Taxing Lessons Case Summaries

Case — Self-Employment Income

THE QUESTION Are commissions received by a retired insurance agent self-employment income subject to self-employment tax? THE DISPUTE Taxpayer Says: Due to retirement, no trade or business was carried on and self-employment tax is not owed on commissions received. Internal Revenue Service Says: Commissions are deferred compensation from past income- producing activities and are subject to self-employment tax. THE LAW…

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Taxing Lessons Case Summaries

Case — Classification as Statutory Employee

THE QUESTION Is an educational consultant working for a school district considered a statutory employee who is not required to pay self-employment tax? THE DISPUTE Taxpayer Says: Services rendered to the school district meet the requirements necessary to qualify under the statutory definition of “home worker”, and self-employment tax is not owed. Internal Revenue Service Says: Self-employment tax is owed.…

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Taxing Lessons Case Summaries

Case — Discharge of Indebtedness Income – Insolvency Exclusion

THE QUESTION Does a taxpayer have to be insolvent both immediately before and immediately after having debt discharged in order to exclude the income from being taxed? THE DISPUTE Taxpayer Says: At the time mortgage debt was forgiven, taxpayer’s liabilities exceeded assets, so cancellation of indebtedness income is excludable from income. Internal Revenue Service Says: The insolvency exception does not apply…

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Taxing Lessons Case Summaries

Case — Gambling Activity: Hobby or Trade/Business?

THE QUESTION Did taxpayer engage in gambling activities with the intention of making a profit? THE DISPUTE Taxpayer Says:  Losses were incurred as a gambling professional engaged in the business of playing slot machines and are deductible in full against winnings. Internal Revenue Service Says: Gambling losses were not incurred in the course of a trade or business, and are deductible only…

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Taxing Lessons Case Summaries

Case — Location of Tax Home and Deductibility of Travel Expenses

THE QUESTION Can expenses incurred while away from home be deducted when an employee accepts a change in job location without knowing how long the job at that location will last or where the next location will be? THE DISPUTE Taxpayer Says:  Vehicle, meals and transportation expenses are deductible because they were incurred while away from home in the pursuit of…

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Taxing Lessons Case Summaries

Case — Charitable Contribution Deduction

THE QUESTION Can an attorney take a tax deduction for case materials donated to a charity? THE DISPUTE Taxpayer Says:  Case files relating to the Oklahoma City bombing that were donated to the University of Texas are eligible for a charitable contribution deduction. Internal Revenue Service Says:  The case files did not belong to the taxpayer (an attorney), making the gift invalid and the deduction not…

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