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Federal Income Tax Tax Tax Deductions

Family Cattle Operation Denied Tax Deductions

In Barnhart Ranch Co. v. Commissioner, No. 16-60834 (5th Cir. 2017), the court considered who was entitled to deduct expenses for cattle that were descended from cattle the taxpayers inherited and other cattle that were subsequently purchased. The case shows how important it is to implement an accounting system to capture income and expenses in […]

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Federal Income Tax Tax Tax Deductions

Deducting Pre-Acquisition Stock Compensation

In Qinetiq US Holdings, Inc. v. Commissioner, No. 15-2192 (4th Cir. 2017), the court addresses the situation where a taxpayer acquired a target corporation and then claimed a substantial tax deduction for expenses the target corporation had paid prior to the acquisition. There are rules intended to prevent taxpayers from being able to deduct pre-acquisition […]

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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 […]

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Estate & Gift Tax Tax

Tax Benefit Rule Does Not Apply to Transfers at Death

If a sole proprietor is able to deduct an expense he incurred in the year he died for property that was not used up in the year he died, must his estate then report the amount as income in the following year for the amount of taxes saved by the deduction in the prior year? […]

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Federal Income Tax Tax Tax Deductions

Seismic Surveyor Entitled to G&G Expense Deductions

In CGG Americas, Inc. v. Commissioner, 147 T.C. 2, the U.S. Tax Court concluded that a seismic surveyor is entitled to geological and geophysical (G&G) expenses deductions even though they merely gathered data for license to third parties and did not engage in exploration or development work. Facts & Procedural History The taxpayer was in […]

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Federal Income Tax

Fines or Sanctions Paid to FINRA Are Not Deductible

In CCA 201623006 the IRS concluded that the payment of a fine or similar penalty to the Financial Industry Regulatory Authority (FINRA), a non-government entity, is not deductible as an ordinary and necessary business expense. Fines & Penalties Non-Deductible ..WHY?? The law is clear that fines and penalties paid to government entities for violation of […]

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Tax Deductions

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 […]