Tax Articles / All Articles / Charitable Issues

A Deep Dive into Conservation Easements

Conservation Easements have caused quite a bit of a stir at the Tax Court in recent years.  Misunderstandings of the requirements and creativity (and greed) in drafting the easements has led to conservation easements earning a persona non grata status amongst the IRS and Tax Court judges, alike.  In this article, we examine the nuts and bolts of conservation easements and take you on a deep dive of the Code and Treasury Regulations related thereto. Introduction to Deduction - Why Conservation Easements are Deductible If a taxpayer makes a charitable contribution of property other than money, the amount of the contribution is generally equal to the FMV of the property at the time the gift is made.[1] However, the Code restricts a taxpayer’s charitable contribution deduction for the donation of an interest in property that consists of less than the taxpayer’s entire interest in such property.[2] There is an exception to…

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April 29, 2021
Tax Articles / All Articles / Penalties Under the Code

A Comprehensive Guide to Preparer Penalties

Preparer penalties are like poison ivy. They lurk around every corner, and despite your best efforts, even the slightest step off the path of (tax return) righteousness can lead to a wholly uncomfortable time.  This article provides a comprehensive, step-by-step analysis of each of the preparer penalties under the Code, both civil and, yes, even criminal and examines, where possible, how to avoid them (after the fact – sort of like an administrative calamine lotion). So, what is a preparer penalty, and to whom do they apply? Who is a Preparer? A “tax return preparer” is any person that prepares (for compensation, or who employs one or more persons to prepare for compensation) any tax return under the Code (income, gift, estate, excise, etc.) or any claim for refund or credit of such tax.[1] The preparation of a substantial portion of a return or claim for refund shall be treated…

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April 29, 2021
Tax Articles / All Articles / Income Tax Issues

The Deductibility of Criminal Restitution & The Claim of Right Doctrine

You have made it a habit to screen your calls, even since your mother gave Uncle Bill your direct line at work. Sure enough, 5:59 PM rolls around, and you have one foot physically out of your office door when your phone rings. Mother of all that is good and holy… As you put your briefcase down in the doorway and slowly amble back to your desk, you are at once relieved that it is not your boss with a rush assignment and utterly dismayed that it is Uncle Bill, and he appears to be leaving a message. The voicemail light begins to blink, mocking you with each seizure-inducing strobe, and despite your better judgment you listen to the message. As you calmly slam the receiver back into the cradle, curse under your breath, and silently throw a tantrum in your mind, you set your head on the desk, try…

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April 29, 2021
Tax Articles / All Articles / Income Tax Issues / Penalties Under the Code / Procedural Issues

A Deep Dive into Innocent Spouse Relief

Uncle Bill has four children…that he knows of. We met Jedediah in a previous post. Jethro is on year four of his five-year stint at Raiford for possession of amphetamines with intent to distribute. In his defense, Jethro agreed with the officer that the crank was his.  However, he vehemently denied that he had any intent whatsoever to share it with anyone else. (Candidly, you absolutely believe him.)  Bill and Ethel’s daughters Jennie and Jaime were far less prone to criminality than their delinquent male siblings. Jennie lived a simple life in the country with her husband Jim Bob, three to four mutts (depending on the season, as the dogs came and went), and a strapping young lad of six, James Robert. Jim Bob and Jennie were itinerant before James Robert was born, which was made all the easier given the fact that their home was, itself, mobile. Once they…

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April 29, 2021
Tax Articles / All Articles / Charitable Issues / Income Tax Issues

Deducting Charitable Contributions from a Trust that Does not Permit Charitable Contributions

Uncle Bill comes to your office in a bit of a tizzy with two beers in one hand and three notices from the IRS in the other.  Unbeknownst to you, he wants to discuss deducting charitable contributions from a trust that doesn't, technically, permit charitable contributions.  Although you are not unaccustomed to his unannounced visits, they are nevertheless jarring at 7:15 on a Tuesday morning. You note that Aunt Ethel recently explained that Bill has become more nocturnal in his advancing age, and, as such, he is not, technically, day drinking – at least not in his personal time zone.[1] Cutting through the hiccups and histrionics, you come to understand that Bill has been making charitable distributions from your Great-Aunt Hilda’s trust for years now and has been taking a charitable deduction on the trust’s tax return.  Having familiarized yourself with Hilda’s trust some years ago, when an issue of…

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April 29, 2021
Tax Articles / All Articles / Income Tax Issues

Deducting Legal and Professional Fees

Income tax deductions are rather like hard truths. A client may not want to hear that an item is not deductible, but you know in your heart of hearts that you cannot, in good conscience, advise them otherwise. No doctor relishes the prospect of telling a patient that he is terminal. Often met with a similar grief-stricken reaction, explaining to a client that the “big ticket” deduction that they wanted to claim (or in my case, as a tax controversy attorney, that the IRS has already disallowed) is wholly without merit. I cannot imagine that the anger, bargaining, and other stages of grief witnessed by that doctor delivering the bad news to her patient, because I have witnessed some rather grandiose reactions in my own (non-life-and-death) practice. Certain deductions are straightforward. Others, however, are buried in a morass of Code sections, Treasury Regulations, and case law. It is in this…

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April 29, 2021