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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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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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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Case — Deduction of Expenses Related to Illegal Activity

THE QUESTION When a business is engaged in two separate activities, do all ordinary and necessary business expenses of both become nondeductible because one activity involves an illegal activity (trafficking in a controlled substance)? THE DISPUTE Taxpayer Says:  All expenses related to separate activities of providing caregiving and medical marijuana (under the California Compassionate Use Act of 1996) are fully deductible.…

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Case — Innocent Spouse Relief

THE QUESTION At what point does a spouse’s knowledge of embezzlement income make innocent spouse relief unavailable? THE DISPUTE Taxpayer Says:  Husband should not have to pay tax on wife’s embezzlement income because he did not know of it at the time the original joint tax return was filed. Internal Revenue Service Says: Innocent spouse relief does not apply because husband knew…

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