Monthly Archives: February 2016

Should Donald J. Trump Release His Tax Returns?

In this most interesting presidential election primary season, many different issues have dominated the news.  Perhaps no candidate has dominated the airwaves more than Donald J. Trump, the leading candidate in the Republican primaries.   Unsurprisingly, Mr. Trump has made a number of controversial statements, antagonizing a variety of groups and countries alike.  It is no surprise then that Trump is again in the center of the latest controversy – the release of his tax returns.

Top Tax Cases Of 2015: Bhutta v. IRS – Treaties And How They Affect Income Of Foreign Nationals

Top Tax Cases Of 2015: Bhutta v. IRS - Treaties And How They Affect Income Of Foreign Nationals

Legal System.

Issue

How can treaties between the United States and other countries affect the income of foreign nationals in the United States?

Facts

Bhutta, a citizen of Pakistan and a foreign medical school graduate, entered the United States in 2009 to participate in an internal medicine residency training program. During the three-year residency training program, for which he received an annual salary, Bhutta treated patients, with supervision; conducted and presented research; and supervised and trained third- and fourth-year medical students. His supervising and training of medical students consisted of having the medical students observe him during “rounds”, preparing the students for monthly examinations, and evaluating the students monthly.

Congratulations on your New Home Purchase…Oops! You’re liable for Seller’s Taxes!

Congratulations on your New Home Purchase…Oops!  You’re liable for Seller’s Taxes!

 

As a buyer, no more rude shock can intrude on your new home celebration than finding out you are liable for Seller’s taxes.  Understandably, by the time of your closing, you may have nearly depleted your bank account, paying the purchase price plus the myriad fees and charges for your new home.  When the IRS comes calling soon afterwards, asking you to also pay Seller’s taxes, you can be excused for being very astonished.  Yes, this can happen; this scenario is not as far-fetched as it may sound.

If I convert a home to a rental, when can I deduct any losses related thereto?

If I convert a home to a rental, when can I deduct any losses related thereto?Issue

If a taxpayer converts a home to a rental, when can the taxpayer deduct any losses related thereto?

Related Tax Rules or Regulations

Internal Revenue Code Section 262, which provides that except as otherwise expressly provided, no deduction is allowed for personal, living, or family expenses.

Internal Revenue Code Section 165 permits a deduction for any “loss sustained that is not otherwise compensated for.” In order for an individual to deduct such a loss, the loss must be incurred in a trade or business, be incurred in any transaction entered into for profit, though not connected with a trade or business, or arise from some sort of casualty or theft. If such property purchased or constructed as a primary residence if, before its sale, it is “rented or otherwise appropriated to income-producing purposes and is used for such purposes up to the time of sale.”

Negligence or Tax Fraud? What is “Negligent” and What Is “Willful” Conduct to the IRS?

What does the IRS consider to be negligent or non-wilful conduct when it comes to tax-related activity like filing income tax returns and making deductions? What does it consider wilful conduct? When is such activity tax fraud?

Tax fraud is a general term which is defined as taxpayer’s intent to defraud the government by not paying taxes that the taxpayer knows are lawfully due. Tax fraud can be punishable either civilly, criminally, or both. Under federal law, civil violations are primarily located in Title 26 and criminal violations mainly in Title 18, respectively, of the United States Code (“U.S.C.”).

Who qualifies as a real estate professional for tax purposes?

Issue

Who qualifies as a real estate professional for tax purposes? More specifically, how does a taxpayer establish that he or she materially participate in rental activities, so that the rentals become non-passive, and any losses can be used without limitation?

Related Tax Rules and/or Regulations

Internal Revenue Code Section 469

Facts

Escalante earned income from teaching and his ownership of rental properties that he managed himself. His teaching contract required him to work a minimum of six hours per scheduled work day. As is customary with this type of contract, it contemplated that there would be a substantial number of hours spent outside the classroom engaging in tasks and activities like lesson planning, grading papers, parent-teacher consultations, and faculty meetings.

Relating to the allocation of partnership liabilities and the tax implication of a foreclosure

Issue

What is the allocation of partnership liabilities and the tax implication of a foreclosure?

Related Tax Rule or Regulation

Internal Revenue Code Section 465

Internal Revenue Code Section 704

Internal Revenue Code Section 731

Internal Revenue Code Section 752

Internal Revenue Code Section 1001

Tax Regulation § 1.1001-2(c),

Case Study

Is there a business deduction for expenses incurred in marijuana related enterprises?

Issue

Is there a business deduction for expenses incurred in marijuana related enterprises?Is there a business deduction for expenses incurred in marijuana related enterprises?

Related Tax Rules or Regulations

Internal Revenue Code Section 61

Internal Revenue Code Section 280E

Prior to 1982, an illegal business was able to reduce its revenue by the cost of any product it sold (Cost of Goods Sold, or COGS), as well as other ordinary and necessary general and administrative (G&A) business expenses like rent, packaging, utilities, travel expenses, and even the cost of a small scale used to weigh the controlled substances sold by the taxpayer. In 1982, the IRS enacted Section 280E which dictated that businesses that trafficked in controlled substances, as defined by the Controlled Substance Act, could no longer deduct its expenses.

Do The Monies Or Amounts Received By An Egg Donor In Exchange For Her Eggs Constitute Taxable Income?

Issue

Do the monies or amounts received by an egg donor in exchange for her eggs constitute taxable income?

Related Tax Rules or Regulations

Internal Revenue Code Section 61 provides that gross income includes all income from whatever sources derived, including compensation for services.

Internal Revenue Code Section 104(a)(2) excludes from taxable income the amount of any damages (other than punitive damages) received on account of personal injuries or physical sickness.

Income Tax Regs sec. 1.104-1(c)(1) defines the term “damages” as “an amount received (other than workers’ compensation” through prosecution of a legal suit or action, or through a settlement agreement entered into in lieu of prosecution.”

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