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Federal Income Tax Tax Tax Loss

Documenting Tax Losses for Worthless Securities

Tax losses for worthless securities are often challenged by the IRS.  It particularly important to document the loss.  There are several elements taxpayers have to establish to secure the benefit of tax losses for worthless securities.  The recent Giunta v. Commissioner, T.C. Memo. 2018-180, case provides an opportunity to consider these elements. Facts & Procedural History The […]

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Federal Income Tax Tax Tax Loss

Court Says Partnership is Worth Less, Not Entirely Worthless

The IRS often challenges tax loss deductions.  In many cases, it does so by challenging the year in which the loss is allowable.  It can be difficult to determine which year the loss should be taken.  When an asset is losing value over time, there is a time when the asset is worth less than […]

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Federal Income Tax Real Estate Tax

The Trade or Business Requirement for the Sec. 199A Deduction

The new Sec. 199A deduction that provides a 20 percent benefit for flow through entities has been in the news as of late.  The Yaryan v. Commissioner, T.C. Memo. 2018-129, case provides an opportunity to consider one aspect of this new Sec. 199A deduction.  Specifically, the Treasury released regulations that adopt a “trade or business” standard […]

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Federal Income Tax

Documenting Loans to Closely-Held Corporations

In Norgaard v. United States, No. 16-12107-FDS (D. Mass. 2018), the court addressed whether a personal loan made to a closely held corporation can be deducted as a bad debt when the business goes out of business. The case highlights why it is important to document loans made to corporations. The Facts & Procedural History […]

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Federal Income Tax Tax Tax Loss

Court Says Deduction for Tax Loss Not Allowed for Worthless Debt

Tax losses for worthless debts often trigger IRS audits. On audit, it is common practice for the IRS to disallow the losses based on the debt not being worthless, the amount of the loss not being correct, and that the taxpayer took the loss in the wrong tax year. Taxpayers can take steps to limit […]

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Federal Income Tax Tax Tax Loss

Bad Credit Results in Disallowance of Bad Debt Deduction

The IRS often challenges bad debt deductions–particularly when the loan is from a family member or friend.  The courts have developed several factors that they consider in these disputes.  One of these factors is whether the borrower would have been able to secure a loan from a third party.   The court recently addressed this in […]

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Federal Income Tax Tax Tax Loss

Bad Debt Deduction for Cease-and-Desist Order

With tax losses, one challenge is to determine what tax year the loss is allowable.  The loss year is usually identified by a triggering event.  Is a cease-and-desist order from the state regulator a triggering event that establishes that a start-up company is worthless in the year the order was received?  The court addressed this in Sensenig […]