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Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024)
No NOL means No NOL. (Betty Amos v. Comm., 11th Cir., No. 23-10532 Non-Argument Calendar (April 2, 2024)) Betty Amos appealed a Tax Court decision denying NOL carryforwards claimed in tax years her 2014 and 2015 and negligence penalties assessed for failing to provide documentation to substantiate the NOL deductions.In 2018, Amos received a notice of deficiency including penalties for tax years 2014 and 2015, disallowing NOL carryforward deductions of $4,220,639 and $4,149,326, respectively, on the grounds that the losses originating in tax years 1999 and 2000 were overstated and not available to be carried over. Tax returns filed for …
Cassandra Tucker and Edward Brodie v. Comm., T.C. Memo 2023-87
COGS is Not a Deduction, Some Expenses Allowed (Cassandra Tucker and Edward Brodie v. Comm., T.C. Memo 2023-87) Cassandra Tucker operated a fashion activity out of her home for many years. During 2015 and 2017 the activity generated gross sales of $1,542 and $1,498, respectively. Claimed cost of goods sold for each of the years were $6,510 and $8,086. To substantiate these amounts, Tucker provided a spreadsheet showing purchases in 2015 of fabric, packaging materials, including “bags, tissue, ribbon and boxes” along with other items. For 2017, the COGS spreadsheet showed purchases of “lifestyle flooring” and “lifestyle closet” totaling $9,003.Through …
Joseph and Louise Speizio v. Comm., TCM 2024-64
It’s Not About the NOL (Joseph and Louise Speizio v. Comm., TCM 2024-64) Joseph and Louise Speizio claimed expenses in 2017 that generated a net operating loss based on pension liabilities acquired in a business taken over by the taxpayer but not paid until 2018 or later. The taxpayer took over a sanitation business that had outstanding pension liabilities due to the local union. Through litigation and bankruptcy, the taxpayer became liable for the debt and was later relieved of the liability. In a bankruptcy proceeding, the pension liabilities were eventually settled and paid in 2019.In general, §404(a)(1)(A) allows a …
Anthony J.A. Bryan Jr v. Comm., T.C. Memo 2023-74
IRS Disallows NOLs by Reaching Back to Prior-Year K-1s (Anthony J.A. Bryan Jr v. Comm., T.C. Memo 2023-74) In 2007, Bryan gave a Watley Group, LLC (taxed as a partnership) a purported promissory note for $2.7 million with a single balloon payment due on or before Dec. 31, 2030 and interest accruing at 4.75%. The note was neither secured nor collateralized to any assets. Watley filed Forms 1065 for years 2008- 2011 without showing the $2.7 million note on the balance sheet. Watley gave Pool Boy the Movie, LLC (another tax partnership) a promissory note in the amount of $2.7 …
Edgardo Villanueva v. Comm., TCM 2022-27
“Concise Statement” Required for NOL Deduction (Edgardo Villanueva v. Comm., TCM 2022-27) Edgardo Villanueva reported a loss of $112,375 on Form 4797, Sales of Business Property, attached to his 2013 return, from the disposition of a condominium. He reported the date of loss as Aug. 5, 2013, although the condominium went through foreclosure in May 2009 and Villanueva lost possession of the condominium at that time. The Court determined that because Villanueva sustained the loss in 2009 when the foreclosure occurred, the deduction, if allowable, would have been for 2009. Villanueva was not permitted to carry forward any portion of that …
Edward & Ellen Berman v. Comm., 163 T.C. No. 1
Taxpayers Trigger Deferred Gain on Stock Sold to ESOP, But Installment Sale Works (Edward & Ellen Berman v. Comm., 163 T.C. No. 1 (July 16, 2024)) In 2002, Edward and Ellen Berman each sold stock to an ESOP for $4,150,000 in which they had bases of $27,428, thereby realizing a gain of $4,122,572 each. As payment, each received a $4,150,000 promissory note, on which a first payment of $449,277 was made in 2003. They made valid elections under §1042 on their 2002 federal income tax returns to defer recognition of the gain each realized for 2002. Effecting that deferral required …
Om and Anjali Soni v. Comm., CA-2, No. 22-829-ag
Tax Return was Jointly Filed Even though Spouse did not Sign the Return (Om and Anjali Soni v. Comm., CA-2, No. 22-829-ag (Jul. 27, 2023)) The U.S. Court of Appeals, Second Circuit, affirmed the Tax Court’s Jan. 7, 2022, opinion that Om and Anjali Soni’s 2004 tax return was jointly filed. Four circumstances were identified as probative of the taxpayers’ intent. First, Anjali knew “a return had to be filed” because “[s]he was generally aware of the U.S. tax system but chose not to engage.” Second, Anjali knew of Om’s “expert knowledge” because he was an experienced businessperson and she …
Adam Sowards v. Comm., TCM 2023-99
No Social Security Number Means No Child Tax Credits (Adam Sowards v. Comm., TCM 2023-99) Adam Sowards and his spouse jointly filed federal income tax returns for the three years at issue. The 2008 return claimed the additional child tax credit (ACTC) with respect to his four children, along with the earned income tax credit (EITC) and the recovery rebate credit. The 2009 return claimed the ACTC with respect to the four children, along with the EITC. The 2010 return claimed the child tax credit (CTC) with respect to the four children. The returns did not provide SSNs for the …
No Taxes on Tips: What Tax Pros and Accountants Need to Know
Recent campaign proposals from both sides of the aisle have suggested eliminating taxes on tips. While this idea may sound appealing to constituents, the reality is more complex — especially for tax professionals advising service industry clients. Here’s what you need to know. (We’ll be discussing this topic even more in-depth in our two-part livestream special, Tax at the Ballot Box, taking place October 22nd and December 10th.) The Current Landscape for TIP TAXATION The service industry comprises approximately 4 million tipped workers, representing 2.5% of the U.S. workforce, according to Yale University’s Budget Lab. These workers tend to be younger …
IRS Issues Relief for Victims of Hurricane Helene
The Internal Revenue Service has announced comprehensive tax relief for individuals and businesses affected by Hurricane Helene. The IRS has extended tax deadlines for the entire states of Alabama, Georgia, North Carolina, and South Carolina, as well as designated counties in Florida, Tennessee, and Virginia. All taxpayers in these areas now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments.This extension applies to:2024 individual and business returns normally due in March and April 20252023 individual and corporate returns with valid extensionsQuarterly estimated tax payments due on Jan. 15, 2025, and April …
Storm Damage Loss Swamped and Sunk for Lack of Appraisals or Other Proof of Loss (Thomas Richey and Maureen Cleary v. Comm., TCM 2023-43)
Thomas Richey and Maureen Cleary owned a home and a boat in March 2017, when Winter Storm Stella hit Stone Harbor and flooded the city’s streets. Richey and Cleary claimed that the storm damaged the waterside portion of their property and their 40-foot boat, The Celtic Dream. On their 2017 tax return, they claimed total casualty losses of more than $820,000 and a deduction—after considering the income limitation—of nearly $740,000. Calculating the Deduction: There are three rules for determining a casualty loss deduction. The first rule is that only physical damage can be counted as a casualty loss and decreases …
California Corner: The California Department of Tax and Fee Administration Tax Guides
This summer, the California Department of Tax and Fee Administration (CDTFA) posted a new comprehensive Tax Guide for Event Planners to help them (and tax practitioners) understand their tax obligations. Here’s a summary of the key points: Tax Guide for Event Planners – Key Topics Sales and Use Tax Application: Event planners may be subject to sales tax on certain services and products they provide. Consultation Services and Planning: Mandatory charges for professional planning or coordination are taxable if connected to sales of tangible personal property. Tips and Gratuities: Optional tips are generally not taxable, but mandatory service charges are …
California Corner: The California Supreme Court Upholds Proposition 22
On July 25, 2024, the California Supreme Court delivered a landmark ruling upholding Proposition 22, a measure passed by California voters in November 2020. The Court’s decision in People v. Uber Technologies, Inc. allows companies such as Uber, Lyft, and DoorDash to classify their drivers as independent contractors rather than employees. The Court’s ruling maintains that drivers for these app-based services are not employees but independent contractors. This classification exempts them from traditional employee benefits while ensuring they receive certain specific benefits under Proposition 22. Compliance Requirements for App-Based Companies: To comply with Proposition 22, app-based companies must adhere to …
The Supreme Court Overrules the Forty-year-old Chevron Doctrine
On June 28, 2024, the Supreme Court delivered a landmark decision in Loper Bright Enterprises v. Raimondo fundamentally altering the role of federal agencies in interpreting the laws they enforce. In a 6-3 ruling, the Court overruled the Chevron doctrine, a principle established in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. (1984). Under Chevron, courts were required to defer to federal agencies’ interpretations of ambiguous statutes if the agency’s interpretation was deemed reasonable, provided Congress had not directly addressed the issue.The recent decision in Loper Bright shifts this paradigm. The Supreme Court ruled that judges should no longer …
DOL Updates Exemptions For Executive, Administrative, Professional, Outside Sales, And Computer Employees
The Department of Labor final rule Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees took effect on July 1, 2024. The final rule updated and revised the regulations issued under §13(a)(1) of the Fair Labor Standards Act implementing the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees. Revisions include increases to the standard salary level and the highly compensated employee total annual compensation threshold, as well as a mechanism that provides for the timely and efficient updating of these earnings thresholds to reflect current earnings data. Specific …
CPE Credit Packages vs. Subscriptions: Which is Right for Your Professional Development?
In the world of continuing professional education (CPE), staying up-to-date with your credits is crucial. But with various options available, how do you choose between traditional CPE subscriptions and a Western CPE Credit Package? Let’s dive into the key differences and help you make an informed decision for your professional development. Understanding CPE Credit Packages CPE Credit Packages are a flexible alternative to the traditional CPE subscription model. Instead of paying for unlimited access, you purchase a specific number of credits that you can use across our entire course catalog. This model allows professionals to: Pay only for the credits …
The Fact and Fiction of the “Self Employment Tax Credit”
Move over, ERC: there’s another social media craze gaining steam. The IRS has issued an alert regarding misleading information on social media telling people they can cash in on the “Self Employment Tax Credit” (sometimes abbreviated as “the SETC”) as a way for self-employed individuals and gig workers to qualify for payments of up to $32,000 (with some sources claiming as high as $36,200) related to the COVID-19 pandemic period. The actual credit being referred to is the Credits for Sick Leave and Family Leave, and while it is certainly real, there are important details some social media influencers are not …
A&A Alert: The Final Chapter of the FASB Conceptual Framework
It’s funny how these things work out. A few days ago, I was at Disney’s Four Seasons Resort for Western CPE’s Orlando conference, speaking about the exposure draft for the final chapter of the FASB’s Conceptual Framework. At the time, I indicated it was still an exposure draft but that I expected a final issuance any day now. Low and behold, when I checked my emails later, the announcement from the FASB was in my inbox. For several years, the FASB has been working on a complete conceptual framework to serve as a basis for any and all future GAAP …
GPS Tracker Doesn’t Work Alone to Get Deduction for Tax Preparer (Patricia Chappell v. Comm., TCS 2024-2)
Patricia Chappell used MileIQ to track her location from March 23 to December 15, 2015. From the app, she entered whether trips were business or personal. MileIQ summarized Ms. Chappell’s tracking information and provided a log that could be used to help substantiate her business miles driven during the year. Ms. Chappell’s driver’s license was suspended for about six months in the middle of 2015. During that time, she used a driver. In a close examination of her records, there were inconsistencies in dates and purchases. There were several days on which gas was purchased multiple times, but no excessive …
Used Car Salesman Sells Judge on Cohan Rule (Jesse Alvarado and Estate of Maria De Lourdes Velasques v. Comm., TCM 2024-1)
After 25 years as a commercial lender at Comerica Bank, Mr. Alvarado opened South Bay Autos, a used car business, preparing a few tax returns on the side. South Bay relied heavily on credit, both for the acquisition of inventory and for the sale of vehicles to customers. South Bay purchased vehicles at car auctions using credit with terms that required repayment in 45 days before having to pay high interest charges. Vehicles were generally sold on credit, with the contracts sold to financing companies. The finance companies would pay the face amount of a contract less a reserve and …