Ryan Dean | TaxConnections

16 Feb 2021

So You Made Money On GameStop, Now What? A Primer On Capital Gains

The GameStop stock saga will undoubtedly go down in history as one of the most mystifying market events Wall Street has ever seen. Indeed, the markets have seen a massive influx of new retail investors into the space. But many of these investors have not previously participated in the market.[1] As noted by CNBC:

There were 3.7 million downloads of Robinhood in January, according to app market intelligence firm SensorTower, even with the millennial-favored stock trading app’s unpopular decision to put trading restrictions on a handful of stocks during GameStop’s climb. After the GameStop drama in February, downloads are still tracking strongly with 1.8 million month-to-date.[2]

Written by Ryan Dean | Posted in Capital Gains • Freeman Law • Texas

26 Jan 2021

IRS Updated Revenue Procedure For Reducing Or Avoiding Understatement Penalties And Tax Return Preparer Penalties

Recently, the IRS issued Revenue Procedure 2020-54, which updated Revenue Procedure 2019-42. Specifically, this new Revenue Procedure identifies circumstances under which the taxpayer makes an adequate disclosure on a taxpayer’s income tax return regarding an item or position for the purpose of reducing the understatement of income tax under section 6662(d) of the Internal Revenue Code (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under section 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns.

To give some context, the IRS may charge a 20% addition to tax for any “substantial understatement of tax” under section 6662. Generally, a substantial understatement of tax exists if the amount of the understatement exceeds the greater of (i) 10% of the amount of tax required to be shown on the return for the tax year or (ii) $5,000. I.R.C. § 6662(d)(1)(A). An “understatement” is the excess of (i) the amount of the tax required to be shown on a return for the tax year, over (ii) the amount of the tax imposed which is shown on the return, reduced by any rebate (within the meaning of I.R.C. § 6211(b)(2)). I.R.C. § 6662(d)(2)(A). Special rules for determining understatements apply to corporations and individuals utilizing § 199A QBI deductions. See I.R.C. § (d)(1)(B), (d)(1)(C).

Written by Ryan Dean | Posted in Freeman Law • Tax Return Preparer Penalties • Texas

29 Dec 2020

Theft Loss Deduction – The “Discovery Year”

A recent Tax Court case has highlighted the importance for individual taxpayers in determining the “discovery year” for the purpose of taking a theft loss deduction. In Giambrone v. Commissioner, the Tax Court held that the taxpayers were not entitled to a theft loss deduction because they did not claim the deduction in the year they discovered the illegal scheme giving rise to the deduction. See Giambrone v. Commissioner, TC Memo 2020-145 (10/19/2020).

Pursuant to I.R.C. § 165(c), an individual taxpayer can deduct an uncompensated loss—even one not connected with a trade or business or a transaction entered into for profit—if such loss arises from a theft. Generally, a theft loss is treated as sustained during the tax year in which the taxpayer discovers such loss. See I.R.C. § 165(e).

Written by Ryan Dean | Posted in Freeman Law • Texas • Theft Loss Tax Deduction

03 Dec 2020

Treasury Warns Against Taking Deductions Related To PPP Funds

As many practitioners and taxpayers know, the Paycheck Protection Program was created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which Congress enacted in March. The PPP program provides loans that can be forgiven tax free if portions of the proceeds are spent on items such as payroll.

However, immediately after Congress passed the CARES Act, questions arose whether expenses funded with PPP loans would be deductible if the loans were forgiven. Soon after, the IRS issued Notice 2020-32, 2020-21 IRB 837, which stated that expenses funded with the forgiven PPP loans would not be deductible—avoiding a double tax benefit to businesses. But that Notice still did not answer the question that many practitioners raised: would expenses funded with a PPP loan be deductible if the loan was not forgivable until a subsequent year?

Written by Ryan Dean | Posted in IRS • PPP Fund Deductions