Tax Court Puffery: Exaggeration is Not Evidence

Every communication makes statements. The statements may be truthful or false. A statement that is misleading or exaggerated is somewhere between these two. There can be significant legal consequences depending on where a statement falls on this continuum. This raises questions as to how precise do the statements have to be to be false? If…Continue readingTax Court Puffery: Exaggeration is Not Evidence

Funeral Expense Organization Denied Nonprofit Status

Gargamel, the antagonist in the Smurfs, is the villain. Wile E. Coyote in the Road Runner, Raquelle in Barbie, Lex Luther in Superman, the Joker in Batman, Darth Vader in Star Wars. The list goes on. That is one side of these stories. It’s the side of the story that is presented to us. It…Continue readingFuneral Expense Organization Denied Nonprofit Status

Rejected e-File Return is a Valid Tax Return

The IRS’s Identity Protection Personal Identification Number (“IP PIN”) is intended to protect those who are victims of identity theft. It does so by making it harder for third parties to file fraudulent tax returns. The IP PIN can also cause problems for taxpayers. This is particularly true for tax returns that are filed close…Continue readingRejected e-File Return is a Valid Tax Return

Meal & Entertainment: The IRS Auditors “Bread & Butter”

I once worked with an IRS agent who would only make two types of adjustments. He would make UNICAP/inventory adjustments and meal and entertainment adjustments. If either of these items could be adjusted for a tax return, he would adjust them. It didn’t matter what else was listed on the tax return. It did not…Continue readingMeal & Entertainment: The IRS Auditors “Bread & Butter”

Tax on Virtual Currency Received for Microtasks

Our Federal income tax laws take a broad view of what counts as income and gain. The tax law then imposes a ridged framework for classifying and computing tax on income or gain. By casting the net wide, the tax law is able to capture just about every type of transaction that one could dream…Continue readingTax on Virtual Currency Received for Microtasks

Illness as a Defense to Late Filing Penalties

Will the IRS penalize you if you are unable to file your tax return on time due to the burden of caring for a loved one with COVID? The IRS has not provided penalty relief for taxpayers impacted by COVID-19. The existing penalty relief rules may provide a remedy for some taxpayers. These rules do…Continue readingIllness as a Defense to Late Filing Penalties

What is a Rental Activity?

The ability to generate current year tax losses is a strong incentive for high-income taxpayers to own real estate. Real estate often produces tax losses, but not economic losses. This happens because the current operating expenses plus tax depreciation result in a current year loss. At the same time, the property likely increased in value…Continue readingWhat is a Rental Activity?

Do Divorce Payments Increase Tax Basis in Business

Our Federal income tax laws often build upon the presumption that seemingly adverse parties are actually adverse. Our tax laws do not always account for instances where the parties are actively working in concert to reduce the IRS’s cut. Transfers and payments made in relation to divorce are an example. With our tax laws, it…Continue readingDo Divorce Payments Increase Tax Basis in Business

Does an IRS Audit Waive a Defect in Tax Return?

When it comes to technicalities in the tax law, the failure to comply with some technicalities can be overcome. Others cannot. As a general rule, the courts evaluate tax disputes involving technicalities based on the policy underlying the technicality versus fairness for requiring strict compliance. If the policy for the technicality is important, the court…Continue readingDoes an IRS Audit Waive a Defect in Tax Return?