Edition 29 Archives - Think Outside the Tax Box

Edition 29

By Annette Nellen, CPA, CGMA, Esq.

Top 10 Federal Tax Cases and Relevance to Practice

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.


Is Wrapping Cryptocurrency a Realization Event? Don’t Overpay!

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.

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Just Good Business – Review Your Beneficiary Designations

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.

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Notice 2019-07 250 Hour Requirement – What It Means and How to Meet It

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.

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