The Service has issued final regulations on the Sec. 21 credit for child and dependent expenses (TD 9354). The final regulations adopt, with changes, proposed regulations that were released in May 2006 (REG-139059-02). The final regulations apply to tax years ending after August 14, 2007. Sec. 21 allows a credit
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Individuals
Amended Regulations on the Student Exception from FICA Are Invalid
The Mayo Clinic (Mayo) and Mayo Foundation for Medical Education & Research (MFMER) are nonprofit corporations in Minnesota. MFMER acts as Mayo’s agent for purposes of paying withholding and FICA taxes for Mayo’s employees.Mayo operates graduate medical education programs for medical residents and fellows (residents). Most of these programs are
Meeting the Home Office “Principal Place of Business” Requirement
Editor: Albert B. Ellentuck, Esq. A self-employed taxpayer may be able to claim deductions for the business use of his or her home. These deductions include mortgage interest, real estate taxes, maintenance, insurance, utilities, and depreciation. However, certain conditions must be met, sand the IRS closely scrutinizes home office deductions
Prop. Regs. on Dependency Exemption for Noncustodial Parent
Generally, under the uniform rules defining a “qualifying child” of a taxpayer, the child must have the same principal place of abode as the taxpayer for over half the year. Special rules for parents who are divorced or legally separated or who live apart at all times during the last
Treatment of Legal Fees Incurred by Individuals
This article explains the possible tax treatments of legal fees and how to determine the proper treatment.
Opportunities to Claim Health Care Expenses as Deductions
Editor: Joel E. Ackerman, CPA, MST It is common knowledge that taxpayers may deduct qualified medical expenses for themselves and their dependent children. There are, however, other opportunities to deduct medical expenses that are not so widely known. One of those is the deduction of medical expenses that a taxpayer
Distinguishing Between Independent Contractors and Employees
Before a business entity pays for services rendered, it should consider this: Is it paying a contractor or has it hired an employee? This question arises every time a business pays a person for services rendered. At times the answer is clear, but often the minute details will present a
Some Prior-Year MTCs Will Be Refundable Beginning in 2007
Editor: Joel E. Ackerman, CPA, MST A growing number of individual taxpayers have been subject to tax under the alternative minimum tax (AMT). Sec. 53(a) provides a minimum tax credit (MTC) for AMT paid in prior years that was attributable to deferral adjustments. The MTC is carried forward to offset
Kiddie Tax Changes for 2008
Editor: Joel E. Ackerman, CPA, MST The tax imposed by Sec. 1(g) on the unearned income of minor children is commonly referred to as the “kiddie tax.” Its purpose is to prevent wealthy parents from shifting unearned income or investment income to their children, who presumably are in a lower
Sale of Vacation Home Disallowed as Tax-Free Like-Kind Exchange
Editor: Joel E. Ackerman, CPA, MST The Tax Court recently ruled that the sale of a vacation home and the purchase of another through an escrow agent did not qualify for tax-free like-kind exchange treatment under Sec. 1031 because the homes were not held for investment (Moore, TC Memo 2007-134).
IRS Extends the Reach of Sec. 83 to Post-Grant Stock Transfers
The IRS has ruled that in a taxable merger of corporations or a merger of corporations that qualifies as a tax-free reorganization, Sec. 83 applies to an employee’s transfer of stock in his or her employer corporation in return for stock in the remaining corporation that is subject to employment-related
Tax Treatment of Market Discount Bonds
Editor: Joel E. Ackerman, CPA, MST Generally, gain or loss on the sale of a note will be capital gain or loss if the note is a capital asset in the holder’s hands. Other than a note or trade receivable arising from the provision of a service or the selling
IRS Announces Redesigned Form 8857
The Service announced that it has redesigned Form 8857, Request for Innocent Spouse Relief, in order to reduce followup questions and minimize the burden on taxpayers. Previously, Form 12510, Questionnaire for the Requesting Spouse, was separate from Form 8857. The redesigned Form 8857 combines the two forms. The IRS believes
Short Sale or Foreclosure of a Principal Residence
It would be a bad dream for any homeowner: selling a home when the debt that secures the property is greater than its fair market value (FMV). With the real estate market slowing, more homeowners are discovering that this can actually happen. When the real estate market was booming, homeowners
Prop. Regs. Create Capital Gains and Losses for Non-bank Lenders
Editor: Frank J. O’Connell, Jr., CPA, Esq. On August 7, 2006, the IRS issued Prop. Regs. Sec. 1.1221-1(e), in an attempt to clarify the character of gains and losses resulting from sales of loans and notes receivable acquired through purchase or loan origination; see REG-109367-06. While the character of such
New Ruling Expands Definition of “North American Area” for Attendance at Foreign Conventions
Editor: Anthony S. Bakale, CPA, M.Tax. Sec. 274(h) limits deductions for expenses incurred while attending a convention, seminar or similar meeting held outside the “North American area.” Generally, no deduction is permitted under Sec. 162 for expenses allocable to such a meeting, unless the taxpayer can establish that they are
Executive Stock Options Under Senate Review
Editor: Anthony S. Bakale, CPA, M.Tax. Over the past several years, executive stock options have drawn the attention of legislators in Washington. This is not surprising, considering that close to 50% of executive pay is attributable to stock option exercises, according to Forbes magazine (see DeCarlo, “Big Paychecks,” Forbes (May
Divorce and Gain Exclusion
For most couples contemplating divorce, the largest single asset at issue is their personal residence. In most situations, one spouse moves out of the residence during the separation and divorce proceedings. Tax consequences are often ignored, as the primary concern is the division of marital assets. However, focus normally returns
Ninth Circuit Affirms Self-Rental Rule
As part of the Tax Reform Act of 1986, Congress enacted Sec. 469, limiting passive activity losses (PALs). As a general rule, PALs can only be offset against income from other passive activities; such losses cannot be offset against nonpassive income, such as dividends, interest, wages or most Schedule C
Claiming Passive Activity Credits
Credits arising from passive activities are allowable only to the extent a shareholder’s regular tax liability is attributable to passive activities for the year. The tax attributable to passive activities is the difference between the: Shareholder’s regular tax liability under Sec. 26(b) based on all income (disregarding credits), and Regular
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
