In general, failure to properly identify a hedge for tax purposes may expose a taxpayer to ordinary treatment of gains and capital treatment of losses (i.e., character whipsaw).
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TOPICS / INDIVIDUALS
Income
Ex-Wife’s Share of Military Retirement Payments Is Subject to Tax
The Tax Court held that a taxpayer’s share of her ex-husband’s military retirement payments was subject to tax despite the fact that a domestic relations order specified that taxes were to be withheld from the payments before the taxpayer’s share of the payments was determined.
Claiming Ordinary Losses for Sec. 1244 Stock
Sec. 1244 encourages new investment in small business by permitting investors to claim an ordinary (rather than a capital) loss on the disposition (including worthlessness) of qualifying small business stock.
IRS Issues Guidance on Determining Wagering Gains and Losses
The Office of Chief Counsel issued a memorandum explaining how to determine the wagering gains and losses of casual gamblers.
Lenders Allowed Nonrecognition Treatment for Certain Securities Loans Terminated Due to Bankruptcy
Rev. Proc. 2008-63 permits securities lenders continued nonrecognition treatment under Sec. 1058(a) for certain securities loans terminated due to the bankruptcy of the securities borrower, provided the lender applies the collateral to the purchase of identical securities within 30 days of the default.
New Rules Seek to Reduce Tax Advantages of Converting Second Home to Principal Residence
Beginning January 1, 2009, the full $250,000/$500,000 exclusion under Sec. 121 will no longer be available on the sale of a taxpayer’s principal residence if the residence was subject to nonqualifying use prior to its ultimate disposition.
Economic Stabilization Act Extends Expired Provisions and Repeals MLTN Standard
The Emergency Economic Stabilization Act extends various tax benefits that expired at the end of 2007 and repeals the “more likely than not” standard for return preparers
Nonphysical Injury Awards After Murphy
The taxation of nonphysical injury awards is far from settled, and taxpayers and practitioners should be diligent in monitoring future developments.
When Plaintiffs in Class Actions Pay Tax on Attorneys’ Fees
The taxation of attorneys’ fees in opt-out class actions has become relatively clear, as long as certain elements are established. In opt-in cases, class members risk being tagged with income in the amount of the attorneys’ fees.
Tax-Deferred Exchanges of Vacation Homes
The IRS carved out a safe harbor for the exchange of vacation homes to qualify for Sec. 1031 treatment.
When Are Payments Treated as Child Support?
Payments are child support for tax purposes if they are either so designated in the divorce or separation agreement (fixed child support) or deemed to be child support.
Selling a Business: Substance and Form Really Do Count
Three concepts regularly come into play when contemplating the sale of a business: noncompete covenants, consulting agreements, and goodwill.
Vacation Property Rental and Resale
The vacation home rules have always been confusing, and with the enactment of Sec. 121(b)(4) they have become more convoluted for clients who convert a vacation home to a principal residence.
Housing Act Contains Tax Provisions
On July 30, 2008, the president signed into law the Housing Assistance Tax Act of 2008, containing tax provisions affecting homeowners and first-time homebuyers, as well as changes to the rules governing the low-income housing credit, tax-exempt bonds, and the alternative minimum tax (AMT).
Individual Taxation Report
This article covers recent developments affecting taxation of individuals, including legislation, regulations, and IRS guidance.
Planning Opportunities with the Sec. 121 Partial Exclusion
The partial exclusion of gains on the sale of a primary residence continues to be an attractive benefit for taxpayers.
Avoiding the Self-Rental Trap
This item gives a general background of the passive activity rules and the self-rental provision and addresses the consequences of a sale of an operating company when the self-rental property is retained.
Tax Consequences of the Rush for Natural Gas in the Appalachians
This item provides an overview of some areas of taxation that taxpayers and their advisers must consider to ensure the most favorable terms if their clients are approached by an energy company seeking a land lease and royalty agreement.
Government Loses Son of Boss Tax Shelter Case
In a rare tax shelter loss for the IRS, a federal district court has allowed a taxpayer to offset income with losses from a “son of boss” transaction.
Converting a Residence to Rental Property
A decision to convert to rental should consider factors such as the taxpayer’s marginal tax rate, availability of excluding gain from the sale of a personal residence, expected growth rate of the rental property, length of time the house will be rented before being sold, cash flow from renting, effect of the passive activity rules, and rate of return on other invested funds.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
