Articles Archive - Page 2 of 46 - Think Outside the Tax Box


A Winner of a Losing Hobby Case

Wolfgang Frederick Kraske, representing himself in Tax Court, pulled off a rare feat. He managed to get two opinions for the price of one in a relatively low stakes case . My friend Lew Taishoff found the regular decision about the $4,574 Section 6662(a) accuracy related penalty to be of great interest . I think the more interesting story is in the memo opinion that covers the tax deficiency of $22,687 for the years 2011 and 2012.

It is mostly about Section 183: Activities not engaged in for profit, commonly referred to as the hobby loss rule. Although in this case, the activity does not even seem to get up to the level of a hobby, much less a business conducted for profit. I didn’t dig any deeper into the case, so the story you are getting is what Judge John H. Gale concluded. Kraske might have had something to say if I had interviewed him.

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Section 1244 Still Worth Remembering

The inherent optimism of entrepreneurs makes thinking about things that mitigate the effect of failure not that unpleasant. In a career in accounting, you are likely to see many deals that don’t work out, so it’s best to remember anything that will lessen the pain. Section 1244 is such a provision. Section 1244 allows what would otherwise be a capital loss to be treated as ordinary. Its significance has been somewhat diminished, but every little bit helps.

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The Constitution for Tax Pros

A case currently before the Supreme Court, Charles Moore, G. Moore et ux. v. United States , has the court looking at some of the fundamentals of the Constitution’s treatment of taxation. Advocates of various views are hoping for an earthshaking result. Also, many “tax protester” arguments base themselves on misreading of Supreme Court decisions from around the time of the 16th Amendment. Knowing a fuller version of what surrounds the snippets they feed you probably won’t help you bring them around if they have drunk deep of the tax protester Kool-Aid, but it will help you maintain your own sanity. Let’s start with what the Moore case is about.

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Passive Activity and Self-Employment Tax In Rentals – One Of These Definitions Is Not Like The Other

Somebody I consult for threw a kind of oddball fact pattern at me. Their client, “Terry,” owns a big house with many rooms in a kind of resort type area. Terry rents the rooms out on a short-term basis averaging three or four days and provides no other services. Between this and that, Terry ends up spending about 15 hours a week.

The big concern comes from Terry buying a cost segregation study, which will mean a big loss. Can Terry use the loss in the year incurred, or will it be suspended? And is the income subject to self-employment tax in the future? I thought the answers to those questions were the same, but we learned from the Chief Counsel’s Office, one of those things is not like the other.

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Start Planning Now For Expiring Provisions of the TCJA

Time flies when you’re dealing with taxes. For instance, eight years must have seemed like an epoch when Washington passed the Tax Cuts and Jobs Act of 2017 (TCJA), the biggest federal tax reform in decades and one that altered tax brackets, deductions, and estate planning, to name just a few.

Best of all, lawmakers probably thought back then, we won’t have to worry about some of these provisions changing until all the way off in 2026!

Except suddenly, we now have less than 26 months to get ready for the end of nearly two dozen TCJA provisions that will happen without action from Congress. That’s barely enough time for some of the planning before what could be one of the biggest groundswell tax years of recent memory.

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Harnessing the Power of Client Testimonials: Boosting Trust and Referrals

When I started my business, referrals and testimonials were not on my mind. Like most entrepreneurs, my crucial motivator was to have freedom of time for my family, to expand my skill set, and to remove the cap on my earnings potential. When I got my first client as a side hustle, my referral source was a board member who knew my skills very well and recommended me to the non-profit he served as treasurer. In December 2018, a prospect asked me for referrals, and I had no idea what to say. There was only a little besides my resume and employer as a reference. Then I thought, hey, I have my non-profit client, and I asked my client whether they would speak with this prospect and answer any questions they had, and they agreed. That’s when I realized the power of referrals and testimonials.

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Are You Really Sure Your Electronic Form 1040 Was Filed?

Considering how soon Halloween comes after October 15, the extended due date for individual returns, having a tax horror story seems really appropriate. The horror story came out on October 24, with the Eleventh Circuit decision in the case of Lee v U.S. Dr. Wayne Lee seemed to have done everything right to be in compliance. His estimates overpaid his taxes every year, and he would let the refund ride into the next year. He hired a CPA to prepare his returns and dutifully signed and sent the CPA Form 8879 IRS e-file Signature Authorization. He did this for his 2014, 2015, 2016, and 2017 returns. Then disaster struck.

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