So you say your “S” corporation is looking high and low for ways to offset some or all of its profits earned during the stellar 2011 tax year.  And the thought occurs to you that because it uses the accrual method of accounting (recognizing expenses when incurred, which may precede the date of actual payment), you can snooker Uncle Sam:  accrue and deduct in 2011, even though the actual payment to you doesn’t occur until 2012.  Aha!  You get the deduction now, and don’t have to pay tax at the personal level on the income until next year! Read the rest of this entry »

Folks should not lose sight of the fact that significant gift opportunities exist today, though may not be around for long.  Present law permits individuals to transfer as much as $5 million in wealth to kids and others in 2011.  Barack and/or the “Super Committee” of Congress may make it their business to end this situation – and rumor has it that they may very well do so sooner rather than later!  But if you’re in a position to do any significant gifting – in any amounts, indeed, but especially if you’re able to take advantage of the $5 million exclusion, you had better act soon – that means now!

We could go on forever about the myriad of ways in which folks might take advantage of the significant gifting opportunities available today.  One in particular worth mentioning, especially in this era of low interest rates, is the “Qualified Personal Residence Trust,” or “QPRT.” Read the rest of this entry »

From our “what will they think of next” department came word, last week, that the government had found yet another thing to tax.  And you thought you had heard it all!

Actually, the ridiculousness of the situation prompted so much howling from we and thee, that Obama actually backed off on the latest and greatest idea:  taxing Christmas trees!

We hear that the Department of Agriculture (USDA) actually put forth a plan to require Christmas tree growers to pay 15 cents per fresh-cut tree to fund an advertising campaign intended to “enhance the image of Christmas trees and the Christmas tree industry in the United States.” Read the rest of this entry »

In today’s world, as foreclosures, short sales and other forms of loan “workouts” seem to be ubiquitous, folks who may be under water might think their problems have only to do with getting the lender off their back.  But even if they are successful in doing same, they might have a nasty surprise come tax time if they hadn’t already considered how the Revenooers look at these sorts of events.

Debt cancellation or forgiveness is the general result of not paying 100% of a loan, and not having your lender come after you any further.  And in these situations, the debtor will generally have to recognize some form of taxable income unless some exception (of which the law provides several) may apply.  Look at it this way:  some time in the past, you pocketed some cash from a lender, and either used the dough to purchase an asset, or spent the money on some other personal or business necessity.  And when all is said and done, you don’t have to pay the lender back in full.  Result?  Income! Read the rest of this entry »

As the clock ticks down toward year end, those of you considering the use of IRAs to fund charitable gifts need to get cracking.

If you’re age 70-1/2 or more, and want up to $100,000 of that IRA to go to your favorite charity (because you really don’t need the dough, even though Uncle Sam requires that you take a minimum distribution each year) get it done by December 31, 2011, and if you handle the transfer correctly, exclude the transfer from recognition as part of your adjusted gross income. Read the rest of this entry »

So you borrowed a bunch of dough to construct that mansion which you envisioned as your residence, but ran into complications regarding the building.  Is the interest deductible even though the manse didn’t ever materialize?

“Yep,” saith the Tax Court, in a decision which just came down last week.  Indeed, in the Rose case, the Court held that folks could deduct qualified residence interest on a vacation home that was never even built! Read the rest of this entry »

So who cares about simplification, says California’s Franchise Tax Board.  In fact, why not make things more complicated?

That seems to be the attitude, as demonstrated in FTB’s latest volley, this week, in the form of a proposal to request yet additional information relative to real estate taxes deducted by California filers. Read the rest of this entry »

With all of this hoorah going on between Warren Buffett and the other boys who think their tax rate is too low, we are reminded of how we got here – to a day in which long term capital gain income is taxed at a “mere” 15%, presently, versus ordinary income potentially taxed at as high as a 35% rate.  Maybe those gains shouldn’t be taxed at all!

Looking back, there actually was once a school of thought which espoused the notion that what we know as “capital gain income” is not income at all, and should not be taxed one whit! Read the rest of this entry »

Seems IRS has its hair on fire over the latest loss in court on the issue of gifts of assets at discounted valuation amounts.

And to add insult to injury, the court in question is the infamous Ninth Circus (oops – that would be ‘Circuit’) Court of Appeals – one level below the Supremes!

In the case of the Estate of Anne Y. Petter v. Comm, the appellate court affirmed the Tax court which upheld an IRS-favored gift tax valuation formula which produced a higher gift tax than was originally reported by the taxpayer, who had given a number of units in her family limited liability company (LLC) to her kids. Read the rest of this entry »

Recall that the “Tax Relief and Health Care Act of 2006″ allowed for an expansion of the IRS’ “whistleblower” program, under which rewards can be available to snitches who report knowledge of other folks’ tax underpayments.  The rewards can be substantial (up to 30% of whatever the Revenooers collect from the malingerers).

But the IRS “whistleblower office” seems to leave a lot to be desired, according to the Government Accountability Office’s (GAO) recent audit of the joint.  First of all, GAO notes that whistleblower claims can take years to wind their way through IRS review and award determination process.  Right now, something like 66% of the claims submitted during the first two years of the program are still in process. Read the rest of this entry »