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Boston Tax Law Blog

Taxes on cancelled debt, part 2: Graduate and professional students

In the first part of this post, we began discussing how forgiveness of student loan debt can lead to a big tax bill for the debtor.

The case concerned the grief-stricken parents of a recent college graduate.
After their son died suddenly of a brain tumor, the lender forgave the students loans the parents had taken out. But years later, the parents got a bill from the IRS for income tax on cancelled debt.

Cancelled debt as income, part 1: case raises student loan issue

The IRS has long taken the position that cancelled or forgiven debts are generally taxable income.

To be sure, there are certain exceptions to this. For example, in recent years Congress has granted relief for struggling homeowners who have gone through a foreclosure or short sale.

Taxing part-year residents: What if have a second home elsewhere?

There are a couple of different scenarios by which Massachusetts can try to tax you as a full-year resident, even if you don't live here all year round.

One is if your domicile (legal residence) is here for the entire year, even if you spend some time elsewhere, such as in a Florida condo during the winter or in a summer home in Maine.

3 Tips for 1099s in the “gig economy”

Listing a guest bedroom on Airbnb or picking up some side income driving for Uber? You need to be thinking about taxes already. Whether or not you receive a 1099 in January, you have the responsibility of reporting income and supporting deductions.

You may be paying more attention to legislation being debated at the Massachusetts Senate that could affect the Uber/Lyft business model. Background checks and a new certification process may make signing up more cumbersome. But what is rarely addressed in the debates are taxes.

What you need to know about the June 30 FBAR deadline

If your investment portfolio includes funds held in an overseas account, you need to pay attention to an upcoming tax filing deadline. U.S. persons (this includes citizens and residents) with an interest, even a signature interest, in a foreign account need to pay attention.

An account or combination of foreign accounts with an aggregate balance of $10,000 or more in 2015 will trigger the reporting requirement. Form 114, Report of Foreign Bank and Financial Accounts (FBAR) needs to be efiled by June 30. There are no filing extensions.

What the IRS has to say about selling your home

In the not-too-distant past, homeowners watched in horror as their most prized asset plummeted in value and their prospects of realizing a profit on its sale rapidly diminished. Fast forward to the present, however, and things are considerably different.

Indeed, with the recession now fully in the rearview mirror and the economy continuing to improve, it's once again become a seller's market for residential real estate. As encouraging as this development is for homeowners, questions naturally arise as to how the Internal Revenue Service treats the sale of a primary residence.

John Oliver gives away medical debt without triggering taxes

In the latest episode of HBO series “Last Week Tonight with John Oliver,” the host created a company and bought approximately $15 million of consumer medical debt for pennies on the dollar. He then relieved 9,000 of their old medical debts.

This television giveaway drew attention to the ease of entry into the debt collection business. Collection tactics have become very aggressive as more organizations outsource debt collection. Even Federal agencies like the IRS have run pilot programs with private collectors.

Tax Court allows late filing caused by winter storm Octavia

The IRS allows taxpayers to appeal from agency decisions. A taxpayer petition must be filed within 30 days in a collection due process case, however.

Miss the deadline and you generally lose the right to have a judge review your case. A recent tax court decision found a taxpayer’s appeal was in fact timely filed when it was delayed one day by a winter storm that had shut down the court.

Wyly widow found to be "innocent spouse" in tax fraud case

The twisted tale of former billionaire brother Sam Wyly and his late brother Charles took a new turn recently when a federal bankruptcy judge found that the pair had committed tax fraud with a convoluted scheme of offshore bank accounts, shell corporations, trusts and other tax shelters. The brothers system involved transferring their interest in various commercial enterprises (among them such well-known companies as Michael's arts and crafts stores and Bonanza Steakhouses) to trusts in exchange for private annuities.

The IRS claimed that the brothers' scheme was purposeful to avoid capital gains taxes and pursued tax evasion and fraud charges and payment of back taxes. The pair also faced securities fraud charges prior to Charles' untimely death. Bankruptcy proceedings were initiated by Sam and by Charles' estate prior to a 2015 ruling finding that the Wyly brothers owed billions in back taxes, penalties and interest as a result of their shady tax dealings.

Massachusetts man accused of failing to file tax returns

The income requirements for filing taxes are quite low. If filing single, you need to file a federal return if you earned more than $10,300 in 2015. The amount doubles for a married couple. If you earned more than $8,000, you need to file a state return. Filing a return is necessary if you expect a refund of taxes withheld by an employer or through the Earned Income Tax Credit.

With this background, an investigation by the Boston Globe indicated that a Massachusetts investor and developer only filed one state return in the last quarter-century. In lawsuits questioning his dealings in real estate transactions, there is evidence that the man earned significant profits.

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