Long-term projects often lose money. They often do so for several years. This is the result of a project that needs capital to build infrastructure or to develop a new market or to capture market share. Taxpayers may be disappointed to learn that the tax losses coming from these long-term projects in the early years…
Category: Federal Income Tax
Federal Income Tax
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Bad Debt Deduction for Real Estate Lender for Non-Real Estate Loan
In the world of finance and investing, making loans is often seen as a relatively safe way to earn a higher rate of return than other investment opportunities. For many individuals, this means venturing into the realm of real estate loans, where they can use their expertise to evaluate the merit of investment opportunities and…
Court Addresses Tax Losses from Short-Term Rentals
Short-term rental properties are more popular than ever. Online services like Airbnb have made this possible. But how are tax losses from short-term rentals handled? Can the taxpayer use the rental losses to offset their non-rental income for tax purposes? The court addresses one aspect of these rules in Eger v. United States, 18-cv-00199-DMR (N.D.…
Court’s Take on How to Avoid the Interest Expense Limitation
Interest one pays is generally deductible for income tax purposes. For real estate owners who borrow against the value of their properties, the interest expense deduction is often one of their largest tax deductions. This tax deduction can be limited. The court in Lipnick v. Commissioner, 153 T.C. 1 highlights how one might avoid this…
Taxpayer Cannot Recoup Attorney Travel Costs
If the IRS wrongfully denies your refund claim and you are successful in litigating the matter in court, you are entitled to recoup some of your court costs. But what about the taxpayer’s tax attorney’s travel costs? And what if the travel costs were necessary as the tax issue was complex and a tax attorney…
Reporting Debt Discharged in a Court Settlement to the IRS
There are some circumstances where information has to be reported to the IRS, even though the information does not trigger a tax. But the potential problem can be that the information reporting triggers an IRS audit or other consequences. The Form 1099-C, Cancellation of Debt, form can have this effect. In PLR 201927005 the IRS…
Voluntary Sale In Advance of Forced Auction an Involuntary Conversion?
A taxpayer can generally avoid paying income tax on gain from the sale of property if the sale is an involuntary conversion. This typically involves a government act that takes or destroys the taxpayer’s property. There are a number of different types of property and takings that can qualify? But what about a local TV…
Recouping Tax on Marital Wages Repaid to Employer After Divorce
If a couple files a joint return and pays tax on the income they earn, but after they divorce it turns out that one of the spouses has to repay monies received in error, can the other spouse recoup their portion of the prior tax paid on the income? The claim of right doctrine may…
Non-Taxable Subsidy or Taxable Benefit?
Some payments are not subject to Federal income tax. State subsidies are an example. But what is the difference between a non-taxable subsidy and a taxable benefit? The court addresses this in Ginsberg v. United States, No. 2018-1788 (Fed. Cir. 2019), in the context of the New York state brownfield tax credit. Facts & Procedural…
IRS Not Limited in Collecting Restitution Assessments
The IRS is authorized to assess criminal restitution for certain tax crimes. This process allows the IRS to collect the criminal restitution as if it was a tax. The law authorizing these collections is relatively new and evolving. The recent Carpenter v. United States, 152 T.C. 12, case highlights why it is important for those…