Documenting Tax Losses for Worthless Securities

Houston Tax Attorney

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Tax losses for worthless securities are often challenged by the IRS.  It particularly important to document the loss.  There are several elements taxpayers have to establish to secure the benefit of tax losses for worthless securities.  The recent Giunta v. Commissioner, T.C. Memo. 2018-180, case provides an opportunity to consider these elements. Facts & Procedural History The […]

Court Says Partnership is Worth Less, Not Entirely Worthless

Houston Tax Attorney

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The IRS often challenges tax loss deductions.  In many cases, it does so by challenging the year in which the loss is allowable.  It can be difficult to determine which year the loss should be taken.  When an asset is losing value over time, there is a time when the asset is worth less than […]

Documenting Loans to Closely-Held Corporations

Houston Tax Attorney

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In Norgaard v. United States, No. 16-12107-FDS (D. Mass. 2018), the court addressed whether a personal loan made to a closely held corporation can be deducted as a bad debt when the business goes out of business. The case highlights why it is important to document loans made to corporations. The Facts & Procedural History […]

Subchapter S Corporation Losses Limited by Tax Basis

Houston Tax Attorney

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One of the benefits of Subchapter S corporations is the ability to have losses flow through from the business’ tax return to the individual shareholder’s tax return. These flow-through losses are limited by the shareholder’s tax basis in the S corporation stock. The court recently addressed this limitation in Tinsley v. Commissioner, T.C. Summary Opinion […]

Bad Credit Results in Disallowance of Bad Debt Deduction

Houston Tax Attorney

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The IRS often challenges bad debt deductions–particularly when the loan is from a family member or friend.  The courts have developed several factors that they consider in these disputes.  One of these factors is whether the borrower would have been able to secure a loan from a third party.   The court recently addressed this in […]

Accuracy Related Penalties Do Not Apply to Full Understatement of Tax

Houston Tax Attorney

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In Hatcher v. Commissioner, T.C. Memo. 2016-188, the court considered a very common error IRS agents make in computing the Section 6662 accuracy related penalty. The IRS applied the penalty to the entire understatement of tax, rather than the portion of the understatement that was not subject to the reasonable cause defense. This is one […]