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By month:February 2008

Good News for 105 Plans

In an ISP, the IRS asserted that the Section 105 medical reimbursement plan may not reimburse the employee-spouse for the cost of health insurance purchased in the employee-owner’s name. This court case held that this IRS position is wrong and that the owner may deduct the cost of medical insurance purchased in his name when that insurance is covered by the Section 105 medical reimbursement plan.

Audit Guide for Your Self-Employed Section 105 Plan

Answering “yes” to the 11 puts you on the road to audit-proof status for your Section 105 medical reimbursement plan.


No Mercy for You When 1031 Exchange Intermediary Goes Bankrupt

When you use an intermediary to complete a Section 1031 exchange, you sell one property and place the cash on deposit with the intermediary. If the intermediary goes bankrupt causing your exchange to fail the time test, you are on the hook for the taxes.

AMT More Likely to Hurt You in 2008

In upcoming years, taxpayers with cash income greater than $50,000 are more likely to pay the AMT than taxpayers with cash income of $1 million or more. Fixing this will require a large tax package.


GAO Tells Senate: “Fiscal Outlook Is Bleak and Action Is Needed to Avoid Serious Economic Disruption”

In testimony before the Senate on January 29, 2008, the Government Accountability Office (GAO) said: “Under any plausible scenario, the federal budget is on an imprudent and unsustainable path. This budget imbalance will necessarily result in tax increases and spending cuts. (And all this is before Treasury Secretary Paulson’s first $700 billion bank bailout.)


Tool Allowance Fails

New tax rules have pretty much killed the once-common tool and car allowances as expense reimbursement methods.


Rental Loss Not Deductible

Carolyn Federson lost all of her rental property loss deductions when the court rejected some of the details of her rental property time records and made its own estimate of the time she spent on her rentals.


IRS Levies IRA for Back Taxes

Anti-alienation provisions prevent ordinary creditors from levying pension payments. The IRS does not suffer these provisions.


No Meal Receipts Equals No Deduction

This taxpayer lost $5,503 in meal expenses because she could not produce receipts or other records to prove the meal deductions.


Gift of Business SUV

When a business vehicle is given away as a personal gift, it is subject to recapture on any expensing or depreciation deductions in excess of straight-line depreciation.


Son Pays the Mortgage Interest

Your son may not deduct the interest on the mortgage payments he makes on your behalf. You need to reconsider and restructure this arrangement.


Husband and Wife Joint Venture

The husband and wife who work together must consider the joint venture election if they want the business treated by the IRS the way they think it should be treated.


Fireproof Safe

Purchase of a safe or file cabinet to protect business tax records is deductible, but only to the extent of business use.


Cruise to Mexico

Taking a cruise ship to Mexico for a business meeting is an acceptable, and deductible, form of travel.


Home Office as Second Office

The accountant who is telling you that you may not deduct a home office because you have an office outside the home is wrong. It makes no difference how adamant he is about this. He is wrong.


Solo 401(k) for Employee-Wife

This proprietor paid his employee-wife $12,000 in wages. Now, she wants to contribute the entire $12,000 as an elective deferral to her 401(k) account but she no longer has $12,000 because of payroll taxes. With some mechanical adjustments, the employee-wife may contribute the full $12,000.


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