Blog Archives

Meal Expense – Navigating Between Internal Revenue Code Sections 162, 274, 132; IRS Technical Advice Memorandum 200030001; and, Churchill Downs v. Commissioner

As per usual I'm swimming in areas where the tax code is seemingly at odds. The latest matter across my desk regards meals and entertainment (M&E) expense. These are the two questions at hand: Specifically at what point does a meeting expense

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Posted in Business Expense, Deductible Expense, Disallowed Expenses, Employee Business Expense, Meal Expense, Tax Court, Tax Deductible Expenses, Taxable Income, Uncertain Tax Position

Marijuana Dispensary Income Tax Guidance Update: IRS Memo 201504011

Business Entity Selection and the Tax Consequences of Converting

As many of you know who follow my tax musings via this blog, I recently led a team of people that shepherded a Marijuana Dispensary through the IRS Examination and Appeals functions. The dispensary in question was owned and operated

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Posted in Amortization, Business Expense, Cash Transaction, Disallowed Expenses, IRS Appeal, IRS Audit, IRS Enforcement, IRS Examination, Marijuana

Schumann v. IRS: Reg. 1.469-2(f)(6) – The Nuanced Relationship Between Passive Losses & Self Rental Gains

The Perturbing New Treatment of Patents Under the Tax Cut & Jobs Act (TCJA)

Schumann v. IRS: Reg. 1.469-2(f)(6) - The Nuanced Relationship Between Passive Losses & Self Rental Gains. Back to my friends that I previously wrote about who misunderstood passive activity and material participation. They are a married couple filing jointly and own

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Posted in 1031 Exchange, Appeals & Audit Resolution, Business Expense, Business Income, Deductible Expense, Disallowed Expenses, IRS Examination, Material Participation, Passive Activity, Rental Real Estate, Self Rental, Sub-chapter S, Tax Court, Tax Guidance & Preparation

Odujinrin v. IRS Commissioner Reinforces the Significance of Engaging a Reputable Enrolled Agent

In Wole Odujinrin v. IRS Commissioner the petitioner, a hematology oncologist who represented himself, did not have adequate substantiation to support his petition and was not entitled to claim a net operating loss. He was also liable for an accuracy-related penalty

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Posted in Back Taxes Owed, Business Expense, Disallowed Expenses, Employee Business Expense, IRS Appeal, IRS Audit, IRS Collections, IRS Enforcement, IRS Penalties, IRS Penalty and Interest Abatement, Tax Abuse, Tax Court, Tax Guidance & Preparation, Tax Preparer

Sophy v. Commissioner – Reviewing Mortgage Interest Deduction Limitations

Taxpayers living in Vail Colorado contacted me most recently to represent them in an IRS audited covering tax years 2009, 2010 and 2011 relevant to several small items but specifically to the mortgage interest deduction claimed on Schedule A of

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Posted in Debt, Disallowed Expenses, IRS Appeal, IRS Audit, IRS Examination, Marriage, Mortgage, Paying Taxes, Tax Filing Status, Tax Guidance & Preparation

IRS Publication 503 – Dependent Care Expenses

A taxpayer came to me today for verification on dependent care expenses. Their basic profile may be similar to yours. A husband and wife with two children in day care. The wife is a full time student that does not

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Posted in Children, Dependent, Disallowed Expenses, Husband/Wife, Tax Guidance & Preparation, Tax Problems & Requests, Taxable Income, Unemployment

Service Fee v. Tip – IRS Guidance to Examiners

Business Entity Selection and the Tax Consequences of Converting

According to IRS administrative guidelines to its examiners concerning Rev. Rul. 2012-18, published in the 2012-26 Internal Revenue Bulletin, when performing a tip examination (aka audit), IRS examiners must ensure that service fees or charges are properly characterized as wages and

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Posted in Audit Technique Guide, Business Expense, Disallowed Expenses, Employment Tax, IRS Enforcement, IRS Examination, Payroll Tax Problems, Tax Guidance & Preparation, Tax Problems & Requests, Taxable Income, Uncertain Tax Position

Is Your Activity For Profit Allowing for Business Deductions – Rundlett v. Commissioner

Business Entity Selection and the Tax Consequences of Converting

You are allowed deductions for ordinary and necessary expenses incurred in the course of business under §162, but you must also keep adequate records to substantiate expenses which can at times seem esoteric if not convoluted. Deductible travel expenses for example under §274(d) are based

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Posted in Business Expense, Deductible Expense, Disallowed Expenses, Hobby, IRS Examination, Rental Real Estate, Tax Abuse, Tax Court, Tax Guidance & Preparation

Interest Deduction Determined Based on Use of Loan Proceeds – Ellington v. Commissioner

Business Entity Selection and the Tax Consequences of Converting

If you incur interest expense on loans you should use the tracing rules of Reg. §1.163-8T to determine whether the interest expense is for: 1. business 2. investment 3. passive activities. or is 4. personal in nature The regulation focuses on the

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Posted in Business Expense, Deductible Expense, Disallowed Expenses, Interest Expense, IRS Examination, Tax Court

Employee Tool and Equipment Plans

Business Entity Selection and the Tax Consequences of Converting

Tool and Equipment Plans generally require employees to provide their own tools. Some plans purport to receive tax-favored treatment as “accountable plans” under the definition of adjusted gross income in Internal Revenue Code § 62(c). If you are expected to use

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Posted in Accountable Expense Plan, Business Expense, Deductible Expense, Disallowed Expenses, Employee Business Expense, Employment Tax, IRS Enforcement, IRS Examination, Tax Abuse, Tax Deductible Expenses, Tax Guidance & Preparation, Trust Fund Recovery Penalty
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