Accounting Today visitors, click here for the pile of clothes.
Maybe somebody has tried this before, but as far as I know, this is a new bad idea. Mr. Lundy, a Florida man, received a non-taxable disability settlement. The IRS didn’t dispute that the settlement was exempt. But then things went to another level. Tax Court Judge Armen explains (my emphasis):
Rather, petitioners contend that they invested Mr. Lundy’s disability retirement income (which respondent does not challenge as nontaxable) in Mrs. Lundy’s sole proprietorship and that, as a consequence, income generated by that proprietorship is nontaxable. Or, in petitioners’ words: “[A]ny thing we funded with those funds were completely tax free also.”
interesting argument. Once you get a tax-free dollar, anything that grows from that dollar is tax-free forever. That would be awesome. You could invest in municipal bonds, and then anything you buy with the exempt interest would be tax-free too! If only it worked that way…
Alas, it doesn’t. Judge Armen elaborates:
In arguing as they do, petitioners fail to distinguish between an item that is excludable from income and the income that such an item may produce once it is invested. Many items are statutorily excluded from gross income. For example, gross income does not include the value of property acquired by gift or inheritance. Sec. 102(a). In contrast, income generated from property acquired by gift or inheritance does not come within such statutory exclusion.
And there is. For reasons that only the bureaucrats at the IRS can fathom, every year over Columbus Day weekend the IRS shuts down their computer systems. This includes processing of returns and IRS e-services.
Well, it’s not like there’s a deadline coming up or anything. Oh, wait…
The sentence came as a shock to Teresa who claimed, in the interview, that her lawyer did not tell her jail time was a possibility under the plea. She said about the plea, “I didn’t fully understand it. I thought my lawyer was going to fight for me. I mean, that’s what lawyers do. I don’t know. That’s why you hire an attorney. You put it in their hands.”
This shows the importance of reading legal documents before you sign them. She signed a plea agreement with the language excerpted here:
I’m not sure how you can sign something that says “the sentencing judge may impose any reasonable sentence up to and including the statutory maximum term” and feel safe. But then again, I’m not a real housewife.
Paul Neiffer, Taxable is Taxable -Whether a 1099 or not! “The bottom line is any income received on the farm is taxable income whether there is a form 1099 or not.”
Liz Malm, How Does Your State Score on Property Tax Administration? Probably Not Very Well (Tax Policy Blog). Iowa gets a C.
Cara Griffith, Is the Maryland Tax Court Hiding Its Opinions? (Tax Analysts Blog)
Here’s the problem: The Maryland Tax Court publishes a small fraction of its decisions online. It published a single decision in 2013 and has yet to publish a decision in 2014. The court has, of course, issued far more decisions; it simply chooses not to make them publicly available. One would presume, then, that the court retains all decisions and that if a taxpayer or practitioner wanted to review those decisions, a copy could be requested. But it is not that simple in Maryland.
According to the court’s most recent retention schedule, decisions are to be permanently retained and periodically transferred to the Maryland State Archives. In reality, however, the tax court retains them for three years, but then the decisions are “shredded.” They are not sent to the archives.
Strange. If decisions aren’t public, they are of no use for taxpayers and practitioners trying to follow an often uncertain tax law. The shredding can also provide cover for favoritism or incompetence on the bench. Outrageous.
Howard Gleckman, Ryan and Lew Both Object to JCT Scoring of Future Tax Reform (TaxVox). “Like a couple of baseball managers working the umpires before a big World Series game, Treasury Secretary Jack Lew and Representative Paul Ryan (R-WI), who wants to be the next chair of the House Ways & Means Committee, are looking to change the way Congress scores tax reform even before Congress begins a rewrite.”
TaxProf, The IRS Scandal, Day 519.
News from the Profession. Comcast: Let It Be Known That We Did Not Ask PwC to Fire That Guy (Caleb Newquist, Going Concern)