Taxpayers may be able to deduct someone else's expenses
Article Abstract:
A number of court cases and administrative releases have demonstrated that taxpayers can deduct others' expenses. Based on the landmark case 'Lohrke,' a taxpayer can make such deductions if the motive that compelled the taxpayer to pay someone else's obligations supports an ordinary and necessary expense of the trade or business of an individual. Therefore, a payment is deductible if the taxpayer pays another's obligations with the aim of protecting or promoting the business of this taxpayer. Different cases have shown that payment of corporate officer's debts, legal fees of officer-shareholders, debts of bankrupt corporations and shareholders' payments can all be deducted. Letter Rulings also indicate that advertising expenses and customers' expenses can be deducted. Reimbursement of other shareholders, newly organized corporations and shareholder debts are also deductible.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Residential mortgage points are now easier to deduct
Article Abstract:
Revenue Procedure 94-27 provides guidance on the treatment of points paid on a mortgage used in acquiring a principal residence. According to Revenue Procedure 94-27, these points can be treated as paid interest and can be deducted immediately by the taxpayer in certain cases. The IRS clarifies, however, that fees and charges paid in connection with a borrowing will only be considered interest if they are levied in relation to the use of money used to acquire the mortgage. Furthermore, the IRS holds that such points can be deducted only when taxpayers use the cash-method to calculate their tax obligations. Another case is when points are paid by the seller as an itemized deduction. To determine whether these points are deductable, the IRS has identified five characteristics that qualify points as being eligible for an immediate deduction under Revenue Procedure 94-27.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Marriage and divorce complicate exclusion for sale of home
Article Abstract:
Section 121 permits individuals to exclude as much as $125,000 on the sale or exchange of a principal residence for so long as several age and ownership rules are met. For married taxpayers, this once-in-a-lifetime exclusion is limited to $62,500 should they file for it separately. For individual taxpayers, the basic age requirement is that the taxpayer should be at least 55 years old and must have lived at the residence for at least three of the five years prior to the sale. For married taxpayers, this requirement must be met by at least one spouse. For individual taxpayers who are planning to marry or for married taxpayers who are planning to divorce, careful tax planning would help maximize the benefits of Section 121.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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