You likely hate tax-law surprises. Foreclosures, short sales, and mortgage modifications can both reward and punish you, sometimes during the same transaction. You may not have a problem with your home’s value or its mortgage, but you may have a relative, friend, or client who faces this situation. If so, you may want to know how tax law treats the principal residence foreclosure, short sale, or loan modification.

The inside buildup of cash value in your life insurance policy coupled with loans against the policy can create an unexpected taxable outlay on your part.

This is part 4 in our series of articles on retirement plans for the one-owner or husband-and-wife-owned business. Here we explain the solo 401(k), which permits the largest deductions of the defined contribution plans. The solo 401(k) has unique advantages when your income fits this profile.

Giving money to and taking it from your corporation needs an audit trail and paperwork to ensure proper treatment. If you operate without the formal paperwork and without the proper logging of entries, you can have unexpected and unwelcome experiences with the IRS and the courts.

Follow the nine steps in this article to ensure that tax law treats your loan gone bad as a real loan rather than as a fake loan. Real loans give you tax-favored bad-debt deductions when uncollectible. Uncollectible fake loans give you undesirable capital contributions and nondeductible business gifts.

The business bad debt generates the best bad debt tax breaks, except when the debt is incurred to protect, enhance, or continue your employee relationship (i.e, keep the corporation in business so you have a place to work).

Your home equity loan can give you a full, partial, or no deduction for your interest. If you will get zero or a reduced benefit, make the necessary changes to protect your tax benefits.

If you are using home equity loan proceeds for your rental property LLC, you need to pay attention to both the legal and tax aspects of that transaction. The legal part is needed for liability protection. The tax part is needed to ensure your tax deductions.

One of your first tax steps in buying a rental property is to go through each line item in the closing statement and assign it to one of the following three categories: (1) basis, (2) loan acquisition, or (3) operations. With basis, you allocate to land, land improvements, buildings, and equipment. Loan acquisition falls into either costs of getting the loan or costs to reduce the interest rate. The assignments have a direct impact on how quickly you realize the deductions.

There are two types of bad debts: business and nonbusiness. Nonbusiness bad debts are deductible in the year the loan is worthless. A business bad debt is deductible either in the year it becomes worthless or to the extent you can prove its decline in value. This is far easier. But, you need to prove your writeoff to get the deduction. We’ll show you how.

Beware! Learn how the Alternative Minimum Tax (AMT) taxes the mortgage interest deduction that lawmakers granted you under the regular income tax. Ouch!

Do you own an asset whose sale will produce a capital gain to you? Are you going to take back a note for some of the sales proceeds? If so, consider the “imputed interest” rules as a net-worth building opportunity. You can get up to 57 percent reduction in your tax bite, without changing the buyer’s out-of-pocket spending.

Traps set by a 1986 tax law still haunt taxpayers today. We can help you avoid some “reforms,” like huge taxes on personal-corporate loans. Instead, make an additional contribution to capital.

There is no such thing as zero interest for tax purposes.

The AMT taxes the deductions you claim on your regular tax return. No, you are not in the Twilight Zone, you are right here in the good ol’ U.S.A. Learn the details of this outrageous act.

Douglas Bynum lent his corporation money before it went bankrupt. He filed to deduct this bad debt, but did it incorrectly. Learn from his mistakes and know the details to do it right.

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

Despite the new law’s press, the Mortgage Forgiveness Debt Relief Act of 2007 only offers relief to a limited number of qualified homes.

Tax law treats foreclosure as a sale of your home. If you sell your home, you have a gain or loss. Most gains are taxable. Losses on a foreclosure or other sale of your personal home are not deductible.

If you are an owner-employee of your corporation, be careful loaning money to your corporation. If it goes under, you might not be able to deduct your bad loans. One solution is to make an additional contribution to capital, but that still doesn’t fully solve the problem.

The slowdown in housing means it’s a buyer’s market. If you have the capital, it’s time to invest. Follow our strategy to see how to best take advantage of the recent economy.

In the latest installment of gimmicky extenders, lawmakers have created a one-year tax benefit window for deducting mortgage insurance. What are the lawmakers thinking? Presumably, they hope the mortgage insurance deduction will boost the housing market in 2007. If this works, look for an extension to 2008.

Business owners, do not be tempted to “borrow” payroll taxes to contribute to the company. This is not only illegal (with penalties), but might leave you personally liable for the stolen money.

Interest paid on a life insurance loan to buy a home does not count as deductible mortgage interest.

To deduct mortgage interest, (1) you must have title, (2) the mortgage must be in your name, (3) the home must secure the mortgage, and (4) you must make the mortgage payments from your money.

Historic rehab tax credits can put you in Donald Trump’s self-proclaimed favorite spot. Tax credits often exceed the cash you invest in the project making the historic rental or office building a “nothing down” deal for you. Add nonrecourse financing to the package and you have no personal risk. None of your cash in the deal and no personal risk—this is Mr. Trump’s favorite spot. You might do as many Congressional leaders do: Donate your personal home’s historic facade to charity so can realize big tax credits.

You probably should hate the IRS for the mileage rate. First, the mileage rate creates the illusion that you don’t need a mileage log (wrong!). Second, individuals who start in business think that the mileage rate makes their tax life easy and that it doesn’t make much difference financially (generally, wrong). Third, mileage-rate addicts think that the mileage rate takes care of everything—then they cost themselves money by failing to deduct a loss on the sale of a business vehicle and overlook the business person’s tax deduction for interest on a car loan.

The auto dealer sent this customer a bogus 1099 because the customer refused to return to the dealership and redo the “no interest” loan to an interest bearing loan. The dealer made a mistake originally and then wanted the customer to help fix the problem—at the customer’s expense. The customer said, “No.” Later, when the bogus 1099 showing interest income from the no-interest loan showed up in this customer’s mailbox, the customer took this dealership problem to the IRS.

To make sure that the IRS will treat the C corporation’s advances to the employee-owner as tax-favored loans rather than tax-penalized dividends, make sure you can answer “yes” to the seven questions.

The security for the loan does not determine if the interest is tax deductible or not.

This taxpayer takes out a $4 million mortgage and makes the interest on $1 million of the mortgage deductible as home-mortgage interest and the interest on the remaining $3 million of the mortgage deductible as investment interest.

Interest paid on a loan used to buy an investment is considered investment interest. Investment interest is deductible to the extent of investment income. The loan used to buy this life insurance is not a loan to buy an investment.