While IRS auditors and IRS attorneys typically focus on imposing the most tax possible, the IRS Office of Appeals does not. Appeals is tasked with settling cases. In doing so, Appeals is supposed to be impartial. This allows Appeals to ‘get it right.’ The recent Onyeani v. Commissioner, T.C. Memo. 2020-15 provides an opportunity to…
Tax Articles
Big Tax Savings With ESOP, But Requires Work
An employee stock ownership plan (ESOP) can produce significant income tax savings. This tax savings isn’t exactly free. One has to keep up with the ESOP and the relevant rules to ensure that the tax savings are achieved. This compliance work is required and failure to comply can be costly. The recent Ed Thielking v.…
Tax Planning for the Start-up Limitation Rules
Our tax laws include start-up rules that limit the ability to deduct certain business and investment expenses. For business owners and investors with other sources of income, this can result in funds being sent to the IRS to pay taxes at a time when the capital is needed to fund the business or investment growth.…
Loan to an S Corporation to Allow Tax Loss
Tax basis can limit a shareholder’s loss from an S corporation. If an S corporation has a tax loss but the shareholder doesn’t have sufficient tax basis to take the loss, the shareholder will typically have to loan money to the S corporation. This tax debt basis makes the loss allowable in the current year.…
Tax on Payment for Being Born With Medical Condition
We can do some amazing things given the state of our science and technology. These advances lead to some interesting tax questions. The IRS recently addressed such a question in PLR 201950004. It considers whether damages paid by a fertility clinic for failing to perform a genetic test are excluded from the recipient’s income as…
Reliance on an Attorney as a Defense to a Tax Crime
Reliance on advice of a tax attorney or CPA is a defense to some tax crimes. But what if a taxpayer merely consults with a tax attorney or CPA and does not actually rely on their advice? The recent United States v. Wright, No. 18-4087 (6th Cir. 2019) case addresses whether this defense is available…
When an IRS Agent Makes a Misrepresentation
IRS agents interact with taxpayers. In doing so, they make misrepresentations as any other human does. Some are unintentional and some are intentional. But what is a taxpayer to do if the IRS agent makes a misstatement and it negatively impacts the taxpayer? The McRae v. Commissioner, T.C. Memo. 2019-163, case touches on this issue.…
Installment Sale Treatment for Mobile Home Trailers
If you buy, subdivide and sell real estate, can you seller-finance the sales and report the gain using the installment sale method? The installment sale method can defer paying tax on the sales by allowing you to recognize the gain in later tax years. As the court in the Joyner Family Limited Partnership v. Commissioner,…
Correcting an Erroneous Judgment for Unpaid Taxes
If the IRS gets a court judgment for unpaid taxes, can you challenge the judgment after it is entered? What if you can show that no tax is due? Can you fix the erroneous judgment after the fact? Can you just prepare corrected returns and file them? The court addresses this in United States v.…
Bad Debt Tax Deduction for Guarantee Payment?
When an individual or company guarantees a loan for a third party, they are essentially agreeing to assume responsibility for the debt if the borrower defaults on their payments. In some cases, the guarantor may be required to make payments to the lender on behalf of the borrower. But what happens when the guarantor has…