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.
READ MOREA 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).
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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.
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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.
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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.
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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.
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What one Judge called "the wrinkled skin of tax law" is on display in US Tax Court again. This month was a technician's bento box, a variety.
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We are so excited to announce the 2024 Summer Education Series! All summer long we will be bringing our loyal subscribers monthly webinars featuring some of the brightest minds in tax. Each webinar will feature our usual blend of high-quality education and entertainment and include continuing education credits for those who qualify. All of this is included in your regular subscription! Continue reading to see what we have in store...
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There are times when I really would like to know the story behind the story. And that is the case with CCA 202352018. The only good thing about not knowing the story behind the story is that I get to make one up. The CCA is about one of the funniest oxymorons in the tax field. It concerns an intentionally defective grantor trust (IDGT). That is serious competition for my favorite tax oxymoron – passive activities. Let’s start out with some background on IDGT. This piece is mainly for the income tax preparers who have to deal with the implications of this fancy planning rather than the fancy planners.
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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.
The gig economy involves more than one-off and part-time jobs. It also includes when you share your property in exchange for money. This can be a residential property, a vacation home, or even a vehicle. The gig economy has connected those who need rides and places to stay with owners via online platforms. We refer to this part of the gig economy as the share economy.
Accessing these accommodations is easy with the online platforms. But how the people participating should report their income isn’t quite as straightforward. Last time we looked at how your clients should report gig income, just like any other income made as a sole proprietor.
But making money from renting your property out is different, right? If you have clients with rental properties, you report their income on Schedule E (1040), Supplemental Income and Loss. We know from last time that we report gig economy income on Schedule C (1040), Profit or Loss from Business. So, how does rental income derived from the share economy get reported on a tax return? Every taxpayer’s favorite answer, it depends.
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).
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