Pedants will argue that you shouldn't refer to Code Section 183 - Activities not Engaged in For Profit as the "hobby loss rule", because the word hobby appears nowhere in the statute. The pedants scored a point in 2021, but I will still be sticking with the term. It looked like a slow year for hobby loss developments, but we finished with two major cases including a big taxpayer win. Let’s take a look.

It is the best of times, it is the worst of times – and charity cannot only help those in need; it can provide some hefty tax deductions to the donor, as well.

2021 had been shaping up to be a pretty slow year in the hobby loss arena until September. Then not long after Labor Day we got a revision of the audit technique guide Activities Not Engaged in for Profit Audit Technique Guide Internal Revenue Code Section. The previous update was issued in June 2009. The two documents are nor radically different, but there are some things worth noting. I will start off with some background on Section 183, but first I will introduce you to a likely target of the revenue agents boning up on the new guide.

Practically overnight, cryptocurrency has gone mainstream, with more and more investors funneling money into Bitcoin, Dogecoin, and other cryptocurrencies. The IRS has responded with increased interest and scrutiny, demonstrated by the addition of the cryptocurrency question on the front page of 1040. Whether you have invested in cryptocurrency or not, you are required to answer this tax return question. Many investors choose to take the most conservative position to avoid future correspondence from the IRS but trying to avoid a letter is no reason to pay more tax than necessary. Keep reading to learn more!

Companies that specialize in the Credit for Increasing Research Activities (also known as the R&D tax credit) sell hard to our clients. During tax season they are online looking for businesses who may qualify for this credit—especially startups. They cast an extremely wide net that has the potential for a lot of bycatch. While it’s true that the R&D credit is often overlooked by small businesses and their return preparers, it’s not as easy to qualify for the credit as some of these companies want small business owners to believe. Savvy tax professionals can help to ensure that their qualifying business clients receive the benefit of this credit while avoiding situations that would make them ineligible for it.

It seems like the left and the right have entered into a competition as to which side can make the silliest tax observation. The New York Times came out strong for the left as its team of reporters was handed fragments of Trump’s 1995 tax filings. They proceeded to “explain” flow-through entities and net operating losses, fairly mundane tax concepts, as if they were tools of Satan. It did not take long for the right to strike back at least as imprudently.

There are some significant lessons in the recent decision in the case of Estate of Michael Connelly. Sorry to spoil the surprise, but what I think the big one is is that co-owners of S corporations (and other sorts of entities) should consider a cross-purchase rather than redemption when they have a buy/sell agreement. That is particularly true if life insurance funds the arrangement. Keep reading to find out why.

It’s not often that we get to wave a magic wand and turn a taxable transaction into a non-taxable transaction, but partnership taxation offers us this opportunity. Partnership taxation is extraordinarily flexible and combines tax-favored aspects of both corporate entity taxation and individual taxation. Proper planning and use of this flexibility can actually turn a contribution in return for a partnership interest from a recognition event that results in taxable income to you to a non-recognition event that merely adds to your basis in the partnership. The difference between contributing services versus property for a partnership interest is huge. Contribute services, and you have taxable compensation. Contribute property, and you have a non-recognition event. Determining whether your contribution is classifiable as property rather than services saves a ton in tax. Keep reading to learn how.