The following tale is the first in a two part series relating to a couple of recent decisions from the United States Tax Court. Both decisions center around the often-litigated topic of a taxpayer’s profit-motive and whether those taxpayers should have been the allowed the losses stemming from their breeding businesses. On December 21, 2021, [...]
A recent U.S. Tax Court decision in Barker v. Comm’r of Internal Revenue, T.C. Memo. 2018-67 exemplified the notion that a taxpayer could win a significant tax battle, but still lose the tax war. Cecile Barker was a successful aerospace engineer who also operated a music production/promotion company called SoBe. Cecile’s son was among the [...]
Substantiating business expenses is a common problem for many businesses going through an audit with either the Internal Revenue Service (IRS) or the Minnesota Department of Revenue (MDR). In a previous blog article, we addressed the first step of a four step process in an IRS or MDR substantiation audit: proving the payment of expenses. [...]
In the State of Minnesota, many gamblers are interested in taking the extra steps to be treated as professional gamblers. In contrast to the treatment the gambler receives from the IRS, a non- professional gambler in Minnesota is subject to the Alternative Minimum Tax and, as a result, is not allowed his or her gambling [...]
Many taxpayers are fortunate enough to turn a hobby or an activity they are passionate about into a business. The IRS, however, too often determines that the taxpayer’s business is not a “real business” when the business loses too much money. While sometimes the IRS determination is right, many times the IRS will incorrectly re-characterize [...]