Flume v. Commissioner (here) revolved around one noteworthy issue: did the taxpayer’s reliance on the advice of his tax return preparer spare the taxpayer from $110,000 in penalties for the taxpayer’s failure to report foreign investments on Form 5471? The taxpayer argued that he relied on the expertise of his tax return preparer to guide…
In Goldsmith v. Commissioner, T.C. Memo. 2017-20 (link) the Tax Court held that the payments from the shareholder’s S corporation were not wages. The Tax Court reasoned that the payments to the taxpayer constituted a non-taxable return of capital. The court reached this conclusion even though the taxpayer did not draw a salary for the…
Takeaway: When calculating insolvency for purposes of the insolvency exclusion of cancellation of indebtedness income, a pension plan may or may not be considered an “asset”. The determination depends on whether the taxpayer has an ability to utilize the equity in the pension plan (e.g., through a lump-sum distribution, loan, sale, etc.) as a means…
On Tuesday November 24, 2015, the IRS released Notice 2015-82 (the “Notice”). The Notice increased the de minimis safe harbor limit, for businesses without “applicable financial statements”, from $500 to $2,500. As a result of the Notice, many small businesses will now be able to expense certain items that would have otherwise been depreciated over…
Overview How can a corporation have a loss for tax purposes if it does not have any bank accounts, credits cards, or other lines of credit and it does not keep any books or records? The taxpayers in Rochlani v Commissioner found out the hard way.[1] Business Formation and Operations In 2006, Mr. Rochlani (the…
Overview In Leyh v. Commissioner[1], the Tax Court held that the taxpayer’s time incurred while traveling from her home to rental properties to perform a variety of tasks with respect to 12 rental activities counted towards the test of whether the taxpayer was a real estate professional.[2] As a result, the taxpayer was considered a…
Overview The Tax Court determined that the extinguishment of the taxpayer’s debt took place in a closed tax year, even though FEMA issued a 1099-C[1] in an open tax year. As a result, the Tax Court held that the IRS was barred by the statute of limitations from assessing the taxpayer for the federal income…
Overview On Tuesday March 3, 2015, the Supreme Court handed down a unanimous decision in favor of the Direct Marketing Association, (“DMA”) in DMA v. Brohl (575 U.S. ____ )(March 3, 2015) and remanded the case back to the Tenth Circuit for further consideration. Although the decision did not come as a surprise, dicta in…
Is it possible to begin depreciating a building before the building opens its doors to customers? Although it seems unintuitive, the answer is yes. In the case of Stine LLC v. USA[1], a Louisiana federal district court held that the taxpayer’s retail building had been “placed in service” despite the fact that the retail stores…
On October 17, 2014, the IRS released a field memorandum, FAA 20144201F, that discusses the ordering rule to be applied for the application of alternative tax net operating losses (“ATNOLs”) deduction to offset corporate alternative minimum taxable income (“AMTI”) when the taxpayer has made The Worker, Homeownership, and Business Assistance Act of 2009 – Section 13…
