Our tax laws make a distinction between income and losses attributable to capital assets. The distinction draws a line in the sand. Assets that are capital produce capital gain and losses. Other assets do not. This in turn has a number of other impacts, such as on the timing of when income and losses are…
Category: Tax
Tax
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When Does the IRS Issue a Lock-in Letter?
When Does the IRS Issue a Lock-in Letter? Many taxpayers get behind in paying the IRS as a result of IRS audits. Others have tax balances as they are self-employed or contractors and they simply do not make estimated payments. There are others who owe tax as they instruct their employers to withhold too little…
Sale of Residence: Poor Financial Decision
We all have financial ups and downs in life. Some of these ups and downs are due to circumstances beyond our control. Be it good luck, bad luck or something else. Many of these circumstances are not foreseeable. There are also circumstances that are due to our own making. Be it poor financial decisions or…
Tax Planning for Start-Up Costs
New business ventures will typically incur losses in the first year or years. These losses can sometimes be used to offset the business owner’s other income. In a way, this tax loss offset and the tax savings is akin to an interest-free loan from the Federal government. Congress has imposed some limitations on this type…
Is a Divorce a Divorce for Tax Purposes?
Each state has its own laws. This includes laws that say how one gets married and how one gets divorced. State laws provide a method for accomplishing both acts. The laws of foreign countries usually have similar laws and processes. Religious bodies and affiliations have similar rules and processes. This raises some interesting questions as…
Is a Gift to a Former Employee Taxable?
Our gift tax rules impose a tax on certain transfers. This gift tax is required given our income tax rules. Absent a gift tax, taxpayers could simply sidestep income taxes by making non-taxable gifts to everyone rather than paying for goods and services. So what happens when a business makes a gift? Does the recipient…
COD Income: Do You Count Pension Payments?
If you have a right to receive $1 in the future, is that right an asset? Our tax laws would generally say that it is. What if you cannot assign the right to receive the $1 and you cannot accelerate the payment? At what point is the right to receive the $1 not an asset…
Unpacking the Moving Expense Deduction
There are several issues that the IRS frequently challenges on audit. For individual taxpayers, this includes moving expenses. Taxpayers are entitled to deduct moving expenses. Our tax laws impose several limitations on what expenses can be deducted and when. The recent Doyle v. Commissioner, Docket No. 6532-20S (2021) case provides an opportunity to consider these…
Are Funds Advanced to Third Party Subject to Tax?
With a cash basis taxpayer, the general rule is that the taxpayer recognizes gross income when money is received. But what if the taxpayer holds money on account for others? This is a common practice. These transfers may include deposits, advances, etc. It can even include funds held in trust for the benefit of a…
Using an Old NOL Carryforward
The things we take for granted these days. If you are younger than me, you may not realize it but there was a significant change that happened in the 1990s. Personal computers were just starting to actually be useful in the workplace. The ability to type and use a 10-day calculator were sought after job…