Anyone paying attention knows that stock markets have been volatile. As a simple example, the Dow Jones Industrial Average saw an increase of over 600 points (1.56%) on April 11 after dropping over 1,000 points (2.5%) on April 10. Similarly, the S&P 500 gained 9.5% on April 9, but dropped 3.5% on April 10. Generally,…
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A recent Tax Court decision underscores an increasingly rigorous examination of Section 831(b) microcaptive insurance arrangements.[1] This ruling may be insightful to taxpayers considering or currently operating microcaptives, has broad implications for businesses seeking legitimate tax incentives created by Congress. Overview of the Case The case at hand involves the Internal Revenue Service’s (“IRS”) rejection…
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With the filing deadline for individuals to file their income tax returns approaching and people becoming more acutely aware of how much in taxes they will pay for the last year, now, perhaps more than other times of the year, I receive comments from people about “starting an LLC to reduce taxes,” or “having expenses…
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Common in estate and trust planning is the gift or sale of assets to an irrevocable grantor trust[1] structured to be outside of the grantor’s taxable estate.[2] Often, such gifts or sales are made of interests in family entities such as LLC’s.[3] These entities can provide significant non-tax benefits including consolidation of assets, centralized management,…
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In a recent Tax Court decision, the Court again approached the critical issues surrounding loss deductions and tax compliance.[1] This case involves Heather and Stewart Weston, a married couple from California, who claimed a $2.1 million loss deduction on their 2017 tax return tied to failed business ventures in Indiana. The Internal Revenue Service (“IRS”)…
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Litigation involving estates and trusts, while sometimes impossible to avoid, is usually exhausting to all parties involved, especially given that such litigation is often among family members and/or is following the death of a loved one. Alternative dispute resolution (“ADR”) is an alternative to traditional litigation, encompassing various methodologies, including mediation and arbitration, aimed at…
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A recent Tax Court opinion sheds light on how unauthorized withdrawals from a jail food account were treated for federal tax purposes.[1] An Alabama sheriff found some unexpected relief when her unauthorized withdrawals, totaling $155,000 from a jail food money account were treated as impermissible, albeit genuine loans, and not embezzled income, subject to taxation.…
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As I have written about previously[1], if a Tax Court petition is not timely filed, the Tax Court will generally[2] lack jurisdiction to hear such petition.[3] In the cases mentioned in my previous article, taxpayers’ petitions were dismissed for lack of jurisdiction despite the taxpayers having good excuses, such as (1) the taxpayers mailed their…
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The IRS has recently announced a compliance campaign intended to address “the attempted deferral of contingent or court-awarded attorney fees by cash-method attorneys/law firms (taxpayers) who direct that such fees be paid to a third-party instead of the taxpayer.”[1] The IRS is concerned that plaintiff’s attorneys are deferring payment of income tax on legal fees…
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Small business corporations, aka S corporations[1], have been much more common than their C corporation counterparts since 1997.[2] S corporations are taxed much differently than their C corporations, with the defining characteristic being that S corporations are flow-through entities, as they are not taxed at the entity level and avoid the widely known “double taxation”…
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