It can be difficult to separate qualified and nonqualified research in computing the research tax credit. The research tax credit rules are generally applied to the “project,” but the term “project” is not even mentioned in the Code. The Trinity Industries, Inc. v. United States, 691 F. Supp. 2d 688, (N.D. Tex. 2010), case provides guidance…
Tax Articles
Research Tax Credit: Taking Expenses for Depreciable Property
The IRS exam function often raises a number of questions about the rules for claiming expenses for depreciable property for the research tax credit. The recent TG Missouri Corporation v. Commissioner, 133 T.C. 13, provides much needed clarity in how to apply these rules. Facts & Procedural History TG Misouri is in the trade or…
Termination Payments to Insurance Agents: Capital vs. Ordinary
When insurance agents exit the business, are termination payments considered capital gains or ordinary income for tax purposes? The characterization can mean thousands in potential tax savings or liabilities. The Lendard v. Commissioner, T.C. Summary Opinion 2009-165, case addresses this issue. It involves an agent who challenged the IRS’s treatment of his termination proceeds. The…
Foreign Branch Income & the Research Tax Credit
The research tax credit is one of the most complicated provisions in our tax code. The international tax law aspects of this credit are even more difficult to follow. In Deere & Company v. Commissioner, 133 T.C. No. 11, the U.S. Tax Court considered whether income from foreign branches must be included in the gross…
Per Diem for Truck Drivers (Explained)
Truck drivers are on the road and focused on driving. They do not have access to an organized office or have time to stop and process paperwork. So they are an easier target than some other types of taxpayers. This is why truck drivers are frequently targeted by IRS auditors. Truck drivers also earn above-average…
IRS Appeals Does Not Have to Hold Open CDP Hearing
Our system of income taxes is based on arbitrary deadlines. Income and expense are counted and tax computed on a set interval, whether calendar year, fiscal year, or a 52-53 week tax year. Tax returns are filed three, four, nine or ten months later. Audits have to be done within three years usually unless extended…
Taxpayer Can Pick & Choose Between Regulations
In FedEx Corporation v. United States, Dkt. No. 08-2423, the U.S. District Court for the Western District of Tennessee concluded that FedEx could rely on the internal use software provisions in the 2001 Final Regulations and the taxpayer-favorable discovery test in the 2003 Final Regulations in computing its research tax credit. The taxpayer did not…
Standard for Research Activities for the R&D Tax Credit
In United States v. McFerrin, 570 F.3d 672, the Fifth Circuit Court of Appeals concluded that the trial court applied the wrong standard for determining what research is qualified and failed to estimate the amount of research expenses for the research tax credit. Contents1 Facts & Procedural History2 The Trial Court3 The Standard for Qualified…
Innocent Spouse Relief Granted Despite Knowledge of Error on Return
Innocent spouse tax relief can provide a remedy for spouses who are liable for taxes reported on a jointly filed income tax return. It is an equitable remedy. But is it available if the tax is due to an obvious error on the tax returns that the spouses both signed? The court addressed this in Denton…
Truck Driver Not Entitled to Deduct Meal and Supply Expenses
Truck drivers are an essential part of our economy, transporting goods across the country to keep businesses running smoothly. Trucking expenses can add up quickly. This puts truck driver tax deductions high on the list of concerns for most truckers. Truck driver tax deductions are expenses that can be deducted from taxable income, reducing the…