How Should a $300,000 Fee Collected by John Smith After Two Years of Work on a Personal Injury Case with a $2,000,000 Jury Verdict in His Clients Favor, Be Reported for Tax Purposes.

The Internal Revenue Code (IRC) is the supreme source of income tax law. When trying to resolve an income tax question, a tax practitioner will look to other sources in addition to the IRC. For example, the tax practitioner may consult IRC regulations,

The Tax Court, per Judge Ruwe, issued an order on May 8, 1995, denying Pope & Talbot 's motion and granting the IRS 's motion. The court 's opinion characterized the issue before it as one of "first impression," and found resort to the legislative history of the statute necessary since the court was unable to "achieve...certainty based on the language of the statute." After reviewing the legislative history of IRC Sec. 311, the court observed the following: It is apparent that the purpose underlying IRC Sec. 311(d) was to tax the appreciation in value that occurred while the corporation held the property and to prevent a corporation from avoiding tax on the inherent gain by distributing such property to its shareholders...It follows that we must focus on the value of the Washington properties as owned by petitioner and value them as if petitioner had sold them at fair market value at the time of distribution.

Sale of rental property does not qualify for exclusion 121 because the two year resident occupation limit cannot be satisfied in income producing business property. The sale will fall under section 1231 which encompasses transactions of sales or exchanges of business property held for longer than one year. In order to determine treatment of section 1231 you must combine all section 1231 gains and losses for the year. A net loss is an ordinary loss. A net gain is ordinary income up to the amount of your non-recaptured section 1231 losses from previous years. Any remaining balance becomes a long-term capital gain. The formula for calculating gain or loss involves subtracting the cost basis from the selling price. If you have taken depreciation on the property in the past and are

Unfortunately, paying down your current mortgage and assuming a new mortgage will not result in different tax consequences for you or Mr. Smith. The only possibly benefit to you would have to be based on the amount of interest (based on the rate) you are paying on your current debt and the amount you would have to pay on the new debt or loan.

2(b) Jane has inquired about the 1031 tax exchange if they could use that plus some of John’s money from the case to purchase a more expensive house.

Explain the argument over whether or not this should be considered a tax instead of

Petitioner married Marianna Packard on November 22, 2008, and they have separate residences until purchasing the house for $203,500 in Tarpon Springs, Florida on December 1, 2009. Mrs. Packard owned and resided in a residence in Clearwater, Florida from April 1, 2004 to November 17, 2009. Petitioner rented a dwelling in Tarpon Springs, Florida, and he does not own the residence during the three years before December 1, 2009. Petitioner and Mrs. Packard

b. Can John and Jane Smith utilize a 1031 tax exchange to buy a more expensive house using additional money from John's case? According to Internal Revenue Code section 1031, a personal property does not qualify for and cannot be exchanged under Sec. 1031. With exchanging of your personal home, you are not qualifying for “like-kind” exchange treatment under the IRC Sec. 1031 tax-free exchange. There are no tax benefits for exchanging their existing home with a larger home. There may be a greater tax deductions for their mortgage interest or/ and Property tax.

As preparers for Mr. Wells’ 2012 Tax Return our team made several assumptions, some of which would require further input from Mr. Wells. We also ran into some opportunities for tax planning for Jack. This memo outlines those assumptions, questions, and opportunities. The following is a list of assumptions broken down by IRS Form or Schedule:

Internal Revenue Code § 121 (a) notes that the $500,000 exclusion for joint returns that the Dutros appropriated would only apply “if, during the 5-year period ending on the date of sale or exchange, such property has been owned and used by the taxpayer as the taxpayer’s principal residence for periods aggregating 2 years or more.” The important phrase to note is that the home has been used by the taxpayer as their “principal residence” for at least two years. Therefore, the dilemma is that the Dutros rebuilt their home and

This is Tom’s third year in the real estate business and he has prepared his own tax returns in previous years. His recordkeeping is shoddy and it seems that Tom wants to deduct as much as possible in business expenses, but his accountant wants to avoid being completely erroneous.

The hobby loss rules under IRC § 183 limit the deductibility of certain items with respect to an activity that is not engaged in for profit. The history of IRC § 183 indicates that one of the primary motivating factors behind its passage was Congress’ desire to create an objective standard to determine whether a taxpayer was carrying on a business for the purpose of realizing a profit or was instead merely attempting to create and utilize losses to offset other income (Nickerson vs Comm, 1983). Congress recognized that “wealthy individuals have invested

The court stated that the “[a]doption of the destination principle does not require us to construe the gross receipts tax to include principles of transfer of title, transfer of possession, or risk of loss, which are concepts that were not included in the language employed by our legislature. Therefore, we hold that the destination principle applies to determine whether an interstate transaction is a taxable sale under our gross receipts tax laws.” While the court does not hold the principles of transfer of title, transfer of possession, or risk of loss as dispositive, they are certainly important in analyzing the situs of the sale.

The bad news: Unfortunately, home sale tax exclusions do NOT apply to inherited houses. Normally, if you own a house for two out of five previous years, you benefit from this tax exclusion. However, if you plan to live in the inherited house for two years, and then sell it, you can still benefit from this exclusion – but many people choose to sell their inherited house right away.

Tax shielding compensation is not necessarily evil. The Bureau of Internal Revenue (BIR) promulgated revenue regulations that enumerate tax-exempt compensation and