Federal Income Tax Archives

Tax Planning for Start-Up Costs

New business ventures will typically incur losses in the first year or years. These losses can sometimes be used to offset the business owner’s other income. In a way, this tax loss offset and the tax savings is akin to an interest-free loan from the Federal government. Congress has imposed some limitations on this type…

Is a Divorce a Divorce for Tax Purposes?

Each state has its own laws. This includes laws that say how one gets married and how one gets divorced. State laws provide a method for accomplishing both acts. The laws of foreign countries usually have similar laws and processes. Religious bodies and affiliations have similar rules and processes. This raises some interesting questions as…

Is a Gift to a Former Employee Taxable?

Our gift tax rules impose a tax on certain transfers. This gift tax is required given our income tax rules. Absent a gift tax, taxpayers could simply sidestep income taxes by making non-taxable gifts to everyone rather than paying for goods and services. So what happens when a business makes a gift? Does the recipient…

COD Income: Do You Count Pension Payments?

If you have a right to receive $1 in the future, is that right an asset? Our tax laws would generally say that it is. What if you cannot assign the right to receive the $1 and you cannot accelerate the payment? At what point is the right to receive the $1 not an asset…

Unpacking the Moving Expense Deduction

There are several issues that the IRS frequently challenges on audit. For individual taxpayers, this includes moving expenses. Taxpayers are entitled to deduct moving expenses. Our tax laws impose several limitations on what expenses can be deducted and when. The recent Doyle v. Commissioner, Docket No. 6532-20S (2021) case provides an opportunity to consider these…

Using an Old NOL Carryforward

The things we take for granted these days. If you are younger than me, you may not realize it but there was a significant change that happened in the 1990s. Personal computers were just starting to actually be useful in the workplace. The ability to type and use a 10-day calculator were sought after job…

Enough is Enough, But An Amended Tax Return is Not

The process for reporting taxes can be more difficult than discerning whether a tax provision applies. This complexity stems from the level of information is required to be reported. The IRS reporting requirements continue increase every year. The IRS’s decision to require partnership tax capital accounts is an example. Why is that information required and…

Fixing Self-Directed IRA Errors

There are ways to structure transactions to avoid income taxes. Creative taxpayers and tax attorneys have used qualified retirement accounts for this purpose (the tax savings from ESOPs is an example). One has to be careful when structuring transactions involving these qualified plans. Given the flexibility in the rules and the absence of financial advisors,…

Hobby Loss vs. Start-Up Expense?

Just about every business starts out with losses. This is the nature of start-ups. The activity will either gain traction and produce income and possibly a profit or, eventually, the activity end. This is basic economics and capitalism at work. The U.S. economy is based on these concepts, allowing would-be entrepreneurs the opportunity and motive…

Tax on Damages for Loss of Consortium

If you’ve received damages from physical injuries or sickness, you don’t have to pay tax on the settlement or award. But what if others are also making ancillary claims in the same lawsuit? The case of the taxpayer-husband being injured and the taxpayer-wife making a claim for loss of consortium raises questions about the tax…