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Federal Income Tax Lottery & Gambling Retirement Accounts Tax

For Early IRA Distribution, Compulsive Gambling Not a Disability

Early distributions from IRAs are subject to a 10 percent additional tax.  The 10 percent additional tax does not apply if the distribution is taken when the IRA owner is disabled.  The recent Gillette v. Commissioner, T.C. Memo. 2018-195, case addresses whether medically-induced compulsive gambling qualifies as a disability. The Facts & Procedural History The taxpayer-wife is a […]

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Federal Income Tax Retirement Accounts Tax

Establishing Tax Basis in IRA Contributions

Contributions to IRAs are deductible.  If not deductible, the taxpayer has basis in his IRA so that this amount is not taxable when taken out of the IRA.  The idea is that the taxpayer probably paid income taxes on the money prior to putting it into the IRA and should not be taxed on it […]

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Federal Income Tax Retirement Accounts Tax

Tax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA

The U.S. Tax Court recently issued another opinion involving a LLC owned by a self-directed IRA. The case is Block Developers, LLC v. Commissioner, T.C. Memo. 2017-142. The case invovles an IRA LLC that purchased a patent and then licensed the patent back to the prior owner, with the intent of the IRA LLC collecting […]

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Federal Income Tax Retirement Accounts Tax

Appeals Court Upholds IC-DISC Roth IRA Tax Strategy

The Sixth Circuit Court of Appeals upheld the IC-DISC Roth IRA tax strategy in In Summa Holdings, Inc. v. Commissioner, No. 16-1712 (2017). This tax strategy allows business owners to sidestep the annual Roth IRA contribution limits, thereby allowing the taxpayers to amass sizable amounts in their Roth IRAs to grow tax-free. The case is […]

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Federal Income Tax Retirement Accounts Tax

Using IRA Funds to Settle a Probate Dispute

IRA Funds to Settle a Probate Dispute Inherited IRAs can present a number of challenges. In Ozimkoski v. Commissioner, T.C. Memo. 2016-228, the court considered the tax implications of a withdraw from an inherited IRA that was used to settle a probate dispute with the couple’s son. The case shows what not to do when […]

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Federal Income Tax

Start-Up Expense Limitation

The Start-Up Expense Limitation: Starting a Business in Retirement There are several occupations where highly skilled individuals are forced to retire due to mandatory retirement provisions. These individuals often use their skills to start new businesses during retirement. The court addressed this situation in Tizard v. Commissioner, T.C. Summary 2016-42. The case provides an example […]

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Federal Income Tax Retirement Accounts Tax

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 […]