We have previously spoken about monetized installment sales (“MISTs”) on Dollars & Sense.  According to the IRS, these structures typically seek to defer gains associated with the sale of an appreciated asset through the use of an intermediary.  In recent years, the IRS has scrutinized taxpayers’ usage of MISTs, even proposing regulations that would make

In November 2023, Gray Reed Tax Partners Joshua Smeltzer and Matthew Roberts authored an article titled “Where Have All the Theft Losses Gone?” published in Taxes: The Tax Magazine.

The article discusses whether taxpayers can deduct theft losses on their tax returns for 2018-2025 after new limitations were set by the 2017 Tax Cuts

Ever thought about packing it all up and starting that romantic, expatriate life abroad? Ever felt like these parts were just so wild, it was time to find yourself a new passport? Expatriation, where a US citizen renounces citizenship, or where a legal permanent resident (LPR) renounces and terminates their status, is a very real

 On remand for re-calculation of 4 errors in deficiency amounts, concerning years 2003, 2004, 2005, and 2006, the Tax Court entered final revised decisions based on the Commissioner’s twice-revised Rule 155 computations.

During the Larkins’ appeal, the Commissioner acknowledged four errors affecting the amounts of the deficiencies, additions to tax, and penalties. The court of

Starting any business has risk, and most businesses take time to become profitable. Unfortunately, the IRS sees multiple years of losses from a business as a red-flag that usually results in further scrutiny. That scrutiny can result in disallowance of legitimate business losses and potential penalties for the underreporting. However, with the proper documentation and testimony, legitimate losses over multiple years can be taken and upheld. A recent Tax Court case on a miniature donkey businesses, Huff v. Comm’r, T.C. Memo 2021-140, outlines the factors needed to defend multiple years of losses in a business.

Vintage composition of handwriting, quill pen and ink. Selective focus on ink and pen. Text is from Shakespeare's Sonnet 18. (Vintage composition of handwriting, quill pen and ink. Selective focus on ink and pen. Text is from Shakespeare's Sonnet 18.,In Shakespeare, an English King blames the loss of an important battle on his lack of a horse:  “A horse, a horse, my kingdom for a horse!”[1]

In real life (and especially, it seems, in tax law) it is more like to be the lack of a timely piece of paper that causes the taxpayer to lose.

In the course of administering a trust, it sometimes happens that mistakes are made that require correction.  For example, distributions may be made that are not in accordance with the provisions of a trust: payments to the wrong beneficiaries, or in the wrong amounts or for the wrong purposes.  A similar situation may arise when a trust instrument requires the trustee not to make any disposition of certain “legacy” assets, and the trustee erroneously sells them anyhow.

In such situations, the way to “undo” the transactions is for the parties to reverse the erroneous transaction by returning the distributions made in error.  When the year of distribution is a closed tax year and the act of correction is made in a later year, it is important to make sure that the distribution that is returned is treated as a tax-deductible expense, thus offsetting the taxable receipt of the erroneous distribution in the prior tax year.

Wooden drawer is open.

There is a wealth of information available from the IRS that is not generally made available to the public.  Most of this information can be obtained by asking.  This information includes files the IRS assembles about a taxpayer, and various training manuals used by the IRS to train its employees.  In addition to training given to its employees, the IRS, like most professional organizations, conducts continuing education on an annual basis for its various divisions.  Most of the training manuals and annual training materials are available to the practitioner pursuant to the Freedom of Information Act (FOIA).

The new Biden administration is clearly signaling that renewable energy will be a key focus of its plan going forward. For example, the Biden administration has set a goal to deploy 30 gigawatts of offshore wind generation capacity by the year 2030. Therefore, it can be expected that tax advisors will be seeing more questions

Close-up Of A Pink Piggybank With Eyeglasses And Calculator On Wooden DeskSeveral abusive tax shelters in the 1970s and 1980s caused Congress to enact rules to prevent taxpayers from deducting losses when a taxpayer doesn’t materially participate in the activity.  These passive loss rules apply to individuals (including partners and S Corp shareholders), trusts, estates, personal service corporations and sometimes closely held corporations. In short, these rules are a wide net that catches a lot of businesses and can impact a lot of taxpayers.  If an activity is determined to be a passive activity it may not only effect the losses claimed but could trigger a 3.8 percent increase from the net investment income tax. Knowing the passive activity rules, and how they apply, can help avoid a dispute or streamline arguments if the IRS questions business activities.