Federal

Abusive Arrangements

As part of its enforcement efforts, the IRS annually identifies what it describes as potentially abusive transactions that taxpayers should avoid.[i] According to the agency, some of these transactions are focused on more complex arrangements that promoters market to higher-income individuals. The IRS has stated that such arrangements will likely attract additional agency compliance efforts in the future; in other words, they are on the IRS’s “enforcement radar screen.”

Among these suspect tax-motivated transactions, the IRS has included so-called “monetized installment sales” (“MIS”),[ii] which the agency claims involve the inappropriate use of the installment sale rules[iii] by a seller who, in the year of a sale of property, effectively receives the sales proceeds through purported loans.Continue Reading Another Setback for Monetized Installment Sales?

Determining Tax Deficiencies

As we discussed a few weeks ago,[i] the IRS is charged with enforcing the U.S. federal tax laws; i.e., it is responsible for processing tax returns and for collecting taxes. As part of its collection function, the agency may examine a taxpayer’s books, accounts, financial and other records to ensure that the information included on the taxpayer’s return for a tax year was reported correctly, and to verify that the reported amount of tax was correct.Continue Reading Visiting the Sins of the Tax Preparer Upon the Taxpayer? The Fraud Exception to the Limitations Period on Assessment

The Latest

Last week, an amicus brief was filed with the First Circuit Court of Appeals in support of a taxpayer’s[i] challenge to the U.S. Tax Court’s dismissal of the taxpayer’s petition[ii] for lack of jurisdiction. The Tax Court determined that the taxpayer failed to satisfy the statutory requirement that a petition be filed with the Court within 90 days after the IRS mails a Notice of Deficiency to the taxpayer if the taxpayer wants to challenge the asserted deficiency in the Tax Court.[iii]Continue Reading Will Congress Extend the Statutory Period For Filing a Petition With the U.S. Tax Court?

Rules

  • Winston: Two rules that cannot be broken, Jonathan. No blood on Continental grounds, and every marker must be honored. Now, while my judgment comes in the form of excommunicado, the High Table demand a more severe outcome if their traditions are refused.
  • John Wick: I have no choice?
  • Winston: You dishonor the marker, you die. You kill the holder of the marker, you die. You run, you die. This is what you agreed to, Jonathan. Do what the man asks. Be free. Then, if you want to go after him, . . .  be my guest. But until then . . .
  • John Wick: Rules.
  • Winston: Exactly. Rules. Without them, we’d live with the animals.[i]

In the fictional world of John Wicks, the High Table enforces a strict code of conduct[ii] without which the lives of its inhabitants would mimic life in a Hobbesian state of nature.[iii]

However, as dangerous and as rule-bound as life “under the Table” appears to be, it pales in comparison, both in terms of numbers and complexity, to the rules that have been promulgated for the administration of the U.S. federal system.Continue Reading Responding Timely to A “90-Day Letter” – Is It Jurisdictional?

C Corp
Imagine a closely held and growing start-up business (“Corp”) that was recently incorporated under state law and, so, is treated as a regular C corporation for purposes of the federal income tax.[i]

Thus, Corp will pay income tax on its taxable income,[ii] and the losses generated in Corp’s first few years of operation – not uncommon with a start-up – will be trapped within Corp and cannot be passed out to Corp’s shareholders for their own use.[iii]Continue Reading Gifting Qualified Small Business Stock – Can You “Stack” the Section 1202 Odds In Your Favor?

Not Long Ago

In the months preceding the general election in 2024, the owners of many closely held businesses who had not yet given much thought to the disposition of their future estates, including their businesses,[i] decided they should meet with their attorneys and other advisers[ii] to see what steps they should consider taking to protect their wealth, which in many, if not most, cases resided primarily in their business.

What prompted many of these owners to act was a sense of urgency arising from the realization that the federal transfer tax[iii] benefits and other tax benefits made available to them by the 2017 Tax Cuts and Jobs Act[iv] were going to expire after 2025 (perhaps sooner);[v] these included the enhanced unified estate and gift tax basic exclusion amount,[vi] the increased generation-skipping transfer tax exemption amount,[vii] the reduced top marginal income tax rate for ordinary income,[viii] and others.Continue Reading The Enactment of OBBBA: It’s Time to Plan, Not Relax – “Winter is Coming”

The “One Big Beautiful Bill Act” (the “Act”)[i] was signed into law last week, on July 4. As promised by the White House, the Act extends – i.e., purports to make “permanent” – many of the otherwise expiring provisions that were introduced by the Tax Cuts and Jobs Act (P.L. 115-97) in 2017.[ii] The legislation also adds some new provisions to the Code, while “updating” others.Continue Reading Closely Held Businesses and Their Owners Ask: What’s Big and Beautiful in the Recent Tax Law?

An Agency Under Siege

The mission statement of the IRS reminds taxpayers that it is their responsibility to understand and meet their tax obligations, while it is the role of the IRS to “enforce the [tax] law with integrity and fairness to all” to ensure that those obligations are satisfied.

The IRA

In 2023, following the $80 billion of funding authorized for the agency by the Inflation Reduction Act (the “IRA”),[i] the IRS announced it was going to increase its enforcement efforts with regard to wealthy and high-earning taxpayers, and the complex partnerships they employ,[ii] to ensure these taxpayers were held accountable for the full amount of taxes they owed.Continue Reading The Limited Partner Exclusion From Self-Employment Tax – But Who Is A Limited Partner?

Back to the Office

You are probably aware that many employers are discarding the fully flexible, remote work policies that were forced upon them – as “nonessential” businesses – during the COVID-19 pandemic[i] and which they retained as an accommodation to employees after the pandemic ended. Indeed, there is now a steadily increasing percentage of employers that are requiring their employees to return to the office or place of business.

Some employers are mandating that employees work in the office full-time.[ii] Many other businesses expect employees to be physically present at least three days per week.[iii] Often, employers are “taking attendance” to ensure compliance with their in-office policies.Continue Reading Employer to Nonresident Employee: “You Cannot Work in New York”; New York to Employee: “We Will Tax You Anyway”

Expiring Provisions

Just a few weeks ago, many individual taxpayers, driven by what they viewed as the relatively imminent expiration of the enhanced federal transfer tax[i] exemptions, sought advice on how to leverage their remaining exemption and thereby optimize the transfer of value to their beneficiaries while limiting the amount of tax incurred.

Even following the results of the November elections, and regardless of the President-Elect’s recent statements about further curbing the federal transfer taxes, many individuals continue to be concerned about the reduction of the “basic exclusion amount”[ii] that is scheduled to occur at the end of this year.[iii]Continue Reading Expiring Federal Transfer Tax Benefits – Nothing is Certain or Lasts Forever