violation of… Continue reading Fines or Sanctions Paid to FINRA Are Not Deductible
Delayed Sale to Former Spouse Not Taxable
Divorce can present tax savings opportunities. Many of the tax savings strategies involve transferring property and income therefrom to the spouse who is in the low- or no-tax tax bracket. The recent Belot v. Commissioner, T.C. Memo. 2016-113, case addresses the tax free transfer of property following a divorce. Facts & Procedural History Mr. and Ms.… Continue reading Delayed Sale to Former Spouse Not Taxable
Payment from Accounting Firm to Settle Claim Excluded From Income
The IRS released Action on Decision 2016-01 to disagree with a court case that held that a payment from an accounting firm to settle a claim against the firm for selling an abusive tax shelter was not taxable to the recipient. Facts & Procedural History The case is Cosentino v. Commissioner, T.C. Memo. 2014-186. In… Continue reading Payment from Accounting Firm to Settle Claim Excluded From Income
TV Commercial Set Designer Was an Independent Contractor
In Quintanilla v. Commissioner, T.C. Memo. 2016-5, the U.S. Tax Court concluded that a set designer for TV commercials was an independent contractor and not an employee for tax purposes. This case provides a good example of factors that show that a worker is in fact an independent contractor. Facts & Procedural History Mr. Quintanilla… Continue reading TV Commercial Set Designer Was an Independent Contractor
R&D Credit Made Permanent & Enhanced
Congress made the research tax credit permanent and enhanced the credit. The changes are retroactive back to January 1, 2015. Temporary Nature of the R&D Credit The permanent research tax credit solves one of the ongoing problems with the credit. As critics of the credit have noted, the credit cannot provide much of an incentive… Continue reading R&D Credit Made Permanent & Enhanced
LLC Owned by Self-Directed IRA Cannot Pay Wages
The U.S. Court of Appeals for the Eleventh Circuit recently affirmed Ellis v. Commissioner, which held that the payment of wages for services to a self-directed IRA owner for his services rendered to an LLC owned by a self-directed IRA was a prohibited transaction. This case provides yet another example of how not to handle… Continue reading LLC Owned by Self-Directed IRA Cannot Pay Wages
How are Employer Loans in Lieu of Wages Taxed?
Can you avoid paying Federal income tax by having your employer make loans to you in lieu of wages, and then have the employer forgive the loans over time? The court addressed this in Wyatt v. Commissioner, T.C. Summary Opinion 2015-31. Facts & Procedural History Dr. Wyatt was a gynecologist. He recruited to practice in Putnam… Continue reading How are Employer Loans in Lieu of Wages Taxed?