The Taxpayer First Act of 2019 made several changes that impact how tax cases are handled. We are just now seeing some of these changes play out administratively and in court. The recent Bacigalupi v. Commissioner, Docket No. 20480-21 (U.S. Tax Court 2022) is an example of this. It is an innocent spouse case that…
Category: Tax
Tax
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Partnerships Have to Maintain Accurate Capital Accounts
One of the tax benefits of partnerships is that they are flexible. The parties can agree to differing terms and the values and dollars associated with those terms can be trued-up in subsequent years. The allocation of profit and loss provisions provides an example. Depending on their agreement, the parties can allocate profits and losses…
Reasonable Cause & Reporting Charitable Donations
The IRS is tasked with enforcing our tax laws. The task should be to ensure “substantial compliance” by taxpayers. But all too often the audit process is nothing more than the IRS examining a handful of go-to-adjustment issues. These go-to-adjustment issues involve tax laws that Congress passed that leave room for interpretation. These issues often…
Overcoming the IRS’s Constructive Dividends Argument
Those who own C corporations have to be careful about what amounts are paid out to or benefit the corporate shareholders. This is particularly true for closely held and family corporations. On audit, the IRS will often assert that these distributions are constructive dividends. This is usually a bad answer for taxpayers as it increases…
The Late S Corporation Election
The Subchapter S corporation remains a popular choice of entity for small and medium-sized businesses. This is true even after the TCJA of 2017 lowered the income tax rate for C corporations to 21 percent. Unlike many other changes made by the TCJA, the 21 percent flat corporate rate is permanent. It is not going…
Married Filing Separate Spouse Liable for Tax
Marriage presents a number of difficult tax questions. One question is whether both spouses can be held liable when they file separately and one spouse fails to pay their taxes. This is a common marriage tax question that we are asked. One might think that the married filing separate status fully protects the other spouse.…
IRA Excess Contribution Tax for Stock Sale
There are a lot of unanswered questions when it comes to the tax rules for IRAs and other qualified plans. IRAs and qualified plans can shelter a significant amount of income from tax. Defined benefit plans are an example. A business owner can contribute and shelter up to $245,000 in these plans in 2022. This…
Website Development Tax Deductions & the Start-Up Rules
There are several tax laws that have to be considered to determine when and how costs to develop websites are deductible. These expenses are almost always deductible. These tax laws raise timing questions. It’s a matter of when the expenses are deductible. For those who are developing website businesses as side-hustles, the issue takes on…
IRS Substantiation for Charitable Contributions & Gifts
Our tax laws allow a deduction for contributions and gifts made to charities. The idea is that the charity is relieving the government of some service or function that the government would have to otherwise have provided. The amount of the charitable contribution deduction can be significant. This benefit has been part of tax planning…
California Taxes Out-of-State Trusts for Out-of-State Asset
A record number of taxpayers have moved from California to other states, such as Texas. With advance tax planning, this type of move can produce significant tax savings. The savings can be had year after year. This type of move can also help avoid the audit and appeals process in California. This alone is worth…