Can an S corporation shareholder for a defunct business pay unpaid taxes in the current year, and have the defunct business deduct the payment in the current year? The court addresses this in Brown v. Commissioner, T.C. Memo. 2017-18. Most business owners may miss this deduction given that the business is no longer operating. Facts &…
Category: Tax
Tax
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Deducting Pre-Acquisition Stock Compensation
In Qinetiq US Holdings, Inc. v. Commissioner, No. 15-2192 (4th Cir. 2017), the court addresses the situation where a taxpayer acquired a target corporation and then claimed a substantial tax deduction for expenses the target corporation had paid prior to the acquisition. There are rules intended to prevent taxpayers from being able to deduct pre-acquisition…
Is a Bad Debt Deduction Triggered by Cease-and-Desist Court Order
Determining the allowable tax year for a loss is a common challenge for taxpayers, often relying on identifying a triggering event. There is very little guidance as to what can qualify as a triggering event for tax purposes. In the case of a cease-and-desist order from a state regulator, does it qualify as a triggering…
S Corporation Owner Subject to Self-Employment Tax
Taxpayers often establish Subchapter S corporations to avoid Social Security and Medicare taxes on a portion of their earnings. This is a very common arrangement. The Fleischer v. Commissioner, T.C. Memo. 2016-238, court case provides an example of how the Subchapter S corporation must be structured to avoid these taxes. Facts & Procedural History In Fleisher, the…
Using IRA Funds to Settle a Probate Dispute
Inherited IRAs can present a number of challenges. In Ozimkoski v. Commissioner, T.C. Memo. 2016-228, the court considered the tax implications of a withdraw from an inherited IRA that was used to settle a probate dispute with the couple’s son. The case shows what not to do when using IRA funds to settle a probate…
Tax Benefit Rule & Transfers at Death
A sole proprietor incurred a business expense. He dies in the same year. The business expense was for property that would last more than one year. Does the business owner’s estate have to report the amount of the deduction as income? This question is answered by considering the tax benefit rule. The court addressed this…
Tax Court Expands Innocent Spouse Relief for Divorced Taxpayers
Innocent spouse relief can allow a taxpayer to avoid joint liability for taxes that arose during the marriage. There is an exception for the would-be innocent spouse if they had actual knowledge of the item that resulted in the tax. The U.S. Tax Court addressed this limitation in McDonald v. Commissioner, T.C. Summary Opinion 2016-79,…
Court Considers Whether Moneygram is a Bank that Makes Loans
There are tax laws that provide significant tax advantages to banks. One of these laws allows banks to deduct capital losses against ordinary income. This allows banks to deduct losses immediately when others might have to carryover the loss to other tax years. There are other tax laws that are specific to banks. These laws…
TIGTA Suggests IRS Follow Transfer Pricing Roadmap
Transfer pricing is and has been the most significant and difficult issue the IRS audits. The audits are typically closed with the IRS agents proposing unreasonably large adjustments and IRS appeals sustaining a very low percentage of the adjustments. The IRS has not been very successful in litigating transfer pricing cases either. As a result,…
Does Changing Roof Mean No Facade Easement Deduction?
Donating the rights to change the facade of a building can qualify for a charitable tax deduction. The donation helps ensure that the historical significance of the building is not compromised. But what if you retain the right to change the roof to the building? Can you still qualify for a facade easement deduction? The…