If you own real estate, you’re no doubt familiar with that wonderful paper loss called depreciation. But you may not be entirely aware that land cannot depreciate. Alas, you must delete part of the price you paid for your real estate land from your original purchase price to generate your tax deduction. A cost segregation study might be the answer. The study, done by an engineer, can accurately allocate the cost between building and land. This price of the allocation can be cost-justified; after all, it can save you tax. But at lower depreciation amounts, the benefits might not outweigh the cost, or, if you’re a tax pro, your client might not believe it does. You’ve still got a tax return to do. Regulation 1.167(a)-5 tells us that we have to do something: In the case of the acquisition on or after March 1, 1913, of a combination of depreciable and nondepreciable property for a lump sum, as for example, buildings and land, the basis for depreciation cannot exceed an amount which bears the same proportion to the lump sum as the value of the depreciable property at the time of acquisition bears to the value of the entire property at that time. It doesn't really give us much guidance. But you may have seen online or heard somewhere about the old 80/20 rule. That’s right, the tax law says 80 percent of cost gets allocated to the building with the remaining going to land. Only, hold on a second, I can’t find a citation for that one. Is it possible there is no such rule? Then again, Reilly’s 19th Law of Tax Planning says that Reilly uses sarcasm when discussing tax. For the truth about this rule, continue reading here.

Most businesses require the purchase of equipment or other property to help generate income. How you deduct the costs of these business assets depends on what it is and how long it will be useful (what are called asset classes and the Business Use Percentages (BUP)). In some situations, you can deduct the full cost of the asset the year you buy it, rather than depreciating it over time, but many times you are deducting a portion of what you paid for the property each year you have it. Fixed assets are assets that have a useful life of more than one year and/or are not expected to be converted to cash within a year (those types of assets are current assets). Land, buildings, furniture, and equipment (including vehicles) are the most common types of fixed assets for businesses. Fixed asset listings are records of the costs of business property and what tax deductions or improvements have been made over time. Unfortunately, these lists can get quite messy and confusing over time, especially the longer a business is in operation, and the more frequently you have changed tax professionals. What most business owners (and even their tax advisers) don’t know is that there are often thousands in tax savings contained on these lists, especially when they are messy or confusing. There are four savings opportunities buried in these records and what you do with them can result in less cash to the IRS. Continue reading to learn more.

Every year, tax courts hear more than 600 federal tax cases, mostly by the U.S. Tax Court. The vast majority are trial court decisions, again, mostly from the U.S. Tax Court, but also district courts throughout the U.S. Independent of the IRS, the court hears cases relating to income, estate, and gift tax and its rulings can be used as precedent for better interpreting the laws. It practically can provide a roadmap as to what the judges are looking for in defense of a taxpayer’s claim or position. Among the Tax Court decisions, most are memorandum and summary opinions focused on figuring out facts so practitioners can apply the proper law. Annually, we might see fewer than 50 regular Tax Court decisions involving a new interpretation of the tax law. But this still leaves a lot of potentially significant cases in attempting to identify the top 10federal tax cases dating back to the start of our modern income tax in 1913. Which are the most significant? That all depends on you and what you are trying to learn from each case. When it comes to tax planning, read on to learn about the top 10 cases of all time.

I’ve been spending too much time thinking about wrapping. You might picture presents neatly wrapped under a Christmas tree, or surprise birthday gifts next to the cake, but I’m thinking of something very different: cryptocurrency token wrapping. A wrapped token is a token that represents a cryptocurrency from another blockchain or token standard. A wrapped token can be used on certain non-native blockchains and redeemed in the future for the original currency. It is typically worth the same as the original cryptocurrency, but when it isn’t, the question arises that when you exchange virtual currency for other property (including other virtual currency) is there tax due, and if so, how much? Like many areas of cryptocurrency tax, the IRS has yet to issue guidance on this topic, resulting in taxpayers having to fend for themselves. The primary question you need to answer is, “Is wrapping cryptocurrency a realization event?” The answer to this question will influence the ultimate tax treatment. Keep reading to learn more.

It seems so simple, right? You open an account and as you complete the paperwork, you enter something on the line labeled “Beneficiary,” and that’s that. But how many accounts are there? What about other assets? What about, well, life? Because life happens, it can have odd effects on the distribution of assets. This is a cautionary tale of unintended consequences and a reminder to review your beneficiary designations, if not annually, at least every time you experience a major life event. Consider a retired couple one of whom has a large 401(k) (or similar) account. Both have Social Security and true pensions, as well. Typically, the Social Security and pension benefits will end with the death of the individual. The 401(k), however, remains and the listed beneficiary is the spouse. The beneficiary spouse dies before the spouse with the 401(k). Upon the death of her spouse, the account holder creates a will using a popular online tool, which does not advise her to review beneficiary designations on her bank, brokerage, and retirement accounts. Keep reading to learn what to check, when, and how to avoid what goes wrong.

Question: How can my rental real estate property qualify for the 199A QBI deduction? Answer: The age-old CPA answer of “it depends” certainly applies here. To qualify for the 20 percent deduction, your enterprise has to, as a threshold, be a trade or a business. So whether a real estate rental is a trade or a business is a thing that matters like… Can analysis be worthwhile? Real estate management companies that want to distinguish themselves should be looking at IRS Notice 2019-07. That is the main lesson of today’s post, but it also applies to tax preparers and self-sufficient owners. There is something new to keep track of, and it is a lot easier if you do it as you go rather than after the fact. I’ve got something here for preparers and property managers, when acting sooner rather than later will be helpful. It’s theory is it is easier to collect information actively when it is fresh, rather than a year or more later as often happens in tax work. Click here to continue reading.

Tax Court Docket 26425-21 can serve as a wake-up call to your clients who have been dabbling in cryptocurrency. TaxNotes has published the petition if you want to know the name and profession of the taxpayer involved, but I am just going to call him Joe. Joe is doing pretty well in his profession. Just for the heck of it he decided to dabble in crypto. He never had more than ten to fifteen thousand dollars invested in crypto. What could possibly go wrong?

The Employee Retention Credit is worth big bucks. Qualifying companies can get significant relief money – sometimes millions of dollars. So, it was no surprise to me when I heard some outlandish eligibility statements such as “the national emergency declaration counts” or even some “every business gets it” claims. There is a lot of desire to qualify out there and plenty of credit consultants looking to make money. But recently I have heard a different argument from multiple sources which has intrigued me. The argument is dressed up much better and almost looks legitimate. Here is a summary of how the line of thinking goes: OSHA rules mandate compliance with CDC guidelines creating partial suspension eligibility for ERC. I call it the “OSHA argument.” That thinking has not set well with some – particularly as the argument results in qualification for every business for all of 2020 and 2021. Red states have had little or no restrictions in 2021 and even deep blue states generally lifted their restrictions in the spring of 2021. But conveniently, the OSHA argument would mean state and local orders do not need to be reviewed at all as a national order is in place. For a consultant charging a percentage of the ERC, they can sell this service now to everyone and avoid the headache of eligibility discussions. Let’s take a closer look at this argument and reasons why it does not work.