About: Jeffrey A. Quinn

Recent Posts by Jeffrey A. Quinn

Don’t Forget IRA-Required Distribution as Year End Approaches

The last quarter of the year is just around the corner, and those of you age 70-1/2 and older should be sure to withdraw from your IRA the “required minimum distribution” (RMD) lest you be subjected to the onerous 50% penalty if you don’t.

Taxpayers must begin RMD withdrawals no later than April 1 following the year in which they reach age 70-1/2, and by December 31 of each calendar year thereafter.

The amount of each RMD is computed separately for each IRA, if you have more than one account, though the aggregate total may be paid out from any one or more of your IRAs.

Section 83 Governs Tax on Property Received for Services

Section 83 provides that any person who performs services in connection with which he receives property may elect to include in gross income for the taxable year of the transfer the excess of the fair market value of the property over the amount paid for it, even in a case in which the property is subject to a substantial risk of forfeiture.

The election is made by filing one copy of a written statement with the IRS office with which the taxpayer files his return within a stipulated period of time, and, in addition, a copy of the statement is supposed to be submitted with the income tax return itself for the year of the transfer.

Recent PLR 201438006, however, provides a bit of leniency regarding the requirement to include a copy of the election with the tax return, noting that failure to submit another copy won’t affect the election’s validity.

IRS Provides YouTube Tips on New Health Care Law

The recently-released videos are part of a series on the IRS YouTube channel, featuring IRS Commissioner Koskinen discussing the premium tax credit and the individual shared responsibility provision, which folks will want to know all about before filing their 2014 tax returns.

“For most people, filing their returns in the spring of 2015 is going to be fairly simple….and that is they’ll simply check a box indicating that they have qualifying insurance or they’ll indicate that they’re eligible for an exemption.  Otherwise, they’ll calculate their shared responsibility payment and add it to their tax return,” says Koskinen.

Go to www.irs.gov for the videos and www.irs.gov/aca for Health Care Tax Tips.

Multiple Businesses Require Separate Schedule C for Each

And that wasn’t the only lesson the Tax Court recently taught taxpayer Zierdt (Douglas Zierdt v. Commissioner, TC Summary Opinion 2014-78).

This taxpayer worked part time as a stock broker, while also considering himself a professional gambler.  In preparing his own returns, he combined (i.e.-netted) his gambling losses) against his income from stock brokering.  The Court noted that “He did not file separate Schedules C with his returns, and instead he claimed deductions for gambling expenses on Schedules C that identified the business activity as ‘stockbroker’.  Such inaccurate and misleading income tax reporting does not reflect a reasonable attempt to comply with the Code.”

Moreover, the Court found that the gambling activity was not a true “trade or business” at all,  but a hobby instead and thus disallowed the gambling losses.  The facts that the taxpayer had net gambling losses for each of the years 2006 through 2010, combined with the fact that he did not maintain complete and accurate records were the main reasons for the Court’s conclusions.

And by the way, the bad reporting and lack of documentation led the Court to the additional conclusion that no “reasonable cause” existed to excuse Mr. Zierdt from imposition of the accuracy-related penalties for several of the years.

IRS Clipped for Taxpayer’s Legal Fees — For Once!

It doesn’t happen very often, but in the case of Michael Swiggart (TC Memo 2014-172), not only did the taxpayer “win,”  his argument, but IRS got stuck with his legal fees to boot!

The argument was over whether or not the taxpayer qualified as a head of household.  He did, and proved it at his “collection due process hearing.”  Nonetheless, it wasn’t until the taxpayer filed a petition with the Tax court did the IRS concede, though they stubbornly refused to pay his expenses.  The Court agreed with Swiggart because he was the prevailing party, exhausted all administrative remedies, and did not unreasonably delay the proceedings.

So there.

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