The importance of planning and documenting transactions is a critical aspect of tax law that can impact taxpayers across various industries and transactions of all sizes. It is a lifesaver when the IRS attacks. Documenting transactions can help taxpayers provide evidence of the details of the transaction, such as the parties involved, the terms of…
Category: Federal Income Tax
Federal Income Tax
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The Hobby-Loss Grouping Rules
The IRS is not a government agency. It does not have to earn a profit. It does not even have to be concerned about keeping basic books and records. Unlike the standard that it imposes on even the smallest of business taxpayers, the IRS cannot produce anything close to a simple profit and loss statement…
The Section 44 Small Business Disabled Access Credit
The Section 44 small business disabled individuals tax credit provides a tax incentive to comply with the Americans With Disability Act of 1990 (“ADA”). There is very little guidance for the tax credit, which makes it hard for taxpayers to plan for this tax incentive. The recent Arevalo v. Commissioner, No.05-61129 (5th Cir. 2006), case provides an…
Late Section 475(f) Election and Section 9100 Relief
Those who are traders in securities or commodities can make a mark-to-market election. This election can allow the trader to immediately deduct losses each year and avoid the wash sale rules. But many traders do not know about this election and only learn of it after it is too late to benefit from it. Even…
Part-Time Employee Not Entitled to IRA Contribution Deduction
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…
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…
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…