Federal Income Tax Archives

The Non-Taxable Return of Capital

Our tax laws acknowledge that a return of capital doesn’t trigger income tax. The fundamental concept is that when property is taken away from a taxpayer and then returned to them, it doesn’t result in an increase in their net worth. Rather, their net worth is restored to where it was before, and since there…

Tax Implications of Debt vs. Equity in Related Entities

Investors who engage in successful ventures often also invest in less successful ones. In some cases, one venture ends up funding another. When a taxpayer operates through multiple legal entities, this can lead to numerous complexities. For example, “due to” and “due from” intercompany transactions raise questions, even if they do not involve international transfers.…

Recovering Taxes Paid for Another Party

If you pay tax for another party, can you recover the payment if the tax is not owed? The answer is generally “no,” as you cannot sue the Federal government unless it consents and it only consents in limited circumstances. One such consent is the ability to sue for a refund. The rules that allow…

IRS Guidance on Structuring Attorneys Fees

It should not be a surprise to learn that attorneys often hire tax attorneys to help them minimize their taxes. One popular tax savings strategy for attorneys is to structure their contingent fees. A contingent fee is a payment arrangement in which a lawyer provides services on the condition that payment will only be made…

Amount of 179D Tax Deduction for Building Designer

Congress often creates tax incentives, but it is up to the IRS and courts to determine their implementation and interpretation. The Sec. 179D tax deduction is an example of this. The statute provides broad concepts but lacks substance, leading to the courts playing a crucial role in determining its implementation and interpretation. The details matter…

Tax Court: Is Diabetes a Disability?

If you find yourself without a job or facing unemployment, one of the options you might consider is taking a distribution from your retirement account. This is especially true if you are disabled and need the income to pay for your living costs or even your medical care. These distributions often result in additional Federal…

About the Monetized Installment Sale

The monetized installment sale is a tax strategy that allows a party to sell an appreciated asset while deferring capital gains tax for an extended period of time and receiving a significant portion of the sale proceeds in cash. The strategy involves the use of an installment sale and a monetization loan, which allows the…

The Premium Tax Credit Trap

In an effort to reform health insurance, the government implemented a system where it would make payments directly to insurance companies on behalf of taxpayers through the use of premium tax credits. These credits were a part of the Affordable Care Act and intended to make health insurance more affordable for those who might not…

The Qualified Nonpersonal Use Vehicle

What Congress provides with one provision, it often takes away with another. This can result in legal challenges whereby the court creates exceptions. The exceptions can be modified and qualified by later legislation. This creates a labyrinth that one has to navigate to determine how an item is treated for federal income tax purposes. The…

Planning for Commercial Solar Tax Credits

The solar tax credit can significantly reduce Federal income taxes. Congress has recently reaffirmed its desire to spur these investments to curb reliance on foreign energy and to help the environment. As with most tax incentives, such as the research tax credit, there are a number of rules that have to be followed to be…