The California Franchise Tax Board announced that with the 0.5 percent increase in inflation over the last fiscal year, adjustments have also been made to income tax brackets, filing requirement thresholds, the standard deduction and certain credits for tax year 2014.
Yesterday, the Tax Court issued a 63 page opinion finding that the taxpayers were not entitled to a $499,000 charitable contribution deduction for the donation of an apartment building to Volunteers for America because the taxpayers failed to obtain a qualified appraisal for the building. Alli v. Commissioner, T.C. Memo. 2014-15. This case highlights the importance of meeting all of the substantiation requirements for charitable contribution deductions. Even where there is no dispute that a taxpayer has donated valuable property, a failure to follow the appraisal rules in many cases precludes the taxpayer from taking any deduction at all. In the Alli case, there were numerous substantiation problems that resulted in a complete disallowance of the taxpayers' claimed deduction.
For many California residents, tax time is stressful. Aside from the hassle of going through receipts and worries that there could be missed deductions, many fear that they will be subjected to tax audits as a result of their return. While there are a number of issues that can trigger a tax audit, some deductions are more likely to invite the scrutiny of the Internal Revenue Service.
In Pollard v. Commissioner TC Memo 2013-38, the U.S. Tax Court recently denied a taxpayers' deduction for the donation of a conservation easement where the taxpayer granted the easement pursuant to negotiations with a local zoning authority for approval of a subdivision exemption.
In a court case closely watched by documentary filmmakers throughout California, Lee Storey, the producer and director of "Smile 'Til It Hurts: The Up with People Story," has prevailed in her tax dispute with the IRS. The tax controversy began a few years ago after the filmmaker sought to deduct her losses from making "The Up with People Story." However, the IRS denied the deduction, saying her filmmaking pursuits were a hobby rather than a business.
The IRS deadline for filing your tax return for 2011 is rapidly approaching, which means more people are becoming concerned about receiving that dreaded audit. Recently, we mentioned how the IRS is increasingly turning to so-called unreal audits ("Audits may not be commonplace, but they are not rare either," Feb. 23) in which the agency informs taxpayers of errors in their returns by way of letter. Yet, no matter the type of audit involved, there are some things California taxpayers can do to reduce their chances of having to deal too closely with the IRS.