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. Facts & Procedural History Arthur R. McFerrin (“McFerrin”) is a prominent chemical…
Category: Tax
Tax
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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…
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…
Refunds After Innocent Spouse Relief Granted
Married couples who file joint tax returns are both liable for any deficiencies or underpayments. But if one spouse qualifies as an “innocent spouse,” they can be relieved of the tax burden. An important question arises – if an innocent spouse previously paid the joint tax debt, are they entitled to a full refund? A…
Litigation Settlements & the Limiting Deductions Involving Fraud
Our tax system is based on an arbitrary calendar or fiscal year. It measures income and expense and applies various rules based on this arbitrary period of time. This can create complications, as the arbitrary time may not capture the true essence of what is going on. Take the case of civil litigation where the…
Income Tax Consequences for Gift Cards
Gift cards remain a popular offering, with sales exceeding $200 billion annually. But when must retailers recognize income from gift card sales for tax purposes? Can related deductions be taken immediately, or only as gift cards are redeemed over time? Get it wrong, and businesses face cash flow headaches or penalties. The IRS Office of…
Reporting ESPPs and ISOs to the IRS: What You Need to Know
Stock acquired as part of an employee stock purchase plan (ESPP) and incentive stock options (ISO) can have significant tax consequences for the recipient employee. If you don’t know what these plans are, you are not alone. You probably have no reason to know about these concepts unless you or a family member work for…
Is Alimony Tax Deductible & Related Tax Disputes Involving Alimony
Alimony can be a complicated and contentious issue in divorce proceedings, particularly when it comes to taxes. If payments qualify as alimony pursuant to federal tax law, the payments may be tax deductible by the payor spouse and included in gross income to the payee spouse. Conversely, if the amounts are not alimony for federal…