TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Friday, December 2, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses multi-level marketing business deductions.

KristanBig Hummer isn’t the same as a big deduction.

I have long been a doubter of multi-level marketing. I prepare no returns for MLM entrepreneurs, but they often seem to have a business model of deducting personal expenses as Schedule C business expenses.

My doubt is shaken a bit by a Tax Court case last week where a multi-level marketer generated a fair amount of revenue from his network. Unfortunately, his deductions were supported no better than you usually see when such cases reach Tax Court.

MLM entreprenuers often take an expansive view of just what constitutes a “business” expense. As they are always “on duty,” goes the logic, everything is an expense. That seems to have been the approach he took for his vehicle expenses:

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December 2, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, November 25, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses the importance of not paying other creditors before you pay payroll taxes to the IRS.

KristanNo good deed goes unpunished if you owe payroll taxes.

IRS>Employees. Pay the payroll taxes to the IRS, no matter who else you have to stiff. That’s the lesson of a sad court case out of Houston last week.

Dr. McClendon ran Family Practice Associates for 20 years. Sometime along the way his CFO started keeping the payroll taxes the practice was supposed to remit to the IRS for himself, until by 2009 $10 million was unpaid. The U.S. District Court Judge takes up the story (my emphasis, citations omitted):

Family Practice stopped operating and remitted its remaining receivables to the IRS to pay toward the tax liability. Dr. McClendon made a $100,000 personal loan to Family Practice “for the restricted purpose of . . . using the funds to pay the May 15, 2009 payroll.” Family Practice used that loan to pay its employees.

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November 25, 2016 in New Cases, Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, November 18, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses the importance of keeping good mileage records if you plan on deducting expenses incurred in the business use of a car (even an Aston Martin).

KristanThere is no short form mileage log for an Aston Martin.

All business. A California aerospace consultant visited his clients in a suitably space-age vehicle — an Aston Martin Vantage. Paleolithic vehicle recordkeeping blew up his car deductions on the launch pad.

The consultant claimed $21,747 in vehicle operating expenses on his 2012 return, along with $21,636 in depreciation expense for the Vantage. That’s a lot of deduction, but then again the Vantage is a lot of car. And, of course, the taxpayer said the car was used 100% for business. And he had proof! Well, sort of. Tax Court Judge Nega takes up the story (my emphasis):

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November 18, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, November 11, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses a recent Tax Court case that illustrates the need for a “'sauce for the gander' rule that allows taxpayers to receive penalty payments from the IRS on the same basis as the IRS can impose penalties on taxpayers taking lame positions."

KristanI’ll take your house, but the money I give you is for sweeping it.

The keys will be extra. It’s common to see a Tax Court decision where you wonder why they bothered to go to the trouble of litigating. It’s unusual when the puzzling litigant is the IRS.

When the real estate bubble popped in 2008, mortgage lenders were swamped with borrowers who couldn’t keep up the payments. To deal with all of the repossessions, they came up with deals to encourage delinquent borrowers to leave quietly without wrecking the house.

A California couple took advantage of such a deal when they got underwater on a second home in North Carolina (my emphasis):

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November 11, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, November 4, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses one way the IRS ferrets out business tax cheating.

Kristan"Sure I lie to them, but you can trust me”

No, this isn’t what “double entry bookkeeping” means. A government attorney reminds us of an inherent danger in business tax cheating. In remarks to a meeting of the California Tax Bar reported by Tax Analysts ($link), Tax Division Senior Litigation Counsel Mark Daly told of a technique to sniff out people who systematically underreport business income:

Daly said his favorite cases come from the IRS Criminal Investigation division’s business opportunity program, in which undercover agents pose as prospective buyers of a taxpayer’s business. He explained that when the agents request information on what they’re buying, the taxpayer will frequently show them a second set of books. The beauty is that the agents are wearing a wire and the taxpayer has basically written the search warrant, Daly added. 

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November 4, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (1)

Friday, October 28, 2016

Weekly Tax Highlight And Roundup

This week, Joe Kristan (CPA & Shareholder, Roth & Company (Des Moines, Iowa); Editor, Tax Update Blog) discusses Jackson v. Commissioner, T.C. Summ. Op. 2016-69 (Oct. 24, 2016).

KristanSometimes love isn’t all you need. Compensation causes income tax. Gifts don’t. This made all the difference in a Tax Court case this week.

A Florida man, who we will call Mr. J., was pastor of a little church with “approximately 25 to 30 active members.” His wife was a “director” in the church.

Mr. J. made an offer to the congregation, according to Tax Court Judge Guy:

Mr. J… informed the church’s board of directors that he did not want to be paid a salary for his pastoral services but that he would not be opposed to receiving “love offerings”, gifts, or loans from the church.

Mr. J. was in a position to keep the love coming:

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October 28, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, October 21, 2016

Weekly Tax Roundup 2.0

Note from Paul Caron:  As I explained on August 1, due to my growing other commitments, I have taken steps to reduce the amount of time I devote to TaxProf Blog.  I previously have announced that:

Today, I am pleased to announce that Joe Kristan, CPA & Shareholder, Roth & Company (Des Moines, Iowa), and editor of Tax Update Blog, one of my favorite tax blogs, has taken over the weekly tax roundup.  (I took a side trip to meet with Joe when I went to my son's first Grinnell College soccer game in 2009.)  I am delighted that Joe is adding a new feature to the roundup:  a discussion of one of the week's important tax developments (often a Tax Court decision).

In this week's inaugural post, Joe discusses Hicks v. Commissioner, T.C. Summ. Op. 2016-68 (Oct. 17, 2016), in Good Records Do Not a Business Mile Make:

KristanGood Records, Bad Facts. A Tax Court case this week shows that no matter how good your records are, they don’t help if they meticulously document why your expenses aren’t deductible.

The taxpayers, whose surname name we abbreviate here as “H,” had an unusual Schedule C. Judge Carluzzo explains:

Petitioners, or at least one of them, established SC Management in 2005. According to petitioner, its stated purpose was to manage the careers of the H family. Although the exact services that the business was intended to provide with respect to the career(s) of each family member are less than clear, it appears that each family member agreed to contribute a portion of income earned from outside sources to SC Management in return for whatever services the family member received. During the years in issue the income shown on the Schedules C is attributable to amounts petitioner and one of his children earned.

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October 21, 2016 in New Cases, Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, July 15, 2016

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Friday, July 8, 2016

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Friday, July 1, 2016

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Friday, June 24, 2016

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Friday, June 17, 2016

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Friday, June 10, 2016

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Friday, June 3, 2016

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Friday, May 27, 2016

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Friday, May 20, 2016

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Friday, May 13, 2016

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Friday, May 6, 2016

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Friday, April 29, 2016

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Friday, April 22, 2016

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Friday, April 15, 2016

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Friday, April 8, 2016

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Friday, April 1, 2016

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Friday, March 25, 2016

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Friday, March 18, 2016

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Friday, March 11, 2016

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Weekly Student Tax Note Roundup

Friday, March 4, 2016

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Friday, February 26, 2016

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Friday, February 19, 2016

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Friday, February 12, 2016

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Friday, February 5, 2016

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Friday, January 29, 2016

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Friday, January 22, 2016

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January 22, 2016 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, January 15, 2016

Weekly Tax Roundup

Friday, January 8, 2016

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Sunday, January 3, 2016

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Sunday, December 27, 2015

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Friday, December 18, 2015

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Friday, December 11, 2015

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Friday, December 4, 2015

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Friday, November 27, 2015

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Friday, November 20, 2015

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Friday, November 13, 2015

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Friday, November 6, 2015

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November 6, 2015 in Tax, Weekly Tax Roundup | Permalink | Comments (0)

Friday, October 30, 2015

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Friday, October 23, 2015

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Friday, October 16, 2015

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Friday, October 9, 2015

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Friday, October 2, 2015

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