Taxing Lessons From Court Decisions

Decision — Substantiation and the Internet

Image source: openclipart.org You’re expected to maintain records for your business deductions. The term used in the tax code is “substantiation”, and it means you need to support your deductions with proof. Generally, substantiation is simple—a receipt, bill, or cancelled check. But some deductions require more proof than others. Listed property is one example, and listed property includes a common…

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Taxing Lessons From Court Decisions

Keeping Up With the Paperwork

Image source: openclipart.org Substantiation of expenses, tax forms, receipts–keeping up with your tax responsibilities requires a lot of paperwork. Sometimes that paperwork may not even appear to have anything to do with your taxes. In T.C. Memo. 2012-10, the taxpayer sent a letter to an insurance company requesting that her life insurance policy be cancelled. She heard nothing from the…

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Taxing Definitions

The Cohan Rule

Image source: http://openclipart.org Substantiation is an underlying requirement of tax law. You’re required to maintain books and records to prove your income and deductions. Yet in some cases, the courts can allow reasonable deductions under what’s known as the “Cohan rule.” The rule springs from a 1930 court case involving George Cohan, a Broadway theatrical manager and producer. Mr. Cohan…

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Taxing Lessons From Court Decisions

Of Chivalry and Attorney Fees

Image source: www.wpclipart.com Where else but at the tax court can you learn about The Sovereign Military Hospitaller Order of St. John of Jerusalem, of Rhodes, and of Malta, which was established in the mid-eleventh century, and qui tam litigation, which first showed up in the thirteenth century–all in the same case? Other than the history lesson, most of T.C.…

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Taxing Lessons From Court Decisions

Timely Filing

Image source: Public Domain via WikimediaCommons Generally, as long as you’ve properly addressed an envelope and included the right amount of postage, the timeliness of your tax filing is determined by the postmark date. (See Internal Revenue Code Section 7502 and related regulations.) When you use a private delivery service (PDS) such as FedEx, the postmark date is either the…

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Taxing Lessons From Court Decisions

Recordkeeping Redux, with Humor

Image source: Minh Nguyễn via Wikimedia Commons You can’t read many tax court decisions without coming to the realization that lack of good records is a continually recurring issue. Each petitioning taxpayer seems to believe his or her situation is special and will be the exception that will make the court overlook the strict substantiation requirements of section 274(d) (documenting the…

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Taxing Lessons From Court Decisions

Substantiation of Charitable Contributions

Image source: Public domain via Wikimedia Commons TC Memo 2010-45 (Friedman) demonstrates the importance of complying with recordkeeping requirements for charitable contributions (as found in Code Section 170(f)(8)(A) and Income Tax Regulation 1.170A-13). In this case, the taxpayer claimed noncash charitable deductions for equipment donations. The IRS disallowed the deductions because the taxpayer did not provide contemporaneous written acknowledgements from…

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