Taxpayers who participate in their employer’s retirement plan are not able to deduct contributions the taxpayer makes to their IRA retirement account. This is also true for taxpayers who are entitled to participate in their employer’s retirement plan, but choose not to do so. In Colombell v. Commissioner, T.C. 2006-184, the court considered whether an…
Category: Tax
Tax
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Comparison: U.S. and France’s Approach to Small Business Taxes
In recent years, governments worldwide have been exploring new ways to address tax-related issues. For example, the French government, which reported a budget deficit of approximately 3% of its GDP, has proposed using the surplus tax revenues to exempt minimum wage employees working for small businesses from payroll taxes. This approach contrasts with the United…
Navigating the Deductibility of Investment Advisory Fees for Trusts
The tax treatment of investment advisory fees paid by trusts has become a hotly debated topic in recent years. The conflicting decisions of various circuit courts of appeals have led to discrepancies in tax treatment across different jurisdictions. While some courts have ruled that investment advisory fees paid by trusts are subject to the same…
Compensatory Damages May Not be Taxable
The tax code is an intricate and complex framework that governs the collection of taxes in the United States. While numerous provisions have been contested in courts, it is quite rare for a provision to be deemed unconstitutional, particularly for a tax code section that has already undergone substantial litigation. In the landmark case of…
Taxes & Limited Liability Companies
A Limited Liability Company (“LLC”) is a popular business entity choice for entrepreneurs and small business owners. It offers the flexibility of a partnership or sole proprietorship, while also providing limited liability protection for its owners. Once formed, LLC owners have the ability to determine how the entity is taxed for Federal income tax purposes,…
Estate Tax Valuation vs. Income Tax Valuation
Valuation often becomes a point of contention in tax disputes where the taxpayer asserts one value while the IRS puts forth another. The preferred valuation in disputes can vary depending on the circumstances. For instance, a higher valuation for buildings and building structures is advantageous when claiming depreciation deductions, while a lower valuation for real…
IRA Beneficiary Designation Planning Opportunities
Designating a beneficiary for an IRA may not be a top priority for most IRA owners, and even those who do give it some thought may not have planned it correctly due to the complex rules surrounding IRA beneficiary designations. However, as investments held in IRAs grow tax-free, it’s important to structure affairs so that…
Tax on Social Security Paid to Disabled Soldiers
Soldiers and military personnel have long been recognized for their service and sacrifices to their country, and as a result, society has generally agreed that they should be given certain privileges. These privileges often include access to free or reduced-cost education, health benefits, and retirement benefits, among others. For example, the GI Bill provides education…
Tax Withholding on Settlement Awards
There are quite a few court cases that address whether a lawsuit settlement award is taxable. Section 104 excludes some damage payments for income tax purposes. But what about withholding taxes? Assuming that the payment or award is taxable, can the award escape withholding tax? One might think that this turns on whether the award…
Estate Plans in Uncertain Times
As 2006 approaches, I can’t help but pause to think about our estate and gift tax regime. The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 changed the rules of the game. Following the enactment of EGTRRA, estate planners and tax attorneys went to work defining and clarifying how estate plans should be…