Revenooer Rants: Love conquers all … or does it?
February 4, 2016
Just ask Diane Blagaich who got into a bit of a tussle with the Revenooers on the question.
Seems Ms. Blagaich received some property (including a Corvette) and a whole bunch of cash (grand totaling about $744,000) from her boyfriend, Mr. Burns.
She didn't consider any of the dough as "income," though following her breakup with Sugar Daddy, he found his way clear to issue her a 1099-MISC, thus telling all involved (specifically including IRS, of course) that income is exactly what she got.
Later, a State court found that our lady had fraudulently induced boyfriend to pay her $400,000 of the total and ordered her to pay it back.
The State court found that other cash and property were "gifts," which Ms. Blagaich could keep. (Indeed, the State court found that boyfriend Burns had given her the Corvette because he did not want her to ride her Harley Davidson motorcycle, "which activity frightened him.")
This Tax Court case involved a bunch of other minutiae set forth in the tax law, but in short, the decision reminds folks of the age-old distinction between "gifts," which are not income subject to income taxation, and "compensation for services" which clearly gives rise to allowing Uncle Sam to clip the recipient for his share.
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And in case you were wondering about IRS' efficiencies, we're sure you will be pleased to learn that IRS issues refunds, nine out of ten times, in less than 21 days!
If you're eager for the dough, don't bother calling the Revenooers. (As we recently reported, talking with taxpayers is in the very low on their list of priorities, which is probably why they make it so difficult for you to actually reach a human being by telephone for this purpose.)
Indeed, go to http://www.irs.gov and look for the "Where's My Refund" tab, which is the best way to get up to date information on the subject.
And finally, this week, comes yet another reminder from the Tax Court of the rules dictating that an expense must be "ordinary and necessary" to your trade or business to allow you to deduct it on your Schedule C.
Check out the decision in the case of Rodney C. Niemann for the details, including the reminder that travel, meals, and entertainment deductions must be substantiated by evidence as to the amount, time, place and business purpose of the expenses, and items like legal fees must be "ordinary and necessary" and paid or incurred while carrying out a "trade or business," rather than related to a mere investment transaction.
Trade or business implies continuous and regular involvement by the taxpayer over a substantial period of time, rather than the occasional or "sporadic" investment transaction.
CONSULT YOUR TAX ADVISER – This article contains general information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn is a CPA recently retired from the firm of Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He welcomes comments at email@example.com.