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A common planning strategy for reducing taxable income in a “regular” subchapter C corporation is through the payment of management fees and other charges to related entities (generally-pass-through enterprises or individuals). Oftentimes, these expenditures take the form of excess compensation and/or management fees. However, the payment of these types of expenses does not sit well […]
The Internal Revenue Service regularly challenges businesses that are found to generate losses and do not have a profit intent. The specific statute that governs these challenges are known as the “Hobby Loss Rules.” In such challenges, the Internal Revenue Service is trying to prove that the undertaking which has resulted in losses over a […]
In a very significant case, the United States Tax Court found that a limited liability company (LLC) was not entitled to a charitable contribution deduction for the donation of a remainder interest in real property because it failed to adequately substantiate its claimed deduction. The Form 8283 (appraisal summary for noncash charitable contributions) the LLC […]
A common element of every marital dissolution, where the divorcing parties have minor children, is the financial consideration and accountability of federal income tax savings associated with the dependency deductions under the law. Creativity within divorce settlements can provide for any number of ways in which this issue is addressed. However, as one recent Tax […]
The Eleventh Circuit of the United States Court of Appeals recently found a taxpayer, who was both a minority shareholder and high-level employee of a corporation, liable for the corporation’s income taxes as a transferee. The case offers a good illustration of the capability of the Internal Revenue Service (IRS) to require repayment of prior […]
The current income tax laws afford taxpaying corporations (“sub chapter C corporations”) a graduated tax rate regime similar to that applicable to individual taxpayers, albeit with fewer “tax brackets”. The rate required on a corporations first $50,000 of taxable income is just 15%. The next $25,000 of taxable income is subject to tax at a […]
While much of the federal tax law is difficult to interpret and often hard to understand, a simple premise that should be easily understood is that a business is not permitted to reduce its taxable income for personal expenses paid for its owner. When the business in question is a corporation, the most often proposed […]
A recently decided Tax Court case once again reinforces the rule that simply guaranteeing corporate debt in an S corporation does NOT increase that shareholder’s tax basis in his stock. However, the case has a few interesting wrinkles that merit consideration. In William and Amaryllis Tinsley, TC Summary Opinion 2017-9 (Tax Ct.), the taxpayer was […]
It is not at all unusual for individual taxpayers to work to reduce their tax liabilities by donating to charity used personal items such as furniture, clothing and household goods that still have some value and utility left in them. A recent Tax Court case, however, demonstrates how excessive noncash charitable contributions can draw the […]
In an important recent case on reasonable compensation, H.W. Johnson, Inc., T.C Memo 2016-95 (Tax Ct.), the Tax Court found for the Taxpayer. The Taxpayer, a concrete contracting business, was owned 51% by the founder’s wife and 49% by her two sons. On its tax return, the taxpayer deducted approximately $4 million and $7.3 million […]
