COMPARING TAXABLE VERSUS TAX-EXEMPT INVESTMENT YIELDS With rising tax rates, some taxpayers are considering allocating at least a portion of their investments to tax-exempt investments. After all, interest earned on tax-exempt investments not only escapes ordinary income tax rates that can be as high as 39.6%, but also the 3.8% net investment income tax (NIIT). [...]
LEASING PROPERTY TO A CLOSELY-HELD CORPORATION Shareholders of closely-held C corporations routinely lease real estate, equipment, and other property to their corporate entity. These leases can be held directly by the shareholder or through a separate entity, such as a partnership, LLC, or S corporation. Of course, the corporation could directly purchase the item or [...]
EXPENSES QUALIFYING FOR THE CHILD CARE CREDIT Working parents can find summer child care solutions challenging. However, a nonrefundable credit is available if the qualifying child care expense is incurred so that you (and your spouse, if married) can work. The maximum credit is 20%-35% (depending on your adjusted gross income) of the lesser of [...]
TAX IMPLICATIONS OF INVESTOR OR TRADER STATUS Most taxpayers who trade stocks are classified as investors for tax purposes. This means any net gains are going to be treated as capital gains versus ordinary income. That’s good if your net gains are long-term from positions held more than a year. However, any investment-related expenses (such [...]
TAXPAYER ADVOCATE REPORTS TO CONGRESS National Taxpayer Advocate Nina E. Olson recently released her annual report to Congress, urging the Internal Revenue Service to adopt a comprehensive Taxpayer Bill of Rights (TBOR)-a step she said would increase trust in the agency and, more generally, strengthen its ability to serve taxpayers and collect tax. The Advocate [...]
TAXPAYER PENALIZED FOR WASTING COURT’S TIME A self-employed hearing aid specialist (“petitioner”) claimed he had no taxable income and made no estimated tax payments on his 2006 and 2007 tax returns. Through third-party information returns and a bank account analysis, the IRS determined he had unreported business receipts of $209,331 for 2006 and $279,600 for [...]