John G. Hodnette

Claim of Right Doctrine of Section 1341

Under the claim of right doctrine, a taxpayer who receives income under a claim of right that is free of restrictions must include the amount in income in the…

Partnership Representatives

Congress adopted new partnership audit rules as part of Bipartisan Budget Act of 2015 (“BBA”), replacing the Tax Equity and Fiscal Responsibility Act of…

Allocation of Income When a Partner Leaves a Partnership

The allocation of income when the ownership of an S corporation changes is discussed in my previous article Section 1377(a)(2) Elections for S Corporations.…

Deemed Asset Sales Under Rev. Rul. 99-5

Revenue Ruling 99-5 discusses the tax treatment of the purchase of some but not all of the membership interests in a wholly-owned LLC. Pursuant to Reg. §…

Tax Benefit Rule

The tax benefit rule was originally established by case law but later codified as Section 111. It provides a taxpayer is not permitted to retain the tax…

How Are Restricted Stock Units Taxed?

Employers often issue incentive stock to employees to promote retention and performance. Restricted Stock Units or “RSUs” are one of many ways to do so.…

Recharacterizing Gain on the Sale of Depreciable Property Between Related Parties

Section 1239 provides gain on the sale or exchange of certain depreciable property between related taxpayers is taxed at ordinary income rates rather than the…

Changes to R&D Deductions and Credits

The Tax Cuts and Jobs Act of 2017 made changes effective in 2022 for the R&D deduction under Section 174 as well as the interaction between that deduction…

Timing of Deductions Under Section 461

Taxpayers primarily focus on the ability to take a deduction. Another consideration, however, is the timing of the deduction. Section 461 provides the rules…

Statute of Limitations on Assessments

Generally, Section 6501(a) prohibits the IRS from auditing a tax return and assessing additional tax after three years from the filing date. Thus, the IRS has…