Taxpayers often overlook “partial asset dispositions.” Their tax advisers do too. This may be due to it being a depreciation issue that seems unimportant. It may also be that the partial asset disposition is a relatively new concept. Regardless, partial asset dispositions can save taxpayers quite a bit in taxes (it is a timing issue,…
Tax Articles
Voluntary Disclosure to IRS of Privileged Communication
The attorney-client privilege projects confidential communications with attorneys. It allows the attorney to avoid disclosing protected communications. But what if the attorney voluntarily discloses information and the disclosure is to the IRS about a tax matter? The court addresses this in Gaetano v. United States, No. 19-1122 (6th Cir. 2019). Contents1 Facts & Procedural History2…
Using Warrants to Make Future Purchases of S Corporation Stock
Can you make a gift to charity but retain the right to pull back the value of the gift in the future, and still get a charitable deduction for the gift? The court said “no” in In Re Stapley, No. 09-47699 RLE (Bankr. N.D. Cali. 2019). The failed tax shelter included an S corporation whose…
Can the IRS Ignore the Legal Existence of a Corporation?
If a taxpayer forms a legal entity and it is taxed as a C corporation, can the IRS disregard the legal existence of the corporation and assess the corporation’s tax to the owner? The court addresses this in Russell v. Commissioner, T.C. Memo. 2019-146. Contents1 Facts & Procedural History2 Corporations are Taxed Separately3 The Sham…
The Timing Trap: Failed Installment Sales
One of the best tax planning strategies is simply to accept payment over time. This is a simple, but effective tax planning strategy as it can allow taxpayers to spread out their tax liability over time. This is possible given the installment sale rules. What happens if you sell an asset and are to receive…
Can IRS Rely on Third Party Reports to Identify Taxable Income?
If a third party collects monies for you and send you a report reflecting the monies but the reports show too much income, should you be taxed on the higher income or what you actually received? The Ghadiri-Asli v. Commissioner, T.C. Memo. 2019-142, case addresses this. Facts & Procedural History The taxpayer is a physician.…
IRS Levy Does Not Attach to Future Payments
The IRS levy is one of the IRS’s primary methods for collecting unpaid taxes. The IRS’s levy power is broad, but it is not unlimited. The IRS levy can attach to some amounts held by third parties that are owed to the taxpayer. It does not attach to future payments. The recent Gold Forever Music…
M&A Finders Fee Not Deductible for Acquirer
If a company acquires another company and pays a finders fee to the party who connected the two for the sale, is the finders fee deductible by the acquirer? This question touches on whether an expense is deductible if the real benefit is to another company. The court addresses this in Plano Holding LLC v.…
Can the IRS Collect Gift Tax From Recipient After 14 Years?
If someone gives you property and then dies and more than ten years has passed since the gift, can the IRS sue you to collect the amount of the gift from you? Most would think the answer is a resounding “no,” as the recipient isn’t liable for unpaid gift taxes and the statute of limitations…
Avoiding State Income Tax on Part-Time Residents
Sometimes you can’t avoid paying state income taxes. This is true for those who have no ties to any state other than a state that has an income tax. But for those who have ties to multiple states, they can often structure their affairs to avoid the state income tax. This can be difficult to…