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Tax Articles

Characterizing Partner Distributions

Generally if payments are in exchange for partnership property, the amount received in excess of the partner’s outside basis in his/her partnership interest is taxed as capital gain. However if the payments represent a distributive share of partnership income or are deemed to be guaranteed payments, the payments are taxed as ordinary income. According to Tax Court Memo 2009-243 Wallis v. Commissioner, retirement payments to…

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Tax Scams by Tax Practitioners Including CPA’s and ‘Tax’ Attorneys Have Been on the Rise

Most paid tax return preparers provide honest and professional service, but there are some who engage in fraud and other illegal activities.   Regardless of professional designation unscrupulous promoters, even those with CPA’s and Law degrees, deceive people into paying for advice on how to file false claims. Some promoters may charge unreasonable amounts for…

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Hobby v. Business determined based on how records were kept: TC Memo 2010-92

If you think you have a viable ongoing business with a profit motive be sure to maintain adequate financial records on a computer that you back up off site on a regular and consistent basis.  Also be aware that in the tax court case of Chandler v. Commissioner (TC Memo 2010-92) the significance of inadequate hand…

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Medical Expense Deductions

Many medical costs are deductible including the cost of treatment to alleviate conditions or diseases and the cost of prescriptions and certain diagnostic services. Additional deductible medical expenses include: Capital expenses for special equipment installed in, or improvements made to, a home that provides a medical benefit; these include wider doorways, entrance ramps, modified bathroom or…

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Home Office Deduction: IRS Publication 587

Okay I’m taking another case to IRS appeals regarding the home office deduction.  In preparation I reviewed IRS Publication 587: Business Use of Your Home and I pulled some relevant quotes. “You can have more than one business location, including your home, for a single trade or business. To qualify to deduct the expenses for…

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Taxable and Non Taxable Settlements

I’ve been getting quite a few calls lately from taxpayers that have received ‘settlement’ money and are confused over the prospective tax ramifications of receiving such money.   The Internal Revenue Service recognizes that receiving a settlement award (amount) from a personal injury suit may create new tax issues for some individuals. The following information…

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Millennium Multiple Employer Welfare Benefit Plan Settles with IRS

The Internal Revenue Service announced that it reached an agreement with the Millennium Multiple Employer Welfare Benefit Plan (Millennium Plan) which is presently the subject of a bankruptcy proceeding filed on June 9, 2010, in the U.S. Bankruptcy Court for the Western District of Oklahoma (Case No. 10-13528).  Those disrespecting the Code have been brought down.…

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Do You Have A Business? Or Is It A Hobby?

The IRS has developed a rule of thumb for analyzing business losses called the Hobby Loss Rule of Thumb that basically says if a business reports a net profit in 3 out of the last 5 years it is presumed to be a for-profit business. Similarly if a business reports a net loss in more than…

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Amortization of Intangible Costs

Also commonly referred to as 197 Intangibles, the following costs must be amortized (deducted as an expense) over 15 years (180 months) starting with the later of (a) the month the intangibles were acquired or (b) the month the trade or business or activity engaged in for the production of income begins: Goodwill; Going concern…

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