Important Tax Developments in the First Quarter of 2015
The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood.
Income Taxes
Tax Rules for Employee Business Travel: A Review
Business travel, a necessary evil at many companies, can be an expensive and time-consuming activity for both the employer and employee. It also can create tax headaches for all concerned unless the rules are followed to the letter. If it’s done right, business travel will be fully deductible by the company (but only 50% of travel meals are deductible), tax-free to the employee, and free of FICA and payroll tax withholding. If the rules aren’t followed, the expense will still be deductible by the employer, but it will be taxed to the employee and fully subject to withholding. This post reviews the business travel rules that apply in a variety of common situations.
Important Tax Updates 2014
The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood.
Failure to Make Real Estate Tax Election Can Be Costly
Even though you may be treated as a real estate professional as defined for tax purposes, failure to make the election to treat all rental real estate activities as one activity can result in loss disallowance. This can be a costly mistake.
Taxpayer’s Fundamental Misunderstanding on Using an IRA to Invest in Real Estate Costly
I frequently receive this question: When using my IRA to invest in real estate, do I withdraw my IRA funds to buy property? Well, only if you want to be taxed on the amounts taken out of your IRA. Do NOT withdraw funds from an IRA to purchase real estate, use a third-party custodian such as NuView IRA, Equity Trust or Pensco. Here is a common misunderstanding with using an IRA to buy real estate….
Net revenue from an apartment complex’s coin-operated laundry was UBTI
Caution IRA’s and 401(k)’s that own rental properties: Coin-operated laundry facility resulted in Unrelated Business Taxable Income (UBTI) but additional parking income did not.
LLC partner who co-guaranteed loan was 50% at risk & not subject to passive loss limits
A district court has determined that a taxpayer was at risk with respect to the aircraft leasing activity of his wholly owned limited liability company (LLC), but was only at risk with respect to 50% of a loan taken out by the LLC on which he was a co-guarantor. The court further concluded that the LLC’s leasing activity wasn’t a rental activity and that the taxpayer therefore wasn’t subject to the passive activity loss (PAL) limitations.
Intention to Flip Real Estate Wasn’t a Trade or Business
The activities of a person who owned two rental properties in Israel, then bought two properties in the U.S., lived in one of the U.S. properties, then rented it out and moved into the other U.S. property, weren’t a trade or business, despite his claimed intention to make money from flipping properties. And, he wasn’t able to avoid the substantial understatement penalty by arguing that he relied on his tax professional’s advice.
“Last Minute” Year-End Tax-Saving Moves for Individuals
Although there are only a few weeks left to go before the year ends, it’s not too late to implement some planning moves that can improve your tax situation for 2013 and beyond. This post reviews some actions that you can take before Dec. 31 to improve your overall tax picture.
Small Compensation Paid from IRA Results in Huge Tax Liability
Where an individual taxpayer had his IRA own the shares of his business, a limited liability company (LLC), the LLC’s payment of compensation to the taxpayer for his services to the LLC was a prohibited transaction resulting in disqualification of the IRA and a deemed distribution of its assets.