How a Forfeited Real Estate Deposit Is Treated for Tax Purposes

Posted by Joseph B. Darby III on Jan 9, 2017 10:41:02 AM

Taxpayer signs a purchase and sale agreement to sell real estate to an unrelated buyer for $2,500,000. Buyer deposits 10% of the purchase price, or $250,000, as an earnest money deposit and as liquidated damages in the event the buyer fails to complete the purchase. The buyer subsequently fails to complete the acquisition, and the deposit is forfeited to the Taxpayer. The real estate in question was held as long-term capital property and not as inventory.

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Topics: Tax Law, real estate, escrow

Darn Those Sox!

Posted by Joseph B. Darby III on Jul 29, 2016 11:45:28 AM

The following is an audited and certified report on the Boston Red Sox covering that portion of the 2016 fiscal baseball year through today’s date.

The Red Sox are unquestionably better – miles and kilometers and even light-years better – than they were during the dismal years of 2014 and 2015, but the question that lingers, like a heavy scent of garlic, is whether this year’s pitching staff, which looks depressingly similar to last year’s pitching staff except at the very beginning (David Price), the middle (where else would you put Drew Pomeranz?) and at the very end (Craig Kimbrel), is really and truly enough improved to make this year’s iteration of the Olde Towne Team a real contender as opposed to a mere pretender. At the moment, the needle is leaning slightly on the pretender side of the cosmic scale, but there remains enough baseball left in this season that a contender could yet emerge from the erratic and distaff patterns that have thus far characterized the Red Sox season.

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Topics: Red Sox

Building the New Berlin Wall: Treasury's Anti-Inversion Regulations

Posted by Joseph B. Darby III on Jun 10, 2016 9:23:03 AM

The Treasury no doubt felt that it could chalk one up in the win column early in April 2016 when, following its release of a veritable carpet bombing of new regulations designed to blow up inversion transactions, the primary target, Pfizer Inc., chose to wave the white flag and cancel—at least for the time being—its efforts to merge with Allergan PLC. 

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Topics: IRS, Tax, Inversion Transactions, U.S. Treasury

Forms Over Substance: IRS Information Reporting Surges

Posted by Joseph B. Darby III on Feb 26, 2016 11:29:25 AM

Once upon a time, the United States federal income tax laws were largely about determining your federal taxable income and then calculating and paying the appropriate amount of income tax. How quaintly old-fashioned that era seems today. 

Increasingly, the IRS is interested in much more than just your income taxes (although you still need to pay your taxes, too). These days, the IRS is also busy chasing a wide range of information, which is required to be reported timely on a remarkable – and often redundant – array of IRS returns. Typically, these returns demand stunningly detailed information covering a broad array of business and personal activities and assets. 

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Topics: IRS, FBAR, Foreign Assets

Proposed Massachusetts Tax Changes: I'll Wait to See the Movie

Posted by Joseph B. Darby III on Feb 4, 2016 11:24:47 AM

Governor Charlie Baker wants to give the Massachusetts corporate income tax a makeover of Lady Gaga-like proportions:  Baker wants to extend the “single sales factor" apportionment regime, which currently applies only to manufacturers and mutual fund service corporations, so that it applies to all Massachusetts corporations. This would be a major boost to a variety of local companies, notably big retailers such as TJX and Staples.

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Topics: MA film credit, Tax, corporate income tax, state and local tax

New Court Decision in Israel Will Impose a Significant Tax Burden on International Companies with Israeli Permanent Establishments

Posted by Boaz Feinberg on Jan 27, 2016 9:51:46 AM

Recently, the District Court in Tel Aviv was required to address the question as to whether foreign companies with an Israeli Permanent Establishment (PE) should include on their revenue calculation unrecognized expenses for tax purposes. Such expenses would include payroll expenses for granted employee’s options and the social expenses derived from it, in companies whose revenues are calculated at the 'Cost Plus' pricing method, even though the options were granted to employees under Section 102 of the Israeli Income Tax Ordinance

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Topics: Tax Law, Foreign Parent Company, Israeli Tax

Choosing the Right Business Vehicle: An Automotive Analogy

Posted by Joseph B. Darby III on Sep 16, 2015 9:05:00 AM

car.jpgWe live in the Era of the Limited Liability Company (LLC).

The LLC has become the dominant business vehicle of the early 21st Century:  It is the “must use” vehicle for all real estate transactions, and an increasingly popular choice for operating a commercial business as well.

How did this come to pass? The short answer is that the LLC is the most flexible business vehicle available. It is not the perfect choice for every situation, but it is the best choice for a majority of situations these days, and its use is likely to continue to burgeon for several reasons, all of which are most easily explained using automotive vehicular metaphors.

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Topics: Tax Law, S Corporation, LLC, Limited Partnership

Darn Those Sox: How to Fix the Holes in the Boston Lineup

Posted by Joseph B. Darby III on Jul 31, 2015 10:18:00 AM

RedSox.jpgThe Boston Red Sox are in a strange place these days – and I am not referring to last place in the America League East, which is a place they have occupied so consistently of late that it has practically become their postal mailing address.

No, I am referring to the fact that they have the 3rd highest payroll in baseball, and yet, quixotically, are a team animated and energized by very young players. During early July when the Red Sox actually played pretty decently (winning four straight series and compiling a 9–4 record) the first three hitters at the top of the lineup were Mookie Betts (age 22), Brock Holt (age 27), and Xander Bogearts(age 22); throw in catcher Blake Swihart (age 23), who was batting ninth during part of that winning streak, and the Red Sox were showcasing impressive and event breathtaking young talent exactly where you want it – up the middle, at catcher, second base, shortstop and centerfield.

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Topics: Sports

Divide and Conquer: The Latest Scoop on Code Section 355 Spinoffs

Posted by Joseph B. Darby III on Jul 10, 2015 11:01:00 AM

YAHOO.jpgYahoo has been much in the news of late – although Yahoo probably wishes that such were not the case. Yahoo’s stock plummeted and then mostly recovered in late May, as the result of some curious and perhaps even unguarded remarks by an IRS official at a Washington D.C. Bar Association event.

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Topics: EBIDTA, Tax Law, 355 Spinoff, 5% ruling standard

A Clever Disclaimer Strategy for Joint Brokerage Accounts

Posted by Joseph B. Darby III on May 29, 2015 1:31:00 PM

clock.jpgThe following is a clever “hybrid” tax strategy — combining estate planning and income-tax planning — that was brought to my attention by my partner and good friend, Henry Comstock.

Joint Financial Accounts

Married couples very frequently hold investment assets, including brokerage accounts, in a “joint” account where both parties are named as co-owners, and on the death of the first spouse the assets automatically pass by operation of state law to the survivor. An easy and logical marital arrangement, so far as it goes.

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Topics: Joint brokerage accounts, Tax Law, Estate Planning


About the Blog

Sullivan's Tax & Sports Update provides timely updates and cutting-edge commentary on all issues affecting U.S. taxation, and, of course, an always humorous take on sports! Edited by Joseph B. Darby III, a partner in Sullivan's Tax Department.

The material on this site is for general information only and is not legal advice. No liability is accepted for any loss or damage which may result from reliance on it. Always consult a qualified lawyer about a specific legal problem.

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