Your Money Or Your Life – Which Can You Deduct ?
The case concerns the 2007 tax year. Apparently the Mills got away with over $2,000,000 in deductions for the first six years the scheme was in effect. The tax accounting issues raised by this are giving me a little bit of a headache. The $2,000,000 in allowed deductions reduced their basis in their LLC interests. Whether that will ever cost them anything depends on what else was inside the LLCs and how long they keep them running. How to sort that out would be a good question to ask on a partnership taxation exam.
Would Be Developer Tripped Up By Interest Tracing Rules
The Tax Court indicated that the renovations would be considered to be funded by the mortgage rather than being funded by the proceeds of the sale of the other property. If someone had been paying attention to the tracing regulations, that problem might have been overcome, but that is easier said than done.
It is troubling that there was no attempt to apply the Cohan rule to allow some of the interest as investment interest.
Follow Me
Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.