John Reyna | TaxConnections

16 Jul 2021

Is The IRS On A Hiring Spree?

Yes! So, if you’ve ever wanted to work as an auditor for the IRS, then it’s time to dust off your resume. The IRS is hiring thousands of auditors by the end of September 2021. And if you’re on the other side of the aisle, then take your vacation before October 2021.

At a recent tax conference, the co-commissioners of IRS’s Small Business/Self-Employed Division and the commissioner of the Criminal Investigation Division announced that they are adding roughly 2,500 new workers before the end of September. Specifically, the SB/SE Division will add about 2,000 positions, including 1,300 revenue agents. The CI Division will add 500 people, with close to half of those being special agents.

Why the sudden influx of employees?

Written by John Reyna | Posted in IRS Hiring • Tax Jobs

01 Jul 2021

What Is Reasonable Compensation For Employees of An I.R.C. § 501(c)(3)? (Part 1)

One of the most important decisions a board determines is what constitutes reasonable compensation. The rules for this determination are robust and so are the taxes imposed for violations of the Internal Revenue Code and the corresponding Treasury Regulations. In this 2-Part series, we examine the taxes imposed for unreasonable compensation and explain the steps for determining reasonable compensation. In this Part 1, we introduce the persons potentially subject to the taxes and the taxes themselves.

Whose compensation is possibly subject to I.R.C. § 4958 taxes?

Written by John Reyna | Posted in Reasonable Compensation

02 Jun 2021

Transfers of Stock or Securities To Investment Partnerships: A Dangerous Exception Lurking For The Unwary

The formation of a partnership is generally a nonrecognition transaction for both the contributing partner and the newly created firm.^[1] Thus, no gain is recognized to a partnership or to any of its partners because of a contribution of property to the partnership in exchange for an interest in the partnership.^[2] While this nonrecognition rule is a useful instrument in the tax practitioner’s toolbox, the rule’s glamor often overshadows an important exception. Under I.R.C. § 721(b), the general nonrecognition rule will not apply to gain realized on a transfer of property to a partnership that would be treated as an investment company (within the meaning of I.R.C. § 351) if the partnership were incorporated.^[3]

This reference to I.R.C. § 351 shifts the analysis to the transfer rules for corporations to determine if the transferee partnership qualifies as an investment company (i.e., an investment partnership). Under the Treasury Regulations, a transfer of property to an investment partnership occurs when:

Written by John Reyna | Posted in Investment Partnerships • Transfer Of Stock

18 May 2021

The Tax Court Addresses The Origin-Of-The-Claim Doctrine And Legal Fees

A recent Tax Court decision addressed the deductibility of legal expenses and the so-called “origin-of-the-claim” doctrine. The Mylan decision demonstrates that the deductibility of a legal expense generally depends on the origin and character of the underlying claim or transaction out of which the legal expense was incurred. An expenditure, such as legal expenses, may be deductible in one setting but nevertheless required to be capitalized in another. Legal expenses directly connected with (or pertaining to) the taxpayer’s trade or business are deductible under I.R.C. Section 162 as ordinary and necessary business expenses, while expenses arising out of the acquisition, improvement, or ownership of property are capital expenditures under I.R.C. Section 263(a) and are not currently deductible.

Written by John Reyna | Posted in Freeman Law