By Keith A. Wood I. Shareholders of Bankrupt S Corporation Failed to Abandon Their Stock; Yaguda v. Commissioner, TC Summary Opinion 2022-21. Mr. and Mrs. Yaguda owned stock of EFI, Inc., an S Corporation. In 2008, a creditor forced EFI into involuntary bankruptcy. Later that year, EFI’s case was converted to a voluntary Chapter 11 […]
By John G. Hodnette A payment for an option to purchase property is not a taxable event to either party upon the grant of the option. See Virginia Iron Coal & Coke Co. v. Commissioner, 99 F.2d 919 (1938); Rev. Rul. 58-234; and Fed. Home Loan Mortg. Corp v. Commissioner, 125 T.C. 248 (2005). That […]
By John G. Hodnette Section 6104(d)(1)(B) provides a right to taxpayers to request the application for tax exemption and annual informational returns for the last three years of any organization described in Section 501(c) or (d) and exempt from taxation under Sections 501(a) or 527(a). That covers both public charities and private foundations exempt under […]
By John G. Hodnette Section 1377(a)(1) generally provides each shareholder of an S corporation is allocated income or loss of the corporation by (a) assigning an equal portion of each item of income or loss to each day of the year, and (b) dividing that portion pro rata among the shares outstanding on that day. […]
By John G. Hodnette Section 401(a)(9) requires annual minimum distributions from traditional IRAs beginning in the year the owner of the account attains age 72 or, if later, the year in which the person retires. These minimum distributions trigger income taxes at ordinary income rates where otherwise the recipient may wish not to receive distributions. […]
By Keith A. Wood This is the last of three installments of this article. I. Bookkeeper Falls Victim to Section 6672 Trust Fund Recovery Penalty; Kazmi, TC Memo 2022-13. In Kazmi, a bookkeeper was found liable for the Section 6672 trust fund recovery penalty. The facts of this case are particularly sad. The bookkeeper, Mr. […]
By John G. Hodnette The Tax Cuts and Jobs Act of 2017 capped the deduction available to individual taxpayers under Section 164 to $10,000 for 2017 through 2025. That deduction includes state income taxes, real property taxes, and personal property taxes. To benefit taxpayers who own partnerships or S corporations, many states have enacted elective […]
By Keith A. Wood This is the second of three installments of this article. I. Contemporaneous Written Acknowledgment Rules for Charitable Contributions of Aircraft and Vehicles; Izen vs. Commissioner (5th Cir. 2022). Mr. Izen donated a 50% interest in an aircraft to a charitable organization. The Fifth Circuit Court of Appeals upheld the earlier decision […]
By Keith A. Wood This is the first of three installments of this article. I. Audit Statistics: What Are Your Chances of Being Audited? The 2021 Internal Revenue Service Data Book contains audit statistics for 2011 through 2019. Below are audit statistics for 2019 returns: A. Audit Rates for Individual Income Tax Returns. During FY […]
By John G. Hodnette In general, operating a business through an entity can provide limited liability in the event the entity is insolvent or goes out of business. Limited liability applies even to business taxes owed by an entity such as a C corporation. Some taxpayers have attempted to take advantage of that by causing […]