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King of Pop, Michael Jackson’s Estate Wins Big At Tax Court

The King of Pop, Michael Jackson’s, Estate Wins Big At Tax Court

Two things are virtually certain in life:  death and taxes.  But, one more should be added to the list where the two converge—an IRS audit.  Indeed, this scenario played out all too well for the “King of Pop,” Michael Jackson’s, estate as shown in the United States Tax Court’s recent 271-page memorandum opinion.  See Estate of Jackson v. Comm’r, T.C. Memo. 2021-48.

Although the lengthy opinion boiled down to general valuation and estate tax principles, it was noteworthy for several reasons.  First, the Tax Court explicitly found that the IRS’ expert had perjured himself during trial, resulting in a significant discounting of his offered opinions to the court. Second, the Tax Court was called upon to value significant intangible assets of Mr. Jackson at the time of his death, including his image and likeness.  Third, the opinion offers additional insights into how estates, unlike individuals, bear the burden of showing non-compliance with Section 6751(b) of the Code.  Each of these are discussed more fully below.

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What Increased Ecommerce Means For Online Retailers

What Increased Ecommerce Means For Online Retailers

While the world has been dealing with the impacts of the COVID-19 pandemic, online retailers have been dealing with an additional issue: the tax implications of increased ecommerce.

As a result of stay-at-home orders, social distancing and health concerns, consumers have turned to online retailers for their shopping. Many of these retailers have seen huge spikes in business, which proved to be a well-timed life preserver as the economic effects of the pandemic took hold last year.

However, in the long term, this jump in sales has created additional tax liabilities and headaches for small retailers that were unprepared to handle it.

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You Love Your Parents! Elder Care Tax Planning

Elder Care Planning Services

Planning for the future is important, and elder care services are crucial to help your elderly family members maintain their independence and financial freedom.

As your cherished family member gets older, they may need some help with their day-to-day financial tasks. Ordinarily simple tasks such as balancing a checkbook and paying household bills become increasingly difficult for the elderly.

You could take care of their day-to-day financial tasks yourself, if you have the time and live close. But if you don’t, you may want to consider hiring a professional to help. With elder care services, you get the help of caring, honest and knowledgeable professionals. Someone on your team, looking out for your loved one’s best interest.

Your loved ones get assistance with their daily finances and business duties and you are kept informed of every step we make. That way, you always know that your family member’s needs are being met.

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Recent Tax Court Case And Theft-Loss Deductions

Recent Tax Court Case And Theft-Loss Deductions

A recent Tax Court case dealt with a familiar topic: Theft losses. I.R.C. section 165 has historically allowed taxpayers to deduct three types of losses: those incurred in a trade or business, those incurred in a transaction entered into for profit, or losses arising from other causes, such as theft.  (Note, however, that due to certain changes pursuant to the Tax Cuts & Jobs Act of 2017, individuals may be prevented from taking certain theft losses.)

A theft for these purposes is defined broadly, and encompasses various criminal conduct, including larceny, embezzlement, and robbery. Treas Regs. Sec. 1.165-8 (d).  A taxpayer must prove that the theft occurred under the law of the jurisdiction where the alleged loss occurred, See Monteleone v. Commissioner, 34 T.C. 688 , 692 (1960), the amount of loss, and the date that the loss was discovered.  Taxpayers who can establish these element may be entitled to deduct a theft loss.  (Again, the TCJA may limit a taxpayer’s ability to deduct a theft loss.

Below is a summary of the Tax Court’s recent decision:

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Corporate Tax Executives Handle Transfer Pricing Remotely

Corporate Tax Executives Handling Transfer Pricing Remotely

It goes without saying that the COVID-19 pandemic is the major concern of nearly all multinational enterprises (MNEs) at the moment. Radical containment measures continue to be put in place by governments around the world in efforts to slow the spread of the virus. Many of these measures center on the concept of ‘social distancing’ and have included closing businesses and organizations, cancelling events, prohibiting international and domestic travel, and quarantining cities and even regions. COVID-19 containment measures have disrupted business as usual, from manufacturing plant shutdowns to creating information inefficiencies and collaboration challenges at MNE headquarters and across global entities. These business disruptions create challenges for effectively managing transfer pricing information and workflows.

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Where Is My Economic Impact Payment?

Help Taxpayers

TaxConnections has received numerous calls from taxpayers wanting to reach out to a tax professional about their economic impact payment. There is a lot of confusion around why so many people have received one payment but not a second one or third one. This is likely a challenge for many tax professionals working with their clients and doing their tax returns.

As a tax professional, we appreciate hearing from you about what  your clients are experiencing with the economic impact payments. Knowing this will help so many taxpayers out there struggling to make sense of all of the payments that come and the payments that never arrived to taxpayers. It sounds like a huge ongoing mess and the voices of tax professionals sharing what they are seeing and hearing from taxpayer clients will go far in helping many taxpayers today understand why they are not receiving these payments.

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Our Responsibility For The Tax Profession Whose Work Is Outsourced To Other Countries

“You need a meaning in life. You need a purpose to sustain you through the challenges and suffering of life. Having a meaning is important; it is not optional and the deeper the meaning the better. It is definitely the case that people find meaning in the adoption of responsibility.” ~Dr. Jordan B. Peterson, Author, 12 Rules For Life

TaxConnections distinguishes itself as a community looking out for tax professionals, their livelihood and their future in the tax profession. We have a purpose and a deeper meaning to our organization that is important to share. It is something rarely discussed in the tax profession and it is important to bring to the attention of the entire tax community.

While everything is changing in the way tax professionals work in what is now a predominantly remote environment; while software companies and artificial intelligence take over jobs done by skilled and alert tax experts; we are watching big firms outsource tax work to organizations outside America. Our responsibility is to remind everyone of the importance of hiring tax professionals trained and working in the United States or their own countries.

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The Tax Court in Brief

The Tax Court in Brief

Freeman Law’s “The Tax Court in Brief” covers every substantive Tax Court opinion, providing a weekly brief of its decisions in clear, concise prose.

Plentywood Drug, Inc. | April 26, 2021 | Holmes| Dkt. No. 17753-16

Short Summary:  The Tax Court was asked to decide whether rent paid by the Taxpayer was reasonable.  The Taxpayer was owned by four related individuals (the “Shareholders”).  The Shareholders owned the building where the the Taxpayer was operating.  The Taxpayer paid rent of $83,584, $192,000, and $192,000 for 2011, 2012 and 2013, respectively.

The IRS disallowed certain rent deductions by the Taxpayer to the Shareholders because the IRS stated that the rent paid by the Taxpayer was greater than what the fair market rent would have been paid at an arm’s length transaction.  The IRS recharacterized the excess rent as dividends, therefore, the Taxpayer would not be able to deduct the dividends.

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Split-Dollar Life Insurance Arrangements And The Tax Code

Split-Dollar Life Insurance Arrangements And The Tax Code

A recent Tax Court decision in De Los Santos v. Commissioner illustrates the complexity of split-dollar life insurance arrangements.  Taxpayers who participate in these or other types of life insurance arrangements should consult knowledgeable tax counsel to ensure that arrangement is reported properly on all applicable tax returns.

In 2003, the Treasury Department issued final regulations addressing the taxation of split-dollar life insurance arrangements. Split-dollar life insurance arrangements of the sort involved in this case fall into one of two categories—“compensatory arrangements” or “shareholder arrangements.”  Reg. § 1.61-22(b)(2)(ii), (iii).  In both types, the “owner” of the life insurance contract pays the premiums, and the “non-owner” has a current interest in the policy.

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An Offer In Compromise May Help Some Taxpayers Settle Their Tax Bill

An offer in compromise may help some taxpayers settle their tax bill

Individual taxpayers and business owners can use the IRS’s recently updated Offer in Compromise Booklet to learn how an offer in compromise works and decide if it could help them resolve their tax debt.

An offer in compromise is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. An offer in compromise is an option when a taxpayer can’t pay their full tax liability. It is also an option when paying the entire tax bill would cause the taxpayer a financial hardship. The goal is a compromise that suits the best interest of both the taxpayer and the agency.

When reviewing applications, the IRS considers the taxpayer’s unique set of facts and any special circumstances affecting the taxpayer’s ability to pay as well as the taxpayer’s:

  • Income
  • Expenses
  • Asset equity

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Freeman Law Tax Update: What A Biden Presidency Means For Your Federal Income Taxes

Freeman Law Tax Update: What A Biden Presidency Means For Your Federal Income Taxes

(Reposted Blog From November 2020, They Are On Top Of It)

With the projected election of Joe Biden, Freeman Law has already begun to review what a Joe Biden presidency could mean to its clients.  And although many of determinations could potentially depend on results from President Trump’s election challenges and a final tally of the United States Senate, Freeman Law wants our clients to be aware of the potential tax changes that could occur in the next few years under Joe Biden.

Increase in Top Marginal Tax Rate for High-Earners.  Currently, the top federal tax rate is 37%.  Mr. Biden has proposed increasing the top federal tax rate to 39.6% for those making more than $400,000 per tax year.

Investment Income.  High-income taxpayers are currently taxed at approximately 23.8% on their net investment income, which includes capital gains and ordinary dividends.  Mr. Biden has proposed maintaining these rates except for those taxpayers who make over $1 million.  In these latter instances, Mr. Biden has proposed increasing the tax on net investment income to ordinary income tax rates of 39.6%.

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The United States Imposes A Separate And Much More Punitive Tax On U.S. Citizens Who Are Residents Of Other Countries

John Richardson April 10

(One Of The Top Blog Posts We Are Reposting Today)

On February 28, 2019 TaxConnections kindly posted my first post comparing the way that 19th Century Britain and 21st Century America Treated Its Citizens/Subjects. The post received a great deal of interest resulting in more than 120 comments (largely reflecting the frustration of Americans abroad and accidental Americans).

The purpose of that post focused largely on citizenship and the fact that the United States imposes worldwide taxation on U.S. citizens who are tax residents of other countries and do NOT live in the United States. What that post did NOT do was to focus on HOW the Internal Revenue Code applies to U.S. citizens who do NOT live in the United States.

The Bottom Line Is:

The United States is in effect imposing a separate and more punitive tax system on its citizens abroad. Strange but true. The purpose of this post is to explain how that works and to provide specific examples.

Prologue

Do you recognize yourself?

You are unable to properly plan for your retirement. Many of you with retirement assets are having them confiscated (at this very moment) courtesy of the Sec. 965 transition tax. You are subjected to reporting requirements that presume you are a criminal. Yet your only crime was having been born in America (something you didn’t even choose) and attempting to live as a U.S. tax compliant American outside the United States. Your comments to my recent TaxConnections Post reflect and register your conviction that you should not be subjected to the extra-territorial application of the Internal Revenue Code – when you don’t live in the United States.

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