In Heinbockel v. Commissioner, T.C. Memo. 2013-125, the U.S. Tax Court considered a routine substantiation case and disallowed business expense deductions for a fashion clothing retailer. This case presents an opportunity to consider how to present routine substantiation cases to the IRS and to the courts. Facts & Procedural History Mrs. Heinbockel was in the… Continue reading Fashion Retailers Business Expenses Disallowed as Routine Substantiation Case
Category: Federal Income Tax
Federal income tax advice, articles, tips, & more.
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Personal Guarantees for Self-Directed IRAs Are Prohibited Transactions
If you have a self-directed IRA, the IRA invests in LLCs, can you personally guarantee a loan for the LLC? The court addressed this in Peek v. Commissioner, 140 T.C. 12. Facts & Procedural History Mr. Fleck identified a business opportunity that he intended to invest in. Mr. Peek, Mr. Fleck’s lawyer, approached Mr. Fleck about… Continue reading Personal Guarantees for Self-Directed IRAs Are Prohibited Transactions
Parking Garages: Parking Lot Depreciation Life
In recent Chief Counsel Memo #20125201F, the IRS concludes that open-air parking garages are considered buildings rather than land improvements for tax purposes. The IRS attorneys go on to say that the taxpayer’s conclusion to the contrary warrants the assessment of a negligence penalty. That is a pretty harsh result given that the tax law… Continue reading Parking Garages: Parking Lot Depreciation Life
What Gross Receipts are Used in R&D Credit?
For the research tax credit, what gross receipts do you include in computing its tax credit? Despite the credit being on the books for several decades, this is an open question. The court addressed this in Hewlett-Packard Co. v. Commissioner, 139 T.C. 8. Facts & Procedural History Hewlett-Packard Co. (“Hewlett-Packard”) is a global technology and service… Continue reading What Gross Receipts are Used in R&D Credit?
Does Work to Validate Prior Research Qualify for the R&D Tax Credit?
For the research tax credit, does work to validate prior research count as a qualified research expense? The court recently addressed this in United States v. Davenport, No. 3:09-cv-02455-L (N.D. Tex. 2012). Facts & Procedural History Morris and David Davenport (collectively, “Davenports”) were fifty percent owners of Burly Corporation (“Burly”). Burly manufactures residential metal roofing and… Continue reading Does Work to Validate Prior Research Qualify for the R&D Tax Credit?
Taxpayer Use of Estimates for Deductions
Can you use publicly available sources of statistical information when you have no records to support the amount of your expenses? The court addressed this in Murray v. Commissioner, T.C. Summary Opinion 2012-66, which involved the IRS’s use of third-party statics. Facts & Procedural History Mr. Murray worked as a truck driver for National Freight, Inc.… Continue reading Taxpayer Use of Estimates for Deductions
Moving Truck Driver Allowed to Estimate Contract Expense Deduction
In Bauer v. Commissioner, T.C. Memo. 2012-156, the U.S. Tax Court held that a moving truck driver was entitled to deduct expenses to hire contractors to load and unload his truck by estimating the amount of the expenses. Facts & Procedural History Mr. Bauer was a moving truck driver. He was hired by clients as… Continue reading Moving Truck Driver Allowed to Estimate Contract Expense Deduction
Court Determines What Truck Driving Expenses Are Deductible
In Nolder v. Commissioner, T.C. Summary Opinion 2012-50, the U.S. Tax Court examined a number of different expenses incurred by a truck driver to determine which expenses were deductible. This case provides a good overview of the typical expenses truck drivers incur that are and are not deductible. Facts & Procedural History Mr. Nolder was… Continue reading Court Determines What Truck Driving Expenses Are Deductible
Wages for Research Were Not Reasonable
The research tax credit provides a significant incentive to perform research. The credit is calculated by factoring in wages paid by the business and income from the business subject to self-employment. Given this, can a business owner pay himself an unreasonably large salary and thereby increase the amount of the credit? The court recently addressed… Continue reading Wages for Research Were Not Reasonable
Tax on Nonresident Alien Gambling Winnings
Are non-resident aliens who receive gambling winnings while visiting the U.S. able to deduct the gambling expenses incurred in earning the gambling winnings? And can they avoid the withholding tax on their gambling winnings? The court addresses these issues in Park v. Commissioner, 136 T.C. 569 (T.C. 2011). Facts & Procedural History The taxpayers are… Continue reading Tax on Nonresident Alien Gambling Winnings