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Archive for Fernando Juarez

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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U.S. Digital Service Providers With Mexican Customers: Avoid Being ¨Shut-Down¨ In Mexico

U.S. Digital Service Providers With Mexican Customers: Avoid Being ¨Shut-Down¨ In Mexico

COVID times has brought us tough changes in our lives, and tax reform is one of them. In the U.S., the CARES Act provided relief to multiple sectors of the economy to alleviate the impact of the pandemic. However, the perspectives of tax reform in other jurisdictions are quite different, mainly considering the impact of COVID in public finances. Mexico is aimed in that direction.

Earlier November of this year, the Mexican Senate approved multiple tax amendments that aim to strengthen the revenue-collection capacity of the tax authorities, but more importantly, intend to regulate certain business activities, such as those provided by Digital Service Providers (DSP) with no tax residence in Mexico.

In the following lines, we will discuss how DSPs will be subject to harsh regulations in Mexico as consequence of the newly approved tax reform which may lead to a ¨shut-down¨ of their operations.

Subjects and Compliance Rules

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Tax Court’s Jurisdiction Over Cases Where The Employer Did Not Properly Classify Its Workers As Employees

Classify Workers As Employees
Tax Court Case Involves “Section 530 Relief”

Reflectxion Resources, Inc. v. Comm’r, T.C. Memo. 2020-114| August 3, 2020 | Gustafson, J. | Dkt. No. 12017-16


Short Summary:  The case involves the analysis and discussion of the Tax Court’s jurisdiction over cases where the employer did not properly classify its workers as employees and seeks relief under section 530.

Reflectxion Resources, Inc. (the “taxpayer”), a medical staffing agency, hired travel therapists for one of its clients, Gevity. Under a services agreement, the taxpayer provided such staff to Gevity for 11 quarters. During the 11 quarters, it was Gevity who acted as employer of the staff and filed the respective employment tax returns. After such period and for the following 5 quarters, it was the taxpayer who filed employment tax returns. During all 16 quarters, the travel therapists were reimbursed travel expenses. Such reimbursements were never reported as wages for employment tax in all 16 quarters.

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