Federal Income Tax Archives

Captive Insurance Tax Deductions Denied, No Risk Distribution

Insurance premiums go up and then they go up some more. The amounts can be substantial. This is particularly true for businesses that offer insurance to employees or that insure more types of risks. And many business owners note that while they pay substantial insurance premiums, the insurance companies often do not have high payouts.…

Split-Dollar Insurance Failure: Income and No Tax Deduction

Business owners frequently seek ways to maximize tax deductions while providing benefits to key employees. Life insurance arrangements can play a part of this strategy. Life-insurance related strategies can be particularly useful if they come with significant tax advantages and help the parties meet their financial goals. However, the line between legitimate business expenses and…

Business Advances in Revenue-Sharing Deals Not Deductible

Government agencies and non-profits often enter into business arrangements with private companies that, ultimately, are structured as a percentage of revenue. This approach frequently replaces traditional fixed payments like rent or management fees. The typical example involves a building that a business owns and leases to a government agency or non-profit. The business collects a…

Probate Estate Can Serve as a Condit for Retirement Assets

When estate planning involves retirement accounts, most advisors recommend naming beneficiaries directly to avoid probate delays and preserve tax advantages. Surviving spouses typically receive the most favorable treatment under the tax code, with the ability to roll over inherited retirement assets into their own accounts and defer distributions based on their own life expectancy. However,…

No AutomaticDenial for ERC Claims Below 10% Threshold

The IRS has called out improper Employee Retention Credit claims filed by taxpayers and their advisors. It has also failed to pay many valid claims, even to this very day. The IRS has taken a position that ERC claims based on partial shutdown due to government orders require a 10 percent reduction in gross receipts…

Can You Create Deductions by Forgiving Debt to Your Own Entities?

Business owners with multiple entities often transfer funds between their companies. These transfers are often accounted for in an inter-company account. In other instances, they may be structured as loans. When financial difficulties arise, these intercompany loans might be forgiven. If this is the case, can the borrowing entity exclude the forgiveness income while the…

Real Estsate Construction Delays Kill Tax Deductions

Real estate investors regularly pursue new ventures that require substantial upfront investments before generating any revenue. A successful investor might purchase land for a luxury resort, spend hundreds of thousands on architectural plans and permits, and begin construction on facilities designed to serve paying customers. These early expenditures represent legitimate business development costs, incurred with…

Converting a House to Rental Use

One of the more popular ways to build wealth with real estate is to buy a house with a loan, move into it, fix it up, and then borrow against the higher value of the property to obtain a down payment for a second house. The trick is often to add sweat equity to increase…

Can Judge-Made Doctrine Override Tax Deductions Allowed by Congress?

The tax code provides specific rules for when taxpayers can claim deductions for losses. These are rules enacted by Congress. There are other so-called “judicial doctrines” that allow the courts to override the rules set by Congress. There are several of these that frequently come up in tax disputes, such as the economic substance doctrine…

Distributions From Forfeited IRA are Not Taxable

You commit a crime, you are convicted, and you do your time. Then the IRS steps in to collect taxes. The IRS takes your assets to pay the tax that arose from your criminal activity. As part of this, the IRS seizes your IRA funds. Are you responsible for paying income taxes on the IRA…