If an insurance company makes loans to its life insurance agents in lieu of wages and the insurance agents use a portion of those funds to repay costs to the insurance company, how is that taxed? The court addressed this in Harper v. Commissioner, T.C. Summary Opinion 2007-133. Facts & Procedural History Mrs. Harper was in the… Continue reading Is an Insurance Agents Repayment of Advanced Commissions Cancellation of Debt Income?
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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Truck Driver Not Entitled to Deductions When Records Destroyed
In Clark v. Commissioner, T.C. Memo. 2007-172, the U.S. Tax Court held that a truck driver who did not file tax returns was not entitled to deduct expenses where his records were destroyed in a fire. Facts & Procedural History Mr. Clark was a truck driver. He was employed by Jimmy Harris Trucking, Inc., Vandy… Continue reading Truck Driver Not Entitled to Deductions When Records Destroyed
There is no Place Like Home (or is There?)
Have you ever said something like “I can’t wait to go home?” If so, you may not know what the term “home” means. According to the IRS, the term “home” means the taxpayer’s “principal place of business.” I am guessing that very few (if any) taxpayers consider their place of business their home. Our federal Tax Code… Continue reading There is no Place Like Home (or is There?)
Real Estate Purchase Price Reduction
The term “income” is broad. It includes just about any money or gain that a person receives. There are exceptions, however. Take the purchase price reduction. Assume Party A sells property to Party B for $100. Party A will likely have a gain on the sale. The gain is income and may trigger income tax.… Continue reading Real Estate Purchase Price Reduction
Can One Spouse Cause IRS to Void Other’s Alimony Deduction?
If a divorce decree says that a payment to an ex-spouse, does that mean that it is alimony the ex-spouse has to report as income for Federal income tax purposes? And if not, can the ex-spouse who receives the payment request a ruling from the IRS to say that the payment was not taxable to… Continue reading Can One Spouse Cause IRS to Void Other’s Alimony Deduction?
Non-Profit No More
The IRS Can Sometimes Take A Hardline With Taxpayers For example, the IRS often takes a hard line with taxpayers in instances where the taxpayer is a non-profit and it fails to timely file a tax return. In these cases the IRS will has the power to revoke the taxpayer’s non-profit status, but in many… Continue reading Non-Profit No More
Taxation of Employee Donated Sick Leave
Employees often want to donate paid sick-leave time to deserving co-workers who find themselves in a pinch. The IRS recently released another ruling, Private Letter Ruling 200720017, that identifies a few of the planning considerations in donating sick leave to co-workers. Income Tax on Donations of Sick Leave The federal tax consequences of donating paid… Continue reading Taxation of Employee Donated Sick Leave
Prepayment: to Deduct in Year 1 or Year 2?
Say you are an accrual method taxpayer and you hire someone to provide a service to you in year one, the service is to be provided to you over a twelve month period, and you prepay the person for this yet to be provided service. When can you claim a deduction for this prepayment? The… Continue reading Prepayment: to Deduct in Year 1 or Year 2?
Bankruptcy Filing Does Not Prevent Innocent Spouse Relief
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
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