Federal Income Tax Archives

Taxpayer Can Pick & Choose Between Regulations

In FedEx Corporation v. United States, Dkt. No. 08-2423, the U.S. District Court for the Western District of Tennessee concluded that FedEx could rely on the internal use software provisions in the 2001 Final Regulations and the taxpayer-favorable discovery test in the 2003 Final Regulations in computing its research tax credit. The taxpayer did not…

Standard for Research Activities for the R&D Tax Credit

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…

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…

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…