Courts Settle Option-to-Buy Tax Question
A business exercising an option to buy property that it was already leasing may deduct a portion of the amount tendered in the transaction as a lease termination payment, the Court of Appeals for the Sixth Circuit ruled, affirming an earlier district court decision. The court rejected the IRS’s argument that the entire amount had…
2015 Health Savings Account Limits Announced
The IRS has provided the annual inflation-adjusted contribution, deductible and out-of-pocket expense limits for 2015 for health savings accounts. The following limitations on contributions for calendar year 2015 were announced in Revenue Procedure 2014-30: $3,350 for an individual with self-only coverage $6,650 for an individual with family coverage under a high-deductible health plan Each of…
Can S Corporations Avoid Higher Medicare Taxes?
S corporations facing increased Medicare taxes may want to take advantage of a planning opportunity. Business owners might be able to reduce or eliminate the increased Medicare taxes that went into effect last year. This opportunity may be available to them if they own a business operating as an S corporation and their total income…
Should IRS Outsource Debt to Collection Agencies? Hmmm?
Twice during the last 18 years – in 1996 and again in 2003 – the IRS has attempted to outsource the collection of tax debts to private collection agencies. Both times the programs lost money. So what is Congress up to now? It is trying to pass a law requiring the IRS to outsource the…
Treasury Explains myRA Program Details
Seizing the occasion of “National Small Business Week” in mid-May, the U.S. Department of the Treasury encouraged small business owners to learn more about making starter savings accounts, called myRAs, available to their employees. The Treasury has provided more details on its website about the working of the myRA program that it will roll out…
Court: Reacquired Home Subject to Capital Gains
The Tax Court has concluded that a taxpayer who sold his primary residence and excluded gain, then reacquired it after the buyers defaulted, had to recognize long-term capital gain on the reacquisition, including amounts previously excluded. In 2006, Marvin Debough sold his personal residence, which he had owned for 40 years. Under the terms of…
Midyear Retirement Plan Amendments Allowed Under Court Decision
The IRS in Notice 2014-37 is allowing certain 401(k) and 403(m) retirement plans, including 403(b) plans, to make midyear amendments to reflect the U.S. Supreme Court’s Windsor decision. The Supreme Court struck down Section 3 of the Defense of Marriage Act in U.S. v. Windsor, et al. (Sup Ct 2013) as an unconstitutional deprivation of…
Raises Aren’t Allowed – But Bonuses Are Just Fine
IRS employees who had been disciplined for tax and conduct issues were rewarded with monetary awards or time off, according to a report issued by Treasury Inspector General for Tax Administration J. Russell George. The report concluded that, for the most part, the reward program for IRS employees complied with federal regulations. “While not prohibited,…
He’s a Real Family Man – But Court Denied Deduction
A recent case demonstrates the difficulties involved in securing a tax deduction from transactions between related parties. Bad debt deduction In 1990, Robert Alpert established two irrevocable trusts to fund his two sons’ educations. In 1996, he established a third trust for the benefit of his sons. Between 1990 and 1996, Alpert transferred $1.1 million…
Attorney-Client Privilege Waived Under Common Law
The Tax Court recently concluded that, when the taxpayers in the case asserted that they had reasonable cause and acted in good faith as a defense to penalties assessed by the IRS, they forfeited their privilege protecting attorney-client communications. In this case (Ad Investment 2000 Fund, LLC, et.al. v. Commissioner, 142 TC No. 13, April…