Introduction The U.S. Court of Appeals for the Ninth Circuit recently affirmed a District Court’s ruling against a married couple who claimed their losses related to three vacation properties were not limited under the passive activity loss rules of IRC § 469.[1] The couple argued that the management company responsible for renting the property to…
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A recent case shows how a shareholder and corporation, being considered alter egos, can cause unintended consequences. In Lothringer,[1]a corporate shareholder’s individual property was subject to enforced collection action by the IRS to satisfy corporate tax liabilities.[2] The court’s finding that the corporation was the shareholder’s alter ego allowed the IRS to hold the shareholder…
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Introduction Generally, a taxpayer may deduct the fair market value of appreciated property donated to a qualified charitable organization.[1] This provision expands the benefits available to taxpayers with respect to charitable deductions. The result, in effect, is that a taxpayer may gift an appreciated asset in lieu of selling the asset, paying tax, and then…
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In a recent Tax Court opinion, the Court granted the IRS’ motion for summary judgment holding that a state law Nonprofit corporation could not election to be treated as S corporation for federal income tax purposes.[1] Clinton Deckard attempted to make an S election for Waterfront Fashion Week, Inc., a Nonprofit corporation organized under the…
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In a recent opinion out of the United States Court of Appeals for the Seventh Circuit, the Court upheld the Tax Court’s ruling that cash payments made from a family owned company to the son of the founder were not bona fide debts, and thus not deductible as bad debt expenses.[1] Additionally, the Court sided…
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In trust planning, it is common that a trust beneficiary is appointed as trustee. A lot of confusion surrounds the consequences of appointing a beneficiary as his or her own trustee. On one hand, I have heard people say it is not allowed to have a beneficiary serve as trustee. On the other hand, I…
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It is not uncommon for a property owner to experience a large loss on the sale of a piece of property. It is also not uncommon that an issue exists regarding character of the loss and whether the asset sold was a capital asset or a business asset used in carrying on a trade or…
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As a basic matter, creditors of a trust beneficiary generally do not have access to assets of the trust.[1] The primary exception is that creditors generally can access trust assets distributable to the settlor of the trust, such a trust being considered “self-settled.”[2] Many states have abolished this exception for trusts that satisfy certain statutory…
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Introduction Earl and Margaret Blasingame filed bankruptcy seeking the discharge of over $7.7 million in debt. They claimed to have monthly income below $900 and total assets of less than $6,000. However, Earl and Margaret lived in a “28-acre gated compound” with a heated swimming pool and lighted tennis courts. The residence was adjoined by thousands…
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