Opportunities for profit beget horse breeding deductions
Article Abstract:
The Tax Court found that the horse breeding and racing activities of a couple were aimed at making a profit and therefore legitimized their claim for a deduction of losses accrued in the said activities. The taxpayers did not have a written business plan although they embraced a business policy that involved racing the healthy horses, breeding the female horses and racing the males until they were claimed, sold or given away. The husband and wife maintained expense records but did not have written records of their income. The IRS argued that they did not engage in the activities with a profit motive as defined by Sec 183, which prevented them from deducting expenses. The Tax Court reviewed the factors and found that the taxpayers operated their equine activities in a businesslike fashion and were serious about these activities, possessed the required expertise, spent long time and exerted effort, and did not pursue personal pleasure.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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Contributions must be 'on account of' the tax year
Article Abstract:
The 10th Circuit held in 'American Stores Co' that a corporation cannot make a deduction of payments to a pension plan made after the end of the tax year and before the extension to file its return had expired. The taxpayer made the 12 customary monthly contributions to a multiemployer pension plan, after which it obtained a tax return filing extension. Before the extended filing deadline, the taxpayer gave eight more monthly contributions. The taxpayer argued that the period for making contributions was not influenced by the year or the month of contributions since the pension plan combined all contributions and paid individuals out of this pool. According to Sec 413(b)(7), collective-bargaining plans introduced certain timing requirements on plan contributions that employers must follow. The taxpayer was thus not permitted to include the additional payments in its deductions for the previous plan year.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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Quitting a job does not make it temporary
Article Abstract:
The IRS did not allow the taxpayers in 'Sanderson,' TCM 1998-358 to claim tax deductions for unreimbursed employee expenses because the living expenses were incurred while the husband was employed by his company indefinitely rather than temporarily. The taxpayer signed a contract with Motorola that identified him as an employee at will, specified his annual salary and clarified the firm's reimbursement policies for employee expenses. The employee left Motorola after six months and claimed tax deductions for unreimbursed employee business costs for travel and lodging, meals and entertainment, and vehicle use. Such expenses are generally nondeductible personal costs but they can be deducted if incurred by a taxpayer working away from home at a temporary job site. The IRS found that the claim of the Sanderson taxapayer was not valid because he had indefinite employment.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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