Self-directed IRAs present a number of opportunities. But what if the self-directed IRA custodian chooses to limit the account holder’s options? Can the IRA account holder go around the custodian’s wishes? The recent Dabney v. Commissioner, Docket No. 14566-12, provides an example where the purchase real estate by a self-directed IRA was a taxable distribution from…
Tax Articles
Truck Expenses Not Deductible Due to Inadequate Mileage Log
In Houchin v. Commissioner, T.C. Summary Opinion 2014-29, the U.S. Tax Court concluded that truck expenses were not deductible as the mileage log did not note the locations the taxpayer traveled to. Facts & Procedural History Mr. Houchin worked as a truck driver, but was unemployed in 2010. He collected unemployment compensation. Mr. Houchin also…
Self-Directed IRA can Flip Houses & Share Ownership of Property
In In re Cherwenka, the U.S. Bankruptcy Court for the Northern District of Georgia concluded that house flipping activities in a self-directed IRA and shared ownership of property with the IRA and the account holder were not prohibited transactions. Facts & Procedural History Mr. Cherwenka was in the business of flipping houses. Mr. Cherwenka established…
IRS Announces Significant Changes to Audit Process
The Large Business & International or LB&I division of the IRS recently announced significant changes to the way its IRS auditors gather information from taxpayers. These announcements were made by directives issued by the LB&I Commissioner to all LB&I agents, which makes it mandatory for IRS agents to follow the directives. Reasons for The Changes…
IRS De-Coordinates All Coordinated Issue Papers
The IRS de-coordinated its remaining Coordinated Issue Papers yesterday. This is the final step in the IRS ending its coordinated issue or tiered program. The IRS’s coordinated issue or tiered program was how the IRS was identifying and working challenging tax issues that presented compliance problems. Coordinated Issue Papers were instructions for IRS auditors on…
Promissory Notes Distributed by Self-Directed IRA Were Not Worthless
Self-directed IRAs are usually profitable. But there are times when they lose money. In Berks v. Commissioner, Docket No. 26883-11S, the U.S. Tax Court addressed a situation where the IRAs held promissory notes that may have been worthless. Facts & Procedural History The Berks rolled over money from pre-existing IRAs to self-directed IRAs, with the…
Car and Truck Expenses Allowed Based on Mileage Not Actual Costs, Absent Records
In Aivatzidis v. Commissioner, T.C. Summary Opinion 2013-105, the U.S. Tax Court concluded that a professional driver could deduct expenses based on mileage, but not for actual expenses. This case provides an example of why drivers should compute car and truck expenses based on mileage if they do not have sufficient records. Facts & Procedural…
Insurance Agent Denied Depreciation Deduction For Airplane
In Brown v. Commissioner, T.C. Memo. 2013-275, the U.S. Tax Court denied an insurance salesman’s bonus depreciation deduction for his private jet as it was not placed in service in the tax year. The case highlights the highly factual nature of determining when an asset is deemed to have been placed in service for tax…
How the IRS Evaluates Offer in Compromise
In Zumo v. Commissioner, T.C. Summary Opinion 2013-66, the U.S. Tax Court examined a case involving the Internal Revenue Service’s (“IRS”) rejection of an offer in compromise based on doubt as to collectibility. An offer in compromise is a request by a taxpayer to settle their tax debt for an amount that is less than…
IRS Closing Agreement Valid If Not Reviewed by Joint Committee on Taxation?
In AM 20133301F, the IRS addressed the validity of a closing agreement that was not submitted to the Joint Committee on Taxation or JCT for review prior to signing the agreement. Facts & Procedural History The taxpayer was an insurance company whose tax returns were being audited by the IRS. The IRS and taxpayer asked…