Loopholes

Our 2024 SUMMER EDUCATION SERIES was such a big hit that we've decided to bring you two BONUS webinars! Every webinar comes with free continuing education credits for those who qualify! Keep reading for more details...

What seemed to be a slow month turned out to have some intriguing developments, a new online petition generator for self-representeds, and new Judges joining the Tax Court bench (at long last).

Creativity on a tax return is a natural tendency. Many strategies and behaviors we know are wrong, e.g. not reporting all income. However, is it ever okay to disregard some deductions and pay more tax? At first glance, it would seem that the IRS should like the idea of more reported income and a higher tax liability attached to the additional income. The IRS does not.

A 2023 Tax Court decision upheld what many small business owners and tax practitioners have wondered about for some time. The court found that shareholders of an S corporation could exclude rental income paid to them by their S corporation for holding planning meetings in their homes. While the IRS and court found that the amounts charged by the shareholders were excessive, the court found the arrangement itself within the bounds of the law. This article examines this case and underlying law and when and how this is a planning idea worth pursuing, the limitations and unknowns involved, and the policy implications of this long standing exclusion. The case is Sinopoli, TC Memo 2023-105 involving the exclusion at IRC Section 280A(g).

Month's-end brought signs of things to come. Earlier we saw clarification of the non-jurisdictional limit in employee classification cases, a new IRS tactic in syndication conservation easements, and, as always, sharpeners for the practitioner's toolkit.

A really neat thing happens when you turn 70 and ½. Your IRAs essentially turn into donor advised funds if you don’t need all the money in them to make ends meet. Rather than withdraw money from your IRA to make charitable contributions, you can make them out of the IRA. So instead of an itemized deduction, you get an exclusion from adjusted gross income. For some people this might be a wash, but for most it probably isn’t. Besides the possibility of not being over the standard deduction threshold, there are a host of computations and thresholds that involve AGI. There are some things you need to watch out for, but first let’s go over the basics.

No dramatic developments this month, but some technical inputs worth noting. A good practitioner is always learning; it's so much better to learn from other peoples' mistakes than one's own.

Everything becomes a tax story eventually. That is what provides me with a lot of "I was today years old" experiences as tax stories are the one thing that I follow religiously. So I first learned about the field of Telephone Consumer Protection Act (TCPA) litigation from reading the proposed findings and recommended dispositions in the case of Ruben Escano v. Innovative Financial Partners LLC and Josh Benson. Innovative Financial Partners is a subsidiary of Humana.