Court’s Take on How to Avoid the Interest Expense Limitation

The Importance Of Accounting For C Corporation Expenses

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

Avoiding Hobby Loss Limits For Long-term Projects

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…

The Sec. 179D Government-Owned Building Allocation

Can Defective Deed Defeat Irs Estate Tax Lien?

Section 179D provides an incentive for building owners to install energy efficient systems. The IRS released CCA 2018-005, which addresses one of the controversial aspects of Sec. 179D–namely, the ability for government building owners to allocate the deduction to the designer of the energy efficient property. About Section 179D Section 179D was enacted in 2005,…

How to Allocate Tax Basis for Real Estate

Can Defective Deed Defeat Irs Estate Tax Lien?

If you sell real estate, you pay tax on the gain. Gain is the product of the sales price less tax basis. Tax basis in turn is the amount invested in the property. But how do you calculate and then prove tax basis for buildings located on the property when you sell some but keep…

Retaining Rights With a Charitable Conservation Easement

Retaining Rights With A Charitable Conservation Easement

Conservation easements can result in significant charitable deductions for real estate owners and investors. But can an owner or investor retain rights to the property and still get the charitable deduction? The courts continue to define when this is possible. The Pine Mountain Preserve LLLP v. Commissioner, 151 T.C. 14, case is the latest case…

Court Clarifies Inventory Capitalization Rules for Producers

Court Clarifies Inventory Capitalization Rules For Producers

There are a few items that are low hanging fruit that make for easy adjustments for IRS auditors.  The adjustment for indirect costs is an example of such an adjustment that can be made for any taxpayer that has inventory.  The recent Patients Mutual Assistance Collective Corporation v. Commissioner, 151 T.C. No. 11 (2018), case provides…

Party Like its 2017: Deductible Entertainment Expenses

Party Like Its 2017: Deductible Entertainment Expenses

Entertainment expenses are deductible but the deduction is limited to 50 percent of the amount spent. There have been a number of disputes between taxpayers and the IRS as to what counts as a limited entertainment expense. The law was recently changed such that entertainment expenses are no longer deductible.  This change to full disallowance…

Conservation Easement Denied for Private Golf Course

Conservation Easement Denied For Private Golf Course

Tax benefits can cause investors to put money were they otherwise would not.  The conservation easement is one example.  Conservation easements reward investors with charitable contribution tax deductions for putting money into projects that conserve real property.  The charitable deductions can be very large in relation to the amount invested.  The recent Champions Retreat Golf Founders,…

Line of Credit Standby Fees, to Deduct or to Capitalize?

Line Of Credit Standby Fees, To Deduct Or To Capitalize?

Many businesses rely on a standby line of credit to cover their expenses, to weather downturns, and to grow.  But this credit can be expensive in terms of interest and fees. The fees can be problematic as they may not be deductible for federal income tax purposes at the time they are paid.  The IRS…

Deducting Fringe Benefits for Family Members

The Trade Or Business Requirement For The Sec. 199a Deduction

Small business owners often look for ways to reduce their taxes.  With family businesses, these plans often involve employing the owner’s children.  This raises the question of whether a small business owner employ their children as independent contractors and deduct seemingly personal expenses for the children as fringe benefits if the children did in fact…