Congress has used Section 172 for net operating losses to stimulate the U.S. economy. It has done this by allowing certain losses to be carried back, thereby generating cash refunds to the taxpayer. This puts cash into the hands of taxpayers who are suffering losses. One only has to look at the history of changes……
Tag: Tax Loss
The Difference Between a Bad Business Investment and a Theft Loss
Business ventures fail for countless reasons. Partners mismanage funds. Projects never materialize. Promises about how capital will be deployed go unfulfilled. When an investment goes south, the parties have to figure out how to minimize the damage. This often shifts the focus to how to benefit from the loss, which can warrant closer examination of……
Using Ranching Tax Loss to Offset Other Income
Ranch operations often start with genuine business intentions. A successful business owner buys land. They get into cattle grazing areas or orchards. The owner hires experienced ranch hands and invests in equipment and facilities. The ranch may make money from livestock sales, hay production, or crop harvesting. The ranch would likely report losses for the……
Business Advances in Revenue-Sharing Deals Not Deductible
Government agencies and non-profits often enter into business arrangements with private companies that, ultimately, are structured as a percentage of revenue. This approach frequently replaces traditional fixed payments like rent or management fees. The typical example involves a building that a business owns and leases to a government agency or non-profit. The business collects a……
Can You Create Deductions by Forgiving Debt to Your Own Entities?
Business owners with multiple entities often transfer funds between their companies. These transfers are often accounted for in an inter-company account. In other instances, they may be structured as loans. When financial difficulties arise, these intercompany loans might be forgiven. If this is the case, can the borrowing entity exclude the forgiveness income while the……
Can Judge-Made Doctrine Override Tax Deductions Allowed by Congress?
The tax code provides specific rules for when taxpayers can claim deductions for losses. These are rules enacted by Congress. There are other so-called “judicial doctrines” that allow the courts to override the rules set by Congress. There are several of these that frequently come up in tax disputes, such as the economic substance doctrine……
Claiming a Casualty Loss for Property You Don’t Own
Natural disasters can be expensive. This is particularly true for those who own or have an interest in real estate. Our tax laws provide some relief through casualty loss deductions and theft loss deductions. But what happens when someone pays to repair property they don’t legally own? This question is particularly relevant when parents continue……
Dealing With IRS Audit of a Hobby Loss Activity
The IRS is a silent partner in every business venture. It is quick to take its share of profits when a business venture succeeds. The IRS is often not a good business partner. It often refuses to share in the losses during the down times. This unequal treatment often comes up when the taxpayer reports……
Breach of Contract as Theft Loss Tax Deduction
Many people have experienced the pain of an investment gone wrong. You put money into a business, loan funds to a friend, or participate in a real estate venture, expecting strong returns. But instead of profits, you end up suffering losses when the deal unravels. It leaves you wondering – can I at least deduct……