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Tax Articles

IRS Undercover Operations STILL Lacks Sufficient Oversight

The Treasury Inspector General for Tax Administration released a report today dated February 3rd 2012 titled Criminal Investigation Can Take Steps to Strengthen Oversight of Its Undercover Operation. This audit was conducted as a follow up to an audit in tax years 2001 and 2002 – 10 YEARS AGO.  So it is fair to presume that the people at…


Exclusion of Capital Gain from Sale of Personal Residence Does Not Always Apply

The US Tax Court case of David A. Gates, et ux. v. Commissioner 135 serves as best I can tell as precedent. Under §121, if married taxpayers own and use property as their principal residence for at least two of the five years ending on the date of sale, they can exclude up to $500,000 of capital gain on a…


Reporting Back Pay

Reporting back pay is not as straight forward as one imagines. If you issued back pay you should report it on IRS Form W-2 (in boxes 1, 3, and 5) for the year payment is made. If any punitive damages are involved in a settlement they should be reported by the company on IRS Form 1099-MISC because they are…


Partnership Vs. Qualified Joint Venture

Under IRC 761 the term partnership essentially includes a syndicate, group, pool, joint venture, or other unincorporated organization through or by means of which any business, financial operation, or venture is carried on, and which is not, a corporation or a trust or estate. It goes on to essentially state that an unincorporated organization may exclude itself from this definition if…


Co-ownership of Rental Real Estate Does Not Require Partnership Formation

Generally co-ownership in rental property does not require the formation of a partnership when the following conditions are met. 1. Each co-owner must hold title to the property as a tenant in common (TIC) under local law. This usually doesn’t apply community property. Although the title to the property can’t be held by an entity, an individual tenant-in-common…


IRS Form 1040 Schedule C: Profit or Loss from Business

The sole proprietorship or Limited Liability Corporation (LLC) is in my opinion the easiest type of business entity to set up and begin operating from an income tax reporting perspective. It is not separate from its owner with the income and expenses reported on IRS Form 1040 Schedule C. Some people have instant success with a…


Lessons From Mitt Romney’s Tax Return

Check out Mitt Romney’s 2010 tax return and learn how he does it. The most important lesson I learned in perusing his return (besides the significance of sheltering your $$ outside of the USA) is the immediate impact of targeted charitable contributions. In my professional opinion the absolute best way to reduce your tax liability is to…


Qualified Medical Expense Tax Deductions for Long Term Care Services

Medical expenses include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease under IRC 213, as well as amounts paid for qualified long-term care services under IRC 7702B. You may deduct certain medical expenses that are paid during the year and that are not compensated for by insurance to the extent that the expenses exceed 7.5%…