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Blast From The Past
Accountants understand cancellation of indebtedness income because they think in double entry. Some of them think there is a big balance sheet in the sky. If somebody writes something off without somebody picking up income the fabric of space-time will become disturbed. They can be extremely disturbed by asymmetrical results. Personally I put taxing debt discharge income in the same category as the GAAP going concern qualification. It’s kicking somebody when they are down.
Time to Purge C Corporations
To compute a corporation’s earnings and profits is often no simple task, especially if the corporation has gone through a series of reorganizations or other adjustments. It may be necessary to decide how a transaction occurring many years ago should have been treated under a long-interred statute because of its effect on accumulated earnings and profits; and, because there is no statute of limitations governing the effect of prior transactions on accumulated earnings and profits, it is advisable to retain corporate records permanently.
Have Some Free Insurance – Not
Eagle Financial Group, Inc, by some sort of wild coincidence a company owned by the agent who sold the policies, issued them a check in the amount of the first year’s premium. They issued a recourse note in the amount of the premium advance to Eagle. There were, however, never any payments made on the note. The policies were canceled in 2003 and Mr. Smith, the agent, was sued by Ohio National Insurance Co for “rebating”.
IRS Declines Rubbing Salt in The Wound
There is really no excuse for people having gotten themselves in this situation. It is true that some facilitators have a sort of black box business model in which the money disappears when you sell the relinquished property. In that model, it’s none of your concern where the money is in the meantime as long as they deliver the target property. That is not the only model though. It is also permissible for the funds to be segregated in separate bank accounts and some facilitators are affiliated with major banks
Deemed Partnership
The case of Holdner v Com TCM 2010-175 is giving me pause. When I read what William Holdner and his son Randal achieved over the years in business I am very impressed. Mr. Holnder seems a much sharper businessman than I am. It makes me hesitate to criticize him as an accountant, which he also is. It’s just that I think he picked an unnecessary fight.
Real estate election relief
If you have been posting negative numbers from real estate investments to your return on the theory that you or your spouse is a real estate professional, you should make sure that you have made the election. If not you may want to consider requesting relief. Furthermore, I generally believe in keeping tax returns indefinitely, but if you must dispose of some of them, be sure to keep the return for the year that you made the election. It is relevant for all future returns in which you are claiming its effect and I know from experience that you cannot rely on the IRS to preserve it for you.
Pigs Get Fed
“Pigs get fed. Hogs get slaughtered.”. I tried to research the origin of the expression and the claims of origin I found all post dated my first exposure to it. As one of my partners commented we really had no idea if there was any agricultural reality to the expression. Unlike some other expressions (“Same difference” “No harm. No foul.”), though, I had a pretty clear idea of the inherent advice. It was that you should be aggressive, but not too aggressive.
Need Form for Dependency Deduction
Thus, without her signature on a form that releases her claim to the dependency exemption deduction, petitioner failed to satisfy section 152(e)(2)(A) and may not claim L.W.K. for the purpose of receiving the exemption.
LLC Member Not Presumed to be Passive
This was originally published on PAOO on August 30th, 2010. In Action On Decision 2010-002 the IRS acquiesced in a Court of Claims decision (Thompson v. US 104...
Sorry We’re The Tax Court Not Divorce Court
The moral of the story is that taxpayers and advisers need to look at joint returns, not as a simple exercise of what produces the lowest total tax, but also consider the implications of joint and several liability. There is some relief available, but it is by no means assured.