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Help Us Forget

Having been swept along for nine days “by the force of the hostile winds on the fishy sea,” Odysseus and his crew came to a strange land. After securing their ships, Odysseus sent some of his “companions ahead, telling them to find out what men . . . might live here in this country.” They came upon the Lotus Eaters, a people “who live upon . . . the honey-sweet fruit of the lotus.”[i] Those crew members who ate of the fruit were left in a state of bliss, forgetting all else, including an urgency to return home to Ithaca.[ii]

Continue Reading Tax Considerations and the Reclassification of Marijuana – We’re Not There Yet
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Almost That Time

In less than four months, the citizens of the United States[i] will be electing their next President to a four-year term.[ii] They will also be deciding which of the two major political parties will “control” the Senate, the House, or both, for at least the next two years.[iii]

In other words, the composition of two of the three branches of the federal government – specifically, those responsible for determining the direction of the country, and perhaps the world – will soon be up for grabs.

Continue Reading The Supreme Court’s Non-Opinion On The “Realization” of Income – A Lost Opportunity?
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You may have heard or even read about the U.S. Supreme Court’s recent decision regarding the date of death value[i] of a deceased shareholder’s shares in a closely held corporation that owned a life insurance policy on the decedent’s life, the proceeds of which the corporation used to redeem the decedent’s shares from their estate.[ii]   

The significance of the decision for the shareholders of many closely held corporations is belied by the brevity of the Court’s opinion and the relative absence of any “technical” analysis.[iii]

Continue Reading Funding the Buyout of a Deceased Shareholder With Corporate-Owned Life Insurance – Did the Court Decide Connelly Correctly?
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Mere Change in Form

It is a basic principle of the income tax that the gain or loss realized by a taxpayer from the conversion of property into cash, or from the exchange of property for other property that differs materially in kind from the exchanged property, is treated as realized income or loss.

Moreover, the general rule with respect to such realized gain or loss is that the entire amount thereof is recognized for purposes of determining the taxpayer’s income tax liability,[i] except in cases where the Code specifically provides otherwise.[ii]

Continue Reading Trust Beneficiary Engages In Like Kind Exchange Using Trust Property
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You Mess With The Bull . . .

An anonymous thinker, lost to history, is credited with having said that the unofficial motto of the IRS is, “We have what it takes to take what you have.”

In some instances, the truth of the above statement is manifested in what may be described by certain observers as an abuse of governmental power. In other cases, however, like that of the Taxpayers described below,[i] many members of the public will feel vindicated by the outcome, while probably many more will categorically approve of a bad actor’s having received their just deserts.[ii]

Continue Reading Collecting an Individual’s Unpaid Taxes from Their Controlled Entities
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“Let’s make sure if they move, they have nowhere else to go because we’re all taxing them together.”[i]

Around the Globe

Earlier this year, the OECD observed there has been a significant increase in global wealth inequality over the last two decades. It also acknowledged that “taxation is a key instrument . . . that governments have at their disposal to address inequalities.” It added that, as “countries are looking for additional revenue sources to meet their long-term public spending needs,” it will be important to ensure “that everyone contributes their fair share,” specifically mentioning those individuals with “offshore wealth.”[ii]

Continue Reading Tax Authorities of the World Unite? Not Quite, But the IRS Joins the Movement to Tax the Rich
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Sale, or Contribution-Distribution?

Assume that X and Y agree to the following: X will transfer ownership of Prop to Y, and Y will transfer cash to X.

What just happened? Obviously, X has sold Prop to Y. If the amount of cash that X receives is greater than his adjusted basis in Prop (generally, his unrecovered investment in the property), then X will realize a taxable gain.

Continue Reading Partnership Transactions Lacking Economic Substance or Business Purpose: Investor Beware
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Notice of Deficiency

Over the years, I have observed there is only one thing that a taxpayer fears more than being notified by the IRS that their income tax return for a particular taxable year has been selected for audit, and that is being notified that the IRS has determined the taxpayer owes additional tax,[i] plus interest[ii] and penalties,[iii]  for such year.

A taxpayer who has received a timely[iv] notice of deficiency[v] is generally presented with three basic options:

Continue Reading Missing the Tax Court’s 90-Day Deficiency Deadline – Now What?
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Use Your Imagination

Imagine the IRS notifies Taxpayer that they have an outstanding tax liability with respect to Tax Year, and that the agency intends to levy on Taxpayer’s property to collect the allegedly unpaid tax. Taxpayer challenges the levy, arguing they had already paid the tax. The IRS Office of Appeals sustains the levy, and Taxpayer petitions the U.S. Tax Court to review that decision.

Imagine also, while the issue of the levy is pending before the Court, the IRS withholds from Taxpayer a refund for a later tax period, to which Taxpayer is concededly entitled, and that is unrelated to the levy.  

Continue Reading IRS Cannot Offset Taxpayer’s Refund With A Disputed Tax Liability
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Tax Season

As we approach the deadline for paying federal individual income taxes and, generally, for filing the returns on which such taxes are determined, some of you may be recalling how the Inflation Reduction Act of 2022 appropriated billions of dollars[i] to the IRS to bolster enforcement of the Code, including hiring more enforcement agents, providing legal support, and investing in “investigative technology.”

Continue Reading An Inveterate Golfer At the IRS