Category: Tax Planning & Compliance
WHEN CAN STATES TAX TRUST INCOME? THE U.S. SUPREME COURT PROVIDES LIMITED GUIDANCE
U.S. Supreme Court provides guidance (although minimal) on the interstate income taxation of Trusts. North Carolina Department of Revenue vs. Kimberly Rice Kaestner 1992 Family Trust, 139 S. Ct. 2213, 588 U.S. (June 21, 2019). When an individual owns several homes and travels between them, spending time in…
Is Registered Mail the Way to Go?
Prior to 1954, the law treated tax documents as timely filed provided the document was physically delivered to the Internal Revenue Service (“IRS”) by the applicable deadline. This rule left taxpayers with no recourse should timely mailing have occurred but through no fault of the taxpayers (e.g. postal service misplacing…
Is My Client’s Small Business Subject to the Business Interest Expense Limitation?
Beginning in 2018 the federal income tax deduction of business interest can be limited. The law provides a “small business” exception to this limitation. However, businesses conducted in multiple related entities must be combined when determining if the small business exception applies. The limitation on business interest expense was originally…
Taxability of Refunds of Paid State and Local Taxes
Internal Revenue Code (“I.R.C.”) § 164(a)(1) provides state and local property taxes and state and local income taxes are allowed as a deduction against income for the year within which such taxes are paid. However, I.R.C. § 164(b)(b) limits the aggregate amount (the “SALT Limit”) of the deduction to $10,000.00…
Ninth Circuit Rejects IRS Argument as to What Constitutes Reasonable Third Party Notice in Summons Case
I.R.C. Section 7602(c) prohibits the Internal Revenue Service from contacting any person other than the taxpayer with respect to the determination or collection of a tax liability of the taxpayer unless the taxpayer is provided reasonable notice in advance that third party contacts may be made. This prohibitive rule does…
New Reporting for Partner Negative Capital Account Balances
Partners and members of an LLC taxed as a partnership will often have negative or deficit capital account balances at the end of a taxable year. A negative capital account balance is permissible if supported by proper allocation of partnership debt (or an obligation to restore a deficit). The new…
Final Regulations under Section 199A Create Safe Harbor for Rental Real Estate, Exclude Triple Net Leases
On January 18, 2019, the Treasury Department and the Internal Revenue Service (IRS) issued final regulations under new Section 199A and three related pieces of guidance. Created by the 2017 Tax Cuts and Jobs Act (TCJA), Section 199A allows eligible taxpayers (individuals, trusts and estates) to deduct up to twenty…
IRS Waives Penalties for Some Underpayments of Estimated Tax
As a general rule, taxpayers are required to pay their federal taxes as they earn income. To the extent these taxes are not withheld, a taxpayer must pay estimated income taxes on a quarterly basis. Internal Revenue Code (I.R.C.) § 6654 provides that, in the case of an individual taxpayer,…
Meals or Entertainment? IRS offers Guidance.
The IRS gave notice it intends to publish proposed regulations clarifying when business meal expenses are nondeductible entertainment expenses and when they are 50 percent deductible expenses. It also provided guidance on the treatment of expenses for certain business meals. Taxpayers may rely on this guidance until the proposed regulations…
Section 199A Proposed Regulations Provide De Minimis Safe Harbor for Specified Service Businesses
New proposed regulations under I.R.C. § 199A provide a de minimis exception for owners of passthrough entities which offer a mix of products and specified services. QBI Deduction and Specified Service Trade or Business Generally, I.R.C. § 199A provides a deduction to non-corporate taxpayers of up to twenty (20%) percent…