How to Identify Physical Injury from Vague Settlement Agreements

Business owners and independent contractors sometimes receive legal settlements to resolve disputes. While most settlement proceeds must be reported as taxable income, payments for physical injuries or physical sickness can be excluded under specific sections of the tax code. This exemption can significantly impact the amount of tax due. The tax consequences focus on the……

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Are Energy Investment Tax Credits Subject to Passive Activity Rules?

There are a number of benefits for investing in renewable energy projects. The energy investment tax credits is one such benefit. Given the specialized nature of energy projects, these tax credits are often sold to taxpayers as investments by firms that organize and operate these investments. After making the investment and receiving allocation notices from……

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Can Self-Employed Taxpayers Deduct the Value of Their Own Time?

Small business owners and self-employed professionals often spend countless hours developing products, services, or processes that enhance their business operations. A construction contractor might spend weekends designing custom software to track job costs. An engineer might devote evenings to developing a proprietary modeling program. In these situations, many entrepreneurs wonder: if they had hired someone……

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Do FBAR Penalties Die With the Taxpayer?

When someone has an undisclosed foreign bank account that the government has not yet assessed penalties for and they die, can the government still pursue the penalties? The answer hinges on a fundamental legal classification that courts are actively debating—are FBAR penalties primarily punitive fines or remedial damages? If FBAR penalties are primarily punitive, they……

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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……

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Substantial Variance Doctrine for Informal Tax Refund Claims

Taxpayers often submit refund claims when they discover that they overpaid their taxes. Taxpayers usually do this by submitting a formal refund claim using the IRS’s prescribed forms. But this is not always required. In many cases, taxpayers will submit so-called “informal refund claims” to the IRS during the course of an IRS audit. The……

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