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…
Tax Articles
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…
Rental Losses for Real Estate Agents
Real estate is a dynamic asset. It can produce passive income. With enough work, it can produce even more income. Hotels are an example. They are fundamentally a rental operation; however, the most successful hotels make more off of the related services than they do from their rental income. A successful hotel can be viewed…
Offer in Compromise: Documenting the Value of Assets
The IRS has a structured process for settling tax debts. This is handled through the IRS’s ‘offer in compromise’ program. The program itself has several different sections or workstreams. The primary workstream is the ‘doubt as to collectiblty’ workstream. This refers to offers that are submitted by taxpayers based on their inability to pay. Assuming…
Abate Tax & Penalties for 911 Attacks
Many taxpayers face unexpected challenges in their lives that can make it difficult to meet their tax obligations. For example, the death of a loved one or the trauma of a major event can have a significant impact on a person’s mental health and their ability to manage their finances. In such cases, individuals may…
Paying a Fee to an S Corp to Avoid Self-Employment Taxes
Sole proprietors and partners who provide services to their partnership business have to pay self-employment taxes on the income they earn from the business. Self-employment taxes include Social Security and Medicare taxes. The owner of the sole proprietorship is then able to deduct one-half of this amount in determining his federal income tax liability. Subchapter…
IRS Guidance on Whistleblower Informant Program
The IRS whistleblower program provides financial incentives for individuals to report tax fraud and evasion. However, the program has drawn criticism for delayed payouts and lack of transparency in processing claims. Recently issued IRS guidance aims to improve procedures by detailing a multi-step review process. However, questions remain about administering reward payments. This article examines…
Reliance on an Incompetent Tax Advisor
The IRS often imposes penalties for various tax return errors and omissions. Taxpayers may defend against certain penalties by showing reasonable reliance on professional tax advice. However, the competence and expertise of the advisor are key, as highlighted in a recent U.S. Tax Court case, Wilson v. Commissioner, T.C. Summary Opinion 2008-91. The case considers…