Lu Gauthier has given me permission to publish his email blasts. This one is particularly important. Many business owners are not aware of how many vendors they need to be sendng 1099s to. The stakes just got higher.
On 06/29/15, the President signed the Trade Preferences Extension Act of 2015 (P.L. 114-27) which contained a number of "offsets" or revenue raising provisions probably the most important of which is Section 806 entitled Penalty for Failure to File Correct Information Returns and Provide Payee Statements. The major changes made by this provision is to increase the penalty for failure to FILE "information returns" from $100 to $250 and to increase the penalty for failure to FURNISH "information returns" from $100 to $250. These changes apply with respect to returns and statements required to be filed after 12/31/15 which means with respect to information returns required to be filed for calendar 2015. For many of your clients, these changes may pose an existential threat to their businesses since many clients fail to file the requisite information returns, and examining agents have been asking to see these information returns during the course of their examinations. If I were you, I would be warning my business clients of these changes and encouraging them to clean up their acts in this regard this year!!!
Showing posts with label 1099's. Show all posts
Showing posts with label 1099's. Show all posts
Wednesday, August 5, 2015
Tuesday, June 24, 2014
Driver - Take Me Where the Action Is
Originally published on Passive Activities and Other Oxymorons on April 4th, 2011.
____________________________________________________________________________
CCA 201106010
As I noted in my post From Mercenaries to Mothers Milk, tax issues enter into all aspects of life. My blogs mission statement "providing a slightly quirky look at current tax developments" causes me to be driven to some extent by the raw material that the system feeds me. So here I find myself once again touching on issues that are less than edifying.
In many major metropolitan areas and even in less than major areas there are business establishments where men go to look at women who are less than fully clothed. With an incredible sense of irony these establishments sometimes characterize themselves as "gentlemen's clubs". In Worcester county, to my knowledge, having heard about them from people who have spoken to people who have actually frequented them, there are at least six such establishments. They are actually not that hard to find and some even have websites.
I once saw a movie, I think it was on the Lifetime Channel, about a sex addict. Checking into a hotel, he says to the desk clerk that he would like to go for a walk but he is unfamiliar with the city and asks if there are any neighborhoods nearby he should avoid. That was clever. Apparently in some cities, he could just hale a cab and get expert advice from the cab driver on where to go and a ride there to boot. It turns out that cab drivers who provide this type of counsel to their passengers are not bound by standards of independence. They frequently receive consideration from the establishments for delivering clients to them. It turns out that this can be a fairly complex affair:
Some adult entertainment clubs (and other establishments) have a practice of making payments to taxicab drivers who bring passengers to their establishments. Generally, the club personnel will not render payment to the driver until the passengers first pay a cover charge or otherwise indicate in some manner that they are patrons of the club (such as purchasing drinks or drink tickets). Payments are usually made in cash, although some clubs issue vouchers to the drivers that can be exchanged for cash at a later time. The amount of the cash or voucher payment may or may not bear any relationship to the meter fare, may vary depending upon the number of passengers, and may be far greater than either the metered fare or the customary tip for the transportation. Typically, one or more passengers are transported from a hotel directly to a club. In some cases the driver may make agreements with certain hotel personnel so that when a guest wants to go to a club, the hotel personnel will summon the driver's taxicab from the queue at the hotel and the driver will split the payment from the club with the hotel personnel. In some cases the passenger may not request a particular destination and the driver or hotel personnel will recommend a club that will pay an amount for delivering the passenger/club patron. Several clubs and other establishments advertise in a local magazine, specifically targeted at drivers in the transportation industry, that they will pay a “referral fee” or “tip” or “incentive” for delivery of passengers/patrons.
There are three tax questions:
1. Whether the payments are income to the drivers
2.Whether the payments are tips for services the drivers perform as employees of the taxicab companies (tips in the course of employment) or are payments for separate and distinct services
3. What reporting requirements apply to the payments
The first question is kind of a "Duh", but they do take the trouble to answer it:
I.R.C. § 61(a)(1) provides that gross income means all income from whatever source derived, including (but not limited to) compensation for services, including fees, commissions, fringe benefits and similar items. Treas. Regs. § 1.61-2(a)(1) provides that tips are income to the recipients. The payments made by the clubs to the drivers are income to the drivers regardless of whether the payments are tips or remuneration for services that are separate and distinct from their employment by the taxicab companies.
The second question is a little more interesting. It turns out that the payments are not tips:
The fact that the payments from the clubs are contingent upon the “passenger” becoming a “patron” of the club—whether by entering the club, paying the cover charge, buying a drink, etc.— illustrates that the payment is made for the separate service of delivering a patron rather than transporting a passenger. The club is not the recipient of the transportation service; they are the recipient of the delivery of a patron. Furthermore, the fact that drivers frequently recommend the passenger's destination, sometimes in collaboration with hotel personnel, in order to secure the payment from a particular club further strengthens the conclusion that the clubs are paying the drivers for bringing them customers, a service separate and distinct from merely transporting passengers to the passenger's requested destination.
That brings us to the third question. It turns out that the "establishments" should be sending 1099's to any of the drivers that receive more than $600 :
Because the payments at issue are for separate and distinct services of delivering patrons to the clubs, the clubs are required under I.R.C. § 6041 to file a Form 1099 with the IRS for each taxicab driver to whom they paid $600 or more during the calendar year. 6 If the clubs do not file Form 1099, whether they are subject to penalties under I.R.C. § 6721 depends on the facts and circumstances.
It seems like the Chief Counsel folks are not getting too excited about taking this project on:
While the facts you have collectively presented warrant the conclusion in this memorandum that the payments at issue are for services separate and apart from the drivers' employment, we note that an examination of a specific club or of a specific driver may produce different or varied facts, including indications that the cab companies receive part of the payments, that may or may not warrant the same conclusion or may present a differing degree of uncertainty regarding the proper characterization of the payments, thereby increasing the hazards of litigation. ——————-——————————————————————————————————————————————————————————-———————— ——————————————————————————————————————————————————-——————————————-
In addition, while published guidance and some case law provide helpful analysis in characterizing the payments at issue, we have found no prior cases or other authority which definitively defines tips in the context of the facts and circumstances described. Accordingly, the legal issue would be somewhat novel in litigation. ——————————————————————————————————————————————————————————-—————————————— ————————————————————————————————————————————-———————————————————————————— ——————————————————————————————-——————————————————————————————— ——————————————————————————————————————————————————————————-—————————————— —————————————————————————————
The blank lines are the portions of the memo that are exempt from disclosure under the Freedom of Information Act. I can't help but wonder if they are discussing the surveillance techniques that they would have to use in order to build cases in this area
____________________________________________________________________________
CCA 201106010
As I noted in my post From Mercenaries to Mothers Milk, tax issues enter into all aspects of life. My blogs mission statement "providing a slightly quirky look at current tax developments" causes me to be driven to some extent by the raw material that the system feeds me. So here I find myself once again touching on issues that are less than edifying.
In many major metropolitan areas and even in less than major areas there are business establishments where men go to look at women who are less than fully clothed. With an incredible sense of irony these establishments sometimes characterize themselves as "gentlemen's clubs". In Worcester county, to my knowledge, having heard about them from people who have spoken to people who have actually frequented them, there are at least six such establishments. They are actually not that hard to find and some even have websites.
I once saw a movie, I think it was on the Lifetime Channel, about a sex addict. Checking into a hotel, he says to the desk clerk that he would like to go for a walk but he is unfamiliar with the city and asks if there are any neighborhoods nearby he should avoid. That was clever. Apparently in some cities, he could just hale a cab and get expert advice from the cab driver on where to go and a ride there to boot. It turns out that cab drivers who provide this type of counsel to their passengers are not bound by standards of independence. They frequently receive consideration from the establishments for delivering clients to them. It turns out that this can be a fairly complex affair:
Some adult entertainment clubs (and other establishments) have a practice of making payments to taxicab drivers who bring passengers to their establishments. Generally, the club personnel will not render payment to the driver until the passengers first pay a cover charge or otherwise indicate in some manner that they are patrons of the club (such as purchasing drinks or drink tickets). Payments are usually made in cash, although some clubs issue vouchers to the drivers that can be exchanged for cash at a later time. The amount of the cash or voucher payment may or may not bear any relationship to the meter fare, may vary depending upon the number of passengers, and may be far greater than either the metered fare or the customary tip for the transportation. Typically, one or more passengers are transported from a hotel directly to a club. In some cases the driver may make agreements with certain hotel personnel so that when a guest wants to go to a club, the hotel personnel will summon the driver's taxicab from the queue at the hotel and the driver will split the payment from the club with the hotel personnel. In some cases the passenger may not request a particular destination and the driver or hotel personnel will recommend a club that will pay an amount for delivering the passenger/club patron. Several clubs and other establishments advertise in a local magazine, specifically targeted at drivers in the transportation industry, that they will pay a “referral fee” or “tip” or “incentive” for delivery of passengers/patrons.
There are three tax questions:
1. Whether the payments are income to the drivers
2.Whether the payments are tips for services the drivers perform as employees of the taxicab companies (tips in the course of employment) or are payments for separate and distinct services
3. What reporting requirements apply to the payments
The first question is kind of a "Duh", but they do take the trouble to answer it:
I.R.C. § 61(a)(1) provides that gross income means all income from whatever source derived, including (but not limited to) compensation for services, including fees, commissions, fringe benefits and similar items. Treas. Regs. § 1.61-2(a)(1) provides that tips are income to the recipients. The payments made by the clubs to the drivers are income to the drivers regardless of whether the payments are tips or remuneration for services that are separate and distinct from their employment by the taxicab companies.
The second question is a little more interesting. It turns out that the payments are not tips:
The fact that the payments from the clubs are contingent upon the “passenger” becoming a “patron” of the club—whether by entering the club, paying the cover charge, buying a drink, etc.— illustrates that the payment is made for the separate service of delivering a patron rather than transporting a passenger. The club is not the recipient of the transportation service; they are the recipient of the delivery of a patron. Furthermore, the fact that drivers frequently recommend the passenger's destination, sometimes in collaboration with hotel personnel, in order to secure the payment from a particular club further strengthens the conclusion that the clubs are paying the drivers for bringing them customers, a service separate and distinct from merely transporting passengers to the passenger's requested destination.
That brings us to the third question. It turns out that the "establishments" should be sending 1099's to any of the drivers that receive more than $600 :
Because the payments at issue are for separate and distinct services of delivering patrons to the clubs, the clubs are required under I.R.C. § 6041 to file a Form 1099 with the IRS for each taxicab driver to whom they paid $600 or more during the calendar year. 6 If the clubs do not file Form 1099, whether they are subject to penalties under I.R.C. § 6721 depends on the facts and circumstances.
It seems like the Chief Counsel folks are not getting too excited about taking this project on:
While the facts you have collectively presented warrant the conclusion in this memorandum that the payments at issue are for services separate and apart from the drivers' employment, we note that an examination of a specific club or of a specific driver may produce different or varied facts, including indications that the cab companies receive part of the payments, that may or may not warrant the same conclusion or may present a differing degree of uncertainty regarding the proper characterization of the payments, thereby increasing the hazards of litigation. ——————-——————————————————————————————————————————————————————————-———————— ——————————————————————————————————————————————————-——————————————-
In addition, while published guidance and some case law provide helpful analysis in characterizing the payments at issue, we have found no prior cases or other authority which definitively defines tips in the context of the facts and circumstances described. Accordingly, the legal issue would be somewhat novel in litigation. ——————————————————————————————————————————————————————————-—————————————— ————————————————————————————————————————————-———————————————————————————— ——————————————————————————————-——————————————————————————————— ——————————————————————————————————————————————————————————-—————————————— —————————————————————————————
The blank lines are the portions of the memo that are exempt from disclosure under the Freedom of Information Act. I can't help but wonder if they are discussing the surveillance techniques that they would have to use in order to build cases in this area
Monday, June 2, 2014
Nasty Surprise Brewing for Winner of Employee Classification Suit
Originally published on Passive Activities and Other Oxymorons on December 27, 2010.
________________________________________________________________________
CCA 201049027
If the 'skeeters don't get him. then the 'gators will.
I'm making this a bonus post. One of the things that I worry about a lot is 1099 compliance (I have to take a break from global warming every once in a while). It was the topic of one of my earliest posts. An insidious observation in several IRS audit manuals, including the one for auto body repair shops, is that there might be more money in penalties for failing to file 1099's and backup withholding then in disallowing deductions. You see if you were supposed to send somebody a 1099, then you were supposed to have asked them for their ID number. Since you didn't ask they didn't give it to you. Therefore, you should have withheld from their payment and remitted it. You can get out of the backup withholding by getting them to sign an IRS form that says they reported the income. Good luck.
CCA 201049027 lays out an even more insidious tactic. Suppose the IRS launches an effort to characterize service providers as employees. These things can take a long time. The Cheryl Mayfield decision which I wrote a post about was decide in October 2010. It concerned proposed employment taxes for 2003 and 2004. Well of course if they had really been employees, you wouldn't be subject to back-up withholding. But let's say, for the sake of argument, that you win on that issue in Tax Court. Now, after all that time does the Service have the ability to assess back-up withholding if your 1099 compliance has been less than perfect. According to this CCA, they can. On top of that, the Tax Court does not have jurisdiction on the issue of back up withholding.
Issue 1:
The Tax Court does not have jurisdiction under § 7436 to determine the application of backup withholding liability for any workers determined to be independent contractors.
Issue 2: If a Taxpayer filed Forms 945 and thus started the running of the period of limitations on assessment with regard to backup withholding, the issuance of the NDWC may nonetheless suspend the period of limitations with respect to the backup withholding.
I get the sense that they feel they may not be on firm ground with this interpretation :
We recognize the potential incongruity in noting that the Tax Court does not have jurisdiction over § 3406 taxes in a § 7436 proceeding while also asserting that the proper issuance of the NDWC suspends the period of limitations with respect to § 3406 taxes. However, due to the unique nature of employment taxes, there is no perfect analogy in the deficiency arena to apply to the operation of § 6503(a), a provision involving income tax deficiencies, in the employment tax arena. The principles we distill above from §§ 6213 and 6503 are especially apt in light of the uniqueness of the situation where assessing one type of employment tax (e.g., backup withholding on non-employees) is inconsistent with assessing another type of employment tax (e.g., social security and Medicare tax on employees). Furthermore, these principles only apply to situations where the period of limitations for assessment of § 3406 taxes is open at the time the NDWC is issued.
Also they were not anxious to release it.
CASE DEVELOPMENT, HAZARDS AND OTHER CONSIDERATIONS
This writing may contain privileged information. Any unauthorized disclosure of this writing may undermine our ability to protect the privileged information. If disclosure is determined to be necessary, please contact this office for our views.
Please call Ligeia Donis at (202) 622-0047 if you have any further questions.
I was thinking of giving Ms. Donis a call and make her the blog's first interview, but I'm passing on it. If this serves as a timely warning thank RIA Checkpoint and the Freedom of Information Act. You can thank me too.
________________________________________________________________________
CCA 201049027
If the 'skeeters don't get him. then the 'gators will.
I'm making this a bonus post. One of the things that I worry about a lot is 1099 compliance (I have to take a break from global warming every once in a while). It was the topic of one of my earliest posts. An insidious observation in several IRS audit manuals, including the one for auto body repair shops, is that there might be more money in penalties for failing to file 1099's and backup withholding then in disallowing deductions. You see if you were supposed to send somebody a 1099, then you were supposed to have asked them for their ID number. Since you didn't ask they didn't give it to you. Therefore, you should have withheld from their payment and remitted it. You can get out of the backup withholding by getting them to sign an IRS form that says they reported the income. Good luck.
CCA 201049027 lays out an even more insidious tactic. Suppose the IRS launches an effort to characterize service providers as employees. These things can take a long time. The Cheryl Mayfield decision which I wrote a post about was decide in October 2010. It concerned proposed employment taxes for 2003 and 2004. Well of course if they had really been employees, you wouldn't be subject to back-up withholding. But let's say, for the sake of argument, that you win on that issue in Tax Court. Now, after all that time does the Service have the ability to assess back-up withholding if your 1099 compliance has been less than perfect. According to this CCA, they can. On top of that, the Tax Court does not have jurisdiction on the issue of back up withholding.
Issue 1:
The Tax Court does not have jurisdiction under § 7436 to determine the application of backup withholding liability for any workers determined to be independent contractors.
Issue 2: If a Taxpayer filed Forms 945 and thus started the running of the period of limitations on assessment with regard to backup withholding, the issuance of the NDWC may nonetheless suspend the period of limitations with respect to the backup withholding.
I get the sense that they feel they may not be on firm ground with this interpretation :
We recognize the potential incongruity in noting that the Tax Court does not have jurisdiction over § 3406 taxes in a § 7436 proceeding while also asserting that the proper issuance of the NDWC suspends the period of limitations with respect to § 3406 taxes. However, due to the unique nature of employment taxes, there is no perfect analogy in the deficiency arena to apply to the operation of § 6503(a), a provision involving income tax deficiencies, in the employment tax arena. The principles we distill above from §§ 6213 and 6503 are especially apt in light of the uniqueness of the situation where assessing one type of employment tax (e.g., backup withholding on non-employees) is inconsistent with assessing another type of employment tax (e.g., social security and Medicare tax on employees). Furthermore, these principles only apply to situations where the period of limitations for assessment of § 3406 taxes is open at the time the NDWC is issued.
Also they were not anxious to release it.
CASE DEVELOPMENT, HAZARDS AND OTHER CONSIDERATIONS
This writing may contain privileged information. Any unauthorized disclosure of this writing may undermine our ability to protect the privileged information. If disclosure is determined to be necessary, please contact this office for our views.
Please call Ligeia Donis at (202) 622-0047 if you have any further questions.
I was thinking of giving Ms. Donis a call and make her the blog's first interview, but I'm passing on it. If this serves as a timely warning thank RIA Checkpoint and the Freedom of Information Act. You can thank me too.
Sunday, December 4, 2011
And Another Purge
This was originally published on PAOO on November 17th, 2010.
I was starting to worry about running out of material, but my last ramble through the hottest stuff on RIA indicated that I am well supplied for a while, so I will continue purging those items that I just couldn't seem to turn into a full length post. I thought they were worth sharing when I first saw them though and have looked at them each a dozen or so times since then, so I hate to let them go without a little salute.
Henry A. Williams v. Commissioner, TC Summary Opinion 2010-125
had a fairly messy set of facts. The bottom line is that when it comes to deducting alimony, oral agreements are not worth the paper they are printed on.
Anthony Cicciarella, et ux. v. Commissioner, TC Memo 2010-195 was about medical expenses, but the issue was really just substantiation. The taxpayers had a not unusual amount of lameness, telling the court that they had "researched" the wrong year, but best of all that some of their records were destroyed in a flood. Unfortunately the flood occurred before the records would have been produced. I was going to title the post "Antediluvian".
THE HENRY E. & NANCY HORTON BARTELS TRUST v. U.S., Cite as 106 AFTR 2d 2010-6004
was a good example of an "is what it is" decision. The exempt trust was taxable on UBIT from securities transactions that it had entered into on margin. Trust's attempt to sidestep statute's clear language with claim that UBIT was really meant only to apply in case of unfair competition was off base since statute was clear and didn't limit UBIT in manner suggested.
More Fun For Landlords
was a title of a post I was working on about the extension of 1099 requirements to landlords. The cautionary note that I wanted to make is the language in several IRS audit manuals :
The examiner must be aware of the potential of the information return test work because it can often lead to significant tax dollars which the primary return (corporate, partnership, or individual) may not produce. Large adjustments can be produced through back-up withholding, return penalties, and even on the returns of the payees who were required to report the compensation but did not receive information returns.
If you were supposed to send somebody a 1099, you were supposed to ask them for their social security number of EIN. Since you didn't ask they didn't give it to you. Therefore you should have subjected their payments to back up withholding. It's a nightmare. You can get out of the back-up withholding by getting them to sign a form swearing they reported the income. Good luck.
Rev. Proc. 2010-36, 2010-42 IRB, 09/30/2010
gives taxpayers a special procedure for claiming a casualty loss from corrosive drywall :
An individual who pays to repair damage to that individual's personal residence or household appliances that results from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.
Taxpayers who have a pending claim for reimbursement may deduct 75% of the amount they spend for repairs in the year they spend it. The loss is claimed on Form 4864 and taxpayers should mark "Revenue Procedure 2010-36" on the top of the form.
Joel P. Arnold v. Commissioner, TC Memo 2010-223
I found the IRS and the Tax Court a little mean spirited in this one. The taxpayer worked as a field auditor for the State of Georgia. He was allowed to check out a state vehicle for his work, but if he travelled more than a certain distance he was required to stay over. This would prevent him from going home to his chronically ill son. So he used his own car and claimed mileage which was disallowed. On the other hand they did allow his job hunting expenses, which were based on the same motivation.
ARGYLE v. COMM., Cite as 106 AFTR 2d 2010-6759 10/14/2010
The taxpayer is a CPA, appealing a Tax Court decision, pro se (That means fool for a client). He tried to file as single even though his divorce had not gone through. He was also trying to deduct legal expenses for criminal proceedings for simple assault, the assault being a kiss. Seemed like an interesting story, but ultimately I couldn't make anything much out of it.
Willard R. Randall v. Commissioner, TC Summary Opinion 2010-163
Mr. Randall was entitled to $69,000 in property equalization from his ex-spouse. He offset the amount against alimony that he was required to pay. The IRS wanted to deny the deduction, but the taxpayer won. I was going to title the post "Still Better to Swap Checks", but as I read it more closely I saw that it was possible that check swapping might not have been a viable alternative (e,g, if the property being equalized was illiquid). It does illustrate the principle that your life will be simpler in the long run if you don't skip transaction steps.
I was starting to worry about running out of material, but my last ramble through the hottest stuff on RIA indicated that I am well supplied for a while, so I will continue purging those items that I just couldn't seem to turn into a full length post. I thought they were worth sharing when I first saw them though and have looked at them each a dozen or so times since then, so I hate to let them go without a little salute.
Henry A. Williams v. Commissioner, TC Summary Opinion 2010-125
had a fairly messy set of facts. The bottom line is that when it comes to deducting alimony, oral agreements are not worth the paper they are printed on.
Anthony Cicciarella, et ux. v. Commissioner, TC Memo 2010-195 was about medical expenses, but the issue was really just substantiation. The taxpayers had a not unusual amount of lameness, telling the court that they had "researched" the wrong year, but best of all that some of their records were destroyed in a flood. Unfortunately the flood occurred before the records would have been produced. I was going to title the post "Antediluvian".
THE HENRY E. & NANCY HORTON BARTELS TRUST v. U.S., Cite as 106 AFTR 2d 2010-6004
was a good example of an "is what it is" decision. The exempt trust was taxable on UBIT from securities transactions that it had entered into on margin. Trust's attempt to sidestep statute's clear language with claim that UBIT was really meant only to apply in case of unfair competition was off base since statute was clear and didn't limit UBIT in manner suggested.
More Fun For Landlords
was a title of a post I was working on about the extension of 1099 requirements to landlords. The cautionary note that I wanted to make is the language in several IRS audit manuals :
The examiner must be aware of the potential of the information return test work because it can often lead to significant tax dollars which the primary return (corporate, partnership, or individual) may not produce. Large adjustments can be produced through back-up withholding, return penalties, and even on the returns of the payees who were required to report the compensation but did not receive information returns.
If you were supposed to send somebody a 1099, you were supposed to ask them for their social security number of EIN. Since you didn't ask they didn't give it to you. Therefore you should have subjected their payments to back up withholding. It's a nightmare. You can get out of the back-up withholding by getting them to sign a form swearing they reported the income. Good luck.
Rev. Proc. 2010-36, 2010-42 IRB, 09/30/2010
gives taxpayers a special procedure for claiming a casualty loss from corrosive drywall :
An individual who pays to repair damage to that individual's personal residence or household appliances that results from corrosive drywall may treat the amount paid as a casualty loss in the year of payment.
Taxpayers who have a pending claim for reimbursement may deduct 75% of the amount they spend for repairs in the year they spend it. The loss is claimed on Form 4864 and taxpayers should mark "Revenue Procedure 2010-36" on the top of the form.
Joel P. Arnold v. Commissioner, TC Memo 2010-223
I found the IRS and the Tax Court a little mean spirited in this one. The taxpayer worked as a field auditor for the State of Georgia. He was allowed to check out a state vehicle for his work, but if he travelled more than a certain distance he was required to stay over. This would prevent him from going home to his chronically ill son. So he used his own car and claimed mileage which was disallowed. On the other hand they did allow his job hunting expenses, which were based on the same motivation.
ARGYLE v. COMM., Cite as 106 AFTR 2d 2010-6759 10/14/2010
The taxpayer is a CPA, appealing a Tax Court decision, pro se (That means fool for a client). He tried to file as single even though his divorce had not gone through. He was also trying to deduct legal expenses for criminal proceedings for simple assault, the assault being a kiss. Seemed like an interesting story, but ultimately I couldn't make anything much out of it.
Willard R. Randall v. Commissioner, TC Summary Opinion 2010-163
Mr. Randall was entitled to $69,000 in property equalization from his ex-spouse. He offset the amount against alimony that he was required to pay. The IRS wanted to deny the deduction, but the taxpayer won. I was going to title the post "Still Better to Swap Checks", but as I read it more closely I saw that it was possible that check swapping might not have been a viable alternative (e,g, if the property being equalized was illiquid). It does illustrate the principle that your life will be simpler in the long run if you don't skip transaction steps.
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