If you get something returned to you, you generally do not pay income tax on the return. You just get your property back. It can be difficult to tell whether you are getting your property back or getting some other property back. Is there a difference? Or should there be a difference? The court grappled…
Category: Federal Income Tax
Federal Income Tax
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IRS Clarifies Real Estate Broker 1099 Filing Requirements
The IRS relies on voluntary compliance from taxpayers, meaning that most people follow tax laws willingly. However, noncompliance can result in penalties, making it an incentive for individuals to comply. To help identify potentially taxable transactions, third parties are required to file information reporting forms with the IRS. For instance, real estate sales typically require…
When Tax-Free IRA Rollovers as Short-Term Loans Fail: Two Examples
Taxpayers often withdraw funds from their IRAs to cover short-term expenses with the hope that they can put the funds back in their IRA within the 60-day window for making a tax-free IRA rollover. This can work out well when taxpayers put the funds back into their IRAs within 60 days. When taxpayers miss the…
What is a “Foreign Country” for Income Tax Purposes?
United States citizens are subject to tax in the U.S. on their worldwide earnings and income. This includes wages earned for work performed in foreign countries. There are exceptions to this treatment, such as the provisions of tax treaties. The other exception involves the foreign-earned-income exclusion. This exclusion allows individual taxpayers to exclude income earned…
Taxation of Employer-Provided Education: A Look At Section 127 Plans
Section 127 plans are often overlooked by both employers and employees as a valuable tax benefit. Despite their potential advantages, many taxpayers fail to take advantage of these plans, which allow employers to deduct educational expenses for their employees, up to $5,250 per year, and employees to exclude these amounts from their taxable income. This…
Taxing Online Video Game Earnings
The advent of virtual worlds like Second Life and online video games has created a new form of commerce that raises a complex issue for tax professionals: should online earnings from virtual businesses be taxed? The compensation for these businesses is paid in virtual currency, which can be converted to U.S. dollars. While traditional U.S.…
Documenting a Non-Compete Allocation
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…
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…