Writings by James F. McDonough

The IRS recently issued a new set of proposed rules on taxes for high-net-worth individuals in the U.S., including citizens and residents, who receive gifts from expatriates. According to the National Law Review, the tax is significant because it is designed to disincentivize U.S. citizens from expatriating individually. The new rules The proposed tax, which […]

On Friday, Aug. 31, the IRS announced proposed regulation changes for the amount of penalties for failure to disclose required reportable transaction information. According to Forbes contributor and tax law professor Timothy Todd, these new changes require taxpayers to properly disclose reportable transaction information to the to the IRS. Any penalties imposed by IRS for a violation […]

In a recent decision, the New Jersey Tax Court ruled that a $271 million business deduction for MCI Communication Services Inc. was disallowed. The ruling is significant because it creates potential conflict between state and federal tax laws. However, it could also cause confusion for corporate taxpayers in other states that require companies to file […]

Restitution payments are now tax deductible The IRS recently issued a final private letter ruling which held that a principal of a business could deduct the amount of money paid as restitution in a business crime plea deal. This ruling was significant because while Sec. 162(f) states that no fines or penalties paid for violation of a […]

Power shifts in trustee material participation Taxpayer victories in Maggie K. Carter Trust v. U.S. and Frank Aragona Trust v. Commissioner  were hailed as opportunities for taxpayers to structure real estate ownership by trusts in a manner that would attribute management activity to the trustee. The result of this trustee material participation was the 3.8% […]

Although all individuals holding a life insurance policy own an investment, they did not have the legal right to exert control over the investments inside the policy. However, according to a recent ruling by the U.S. Tax Court, investors who exercise control over how money is invested are subject to tax on the investment income. […]

The U.S. Tax Court recently issued a surprising decision that invalidated the part of an IRS cost-sharing regulation – under code section 482 – which states that taxpayers are required to take the costs of stock-based compensation into account. The decision regarding the cost-sharing regulation supports taxpayer criticism that questioned the regulatory requirement that cost-based transfer […]

The Treasury Department proposed new regulations that may impose limitations on transfer tax savings for corporate, partnership and limited liability company agreement provisions between family members. The proposed regulations by the Treasury Department may place limitations on the availability of discounts for lack of control and lack of marketability on ownership of transfer tax savings […]

Last week, the Ninth U.S. Circuit Court of Appeals ruled that legal medical marijuana dispensaries cannot claim business expenses to the IRS as other commercial enterprises. According to Forbes, the decision is considered a financial setback for legal medical marijuana dispensaries because, with business deductions being disallowed, they must pay taxes on 100 percent of […]

Presidential contender, Hillary Clinton, announced a proposal for capital gains tax reform. In the plan, capital gains taxes will be increased for assets held for less than six years by top-bracket investors. The proposed capital gains tax increase As part of her proposal, the top-ranking tax rate will be 43.8 percent for assets held less […]

Last week, the Internal Revenue Service issued a notice to announce that it will prohibit a cash-out window for Employee Retirement Income Security Act pension plans. The amendment to the ERISA pension plan de-risking strategy will prevent lump sum payments in lieu of remaining annuity payments. The new ERISA de-risking strategy The IRS announced in Notice […]

I do not respond on the postings of persons who comment on the tax blog; however, one such post was brought to my attention and it is prescient and deserving of a response. The comment was written in response to our blog that described the impact of this state’s Inheritance Tax and Estate Tax upon […]