Guest Article

A recently filed lawsuit against CohnReznick opens a window into a niche form of tax practice – compliance and planning around the Low-Income Housing Tax Credit . The case highlights a current controversy between investors seeking returns and not-for-profits seeking to insure continued affordability and their own interests to be just a bit cynical. We get to discuss some obscure tax issues and reflect on the question of who it is that is actually your client.

The story of Scott M. Hoensheid’s charitable planning gone awry as related by Judge Joseph W. Nega of the United States Tax Court is an interesting one. Click here to continue reading…

Beanie babies, Pokémon cards, POGs, and digital pictures of monkeys on the internet, one of these things is not like the others. All these are items that people may collect or at least have collected in the past. Maybe they were just collecting for fun, or perhaps they acquired in hopes of selling their items in the future for a profit. However, the IRS has highlighted only one of the items on this list as potentially being a collectible. A non-fungible token (NFT) “is a unique digital identifier that is recorded using distributed ledger technology and may be used to certify authenticity and ownership of an associated right or asset. Ownership of an NFT may provide the holder a right with respect to a digital file (such as a digital image).” NFTs run the gamut from bored apes (computer generated pictures of monkeys that sell for hundreds of thousands of dollars, not to be confused with board apes, which are monkey pictures on sandwich and surf boards and do not sell for hundreds of thousands of dollars) to Ruish Bronzelight (a DeFi Kingdoms online video game Warrior Wizard we met in “Tax Planning for DeFi Based Games”), and even event tickets (especially popular with crypto conferences). There is even at least one CPA who sells access to his tax practice via NFT. Click here to continue reading…

At its peak, Alphonse (Al) Capone’s criminal empire was worth approximately $1.3 billion when adjusted for inflation. On June 5, 1931, Capone was indicted on multiple counts of income tax evasion. At the time the maximum penalty for his offenses was 32 years in jail and $80,000 in fines (almost $1.6M in inflation adjusted dollars). The prosecution in Capone’s case “documented Capone's lavish spending, evidence of a colossal income. The government also submitted proof that Capone was aware of his obligation to pay federal income tax but failed to do so." Click here to keep reading about this fascinating case…

Every tax professional has at least one client that when asked about business mileage replies, “I don’t know; what did I have last year?” You may have read that last sentence and thought, “most of them.” Self-employed taxpayers generally know they must track their mileage, but it’s seldom done correctly, or at all. Vehicle deductions are an area frequently challenged by the IRS on examination as well as an area the taxpayer is unlikely to prevail without strong, contemporaneous documentation. That said, very few taxpayers keep perfect records, so what are the best practices for mileage deductions in the real world? Keep reading to find out!

IRC § 1031 exchanges have the ability to confer substantial financial benefits to taxpayers. Although taxpayers may use § 1031 to place themselves in a superior economic position, taxpayers may not exploit this section in an abusive manner. Taxpayers can use exchanges to give themselves different types of benefits, but one of the primary benefits is the deferral of federal income tax. When conducted correctly, 1031 exchanges are regarded as a form of legitimate tax avoidance. One of the main issues involved with these transactions is determining the boundaries between abusive tax avoidance and non-abusive tax avoidance. In the context of “related party exchanges” – i.e. those transactions which involve subsection 1031(f) – this issue shows up in a relatively complex fashion, because the related party rules are not well understood by most practitioners. Furthermore, determining abusive tax avoidance with related party exchanges is difficult because of the scarcity of case law. Based on the case law which we have, and on the other authoritative references, we can put together a reasonable overview of the risks of related party exchanges. This overview should prove useful when providing expert counsel to taxpayers seeking to conduct this type of transaction. For direct exchanges, the 2-year ownership rule found in 1031(f)(1)(C) should be used as the dominant source of guidance. For “indirect exchanges,” taxpayers must be aware of the higher levels of risk involved, as there is a greater possibility of abusive tax avoidance. To read more click here!

The price of a forever stamp increased from $0.58 to $0.63 on January 1, 2023. A tax pro posted this fact as a public service announcement on Facebook. Of course, tax pros being tax pros, someone chimed in, “Do I have to recognize a capital gain upon disposition of my forever stamp?” And of course, someone (me) felt obliged to answer, “It depends.” A direct message followed this bit of tax drollery on Twitter that says, “In theory, if I’m holding stamps as an investment, they would be a capital asset.” And so it begins…

Reilly’s Fourth Law of Tax: “Execution isn’t everything, but it’s a lot” might be amended when it comes to charitable deduction of property, because there you have an area where execution is almost everything. It is also an area that dramatically illustrates the Seventh Law: “Read the instructions.” In January, we received guidance from the IRS on the reporting requirements for charitable contributions of crypto currency . If you have followed IRS guidance on crypto and know something about charitable donation reporting requirements, the result shouldn’t surprise you , but maybe it will. The most disturbing part of the story is that the IRS may be asking for something we can’t provide...