This article considers theft losses “incurred in an activity engaged in for profit.” These investment theft losses are not subject to the 10% of AGI reduction for losses of personal use property, the 2% of AGI floor for miscellaneous itemized deductions, or the itemized deduction phaseout rules of Sec. 68.
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Individuals
IRS Issues Optional Safe-Harbor Treatment for Victims of Ponzi Schemes
The IRS recently issued two rulings about the tax treatment of victims of Ponzi schemes and similar financial frauds.
Residential Energy-Efficient Property Credit Rules Issued
The IRS has provided guidance to manufacturers and consumers on satisfying the requirements of the residential energy-efficient property credit.
Correcting Employment Tax Errors
Correcting an employment tax error that is discovered in the year in which the error occurs is generally a simple process. However, employers often discover such errors after the close of the calendar year in which they paid the wages to an employee. The adjustment process to correct those errors is confusing and often leads to further mistakes.
Expatriation and the New Mark-to-Market Rules
New rules subject taxpayers that renounce their U.S. citizenship or abandon their U.S. residency to a mark-to-market exit tax on their assets.
Clergy Tax Rules Extend Beyond Churches
This article provides guidelines to help determine who qualifies as a minister and summarizes tax rules applicable to ministers.
Sec. 1245 Recapture Rules Can Apply to Stock
This item discusses how a reduction in a debtor’s stock basis through application of the Sec. 108 attribute reduction rules can result in Sec. 1245 recapture on a disposition of that stock. It also examines how the consolidated return rules in certain circumstances eliminate, in whole or in part, the potential Sec. 1245 recapture on a disposition of stock of a subsidiary member.
Student Loan Forgiveness and Repayment Programs
To provide a roadmap for these students and their tax advisers, this article describes the more prevalent loan forgiveness and loan repayment programs, along with the associated tax consequences.
IRS Advises How Part Owners Should Handle $1 Million Mortgage Deduction Limit
The IRS Office of Chief Counsel has issued a memorandum outlining how partial owners of a principal residence with a mortgage larger than $1 million should handle their mortgage deduction.
Limitation Period for Equitable Innocent Spouse Relief Held Invalid
In a decision of the full court, the Tax Court held that Regs. Sec. 1.6015-5(b) (1), which imposes a two-year limitation period for requesting equitable innocent spouse relief, is an invalid interpretation of Sec. 6015(f).
IRS Issues Guidance on Losses from Ponzi Schemes
The IRS has released guidance on how investors who have fraud losses from a Ponzi scheme should treat their losses for tax purposes and has provided a safe harbor for taxpayers to use in determining the amount and the timing of their losses from a Ponzi scheme.
Securities Transfer Is Not a Securities Lending Arrangement
The Tax Court held that a billion dollar–plus securities transaction was not a securities lending arrangement under Sec. 1058 because its terms reduced the opportunity for gain to the transferor of the securities in the transaction for almost the entire transaction period.
Financial Planning Using a Client’s Form 1040
CPAs can provide valuable assistance to their clients by taking some time after busy season to use the tax return as a guide to helping their clients deal with the current economic difficulties.
Like-Kind Exchanges: Deferral Is Not Always the Best Option
Sec. 1031 gives taxpayers the opportunity to defer taxation on the gains they may have on their transactions. Anytime there is an opportunity to defer tax costs, tax practitioners and their clients automatically tend to assume that they should take advantage of the opportunity. However, in the case of like-kind exchanges, it is not always in the taxpayer’s best interest to elect to defer the recognition of gain on realty.
Personal Goodwill: Alive and Well?
A pair of recent decisions calls into question whether the sale of personal goodwill is still available as a tax planning strategy.
Tax Court Not Limited to Administrative Record in Innocent Spouse Cases
The Eleventh Circuit held that the Tax Court properly considered evidence outside the administrative record in a trial to determine whether a taxpayer was entitled to innocent spouse relief.
Ponzi Schemes: The Implications for Defrauded Investors
The losses incurred in a Ponzi scheme may be deductible as theft loss under Sec. 165(a) as an ordinary deduction in the year the loss was discovered, with certain limitations. A taxpayer cannot deduct losses as long as there is a possibility of recovery and litigation is ongoing.
Sec. 121 Planning Opportunities After the Housing Assistance Tax Act
The Housing Assistance Tax Act of 2008 (the Housing Act) implemented major revisions to Sec. 121.
IRS Explains How Unmarried Taxpayers Allocate First-Time Homebuyer Credit
The IRS has issued Notice 2009-12, explaining how the Sec. 36 first-time homebuyer credit should be allocated between unmarried taxpayers who buy a principal residence together.
The Importance of Proper and Timely Hedge Identification
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).
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.
