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The Tax Professionals Blog

Tax Treatment of Below Market ( Gift ) Loans

Posted by Lee Reams Sr. on

Occasionally when preparing tax returns, we encounter situations where there are loans between family members, or occasionally between employer and employee, with no interest being charged or the rate of interest is below market rates.  IRC Sec. 7872 deals with issues related to below market loans including: creating interest income, interest payments, investment interest, gift consequences and certain exceptions to the Sec 7872 treatment.  Sec 7872 covers a variety of circumstances; however this article deals only with its application to non-business loans between family members or between employer and employee. 

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Analysis of Required Minimum Distribution for Year of the Individual Retirement Account Owner’s Death

Posted by Lee Reams II on

Often the question arises related to the need for a required minimum distribution (RMD) in the year of the IRA owner’s death.  Information on this requirement is sketchy at best.  The following has been gleaned from the regulations and IRS Publication 590-B. 

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IRAs and Unrelated Business Income

Posted by Lee Reams Sr. on

Generally an IRA is exempt from all income taxes.  An exception to that is tax on unrelated business income (UBI), which the IRA received from activities that are not substantially related to the functions for which the IRA is allowed an exemption from income tax, such as engaging in a business normally carried on for profit.

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Taxation of Pensions by Former Resident States

Posted by Lee Reams Sr. on

A frequent question is: what is the taxation of IRAs and qualified pensions by a taxpayer’s former state of residence?  The Congress in 1995 passed P.L. 104-95 (H.R. 394) that prevents states from taxing the pensions of former residents of any state received after December 31, 1995.  Prior to that date several states were taxing IRAs and qualified retirement plans on the premise they were based on income sourced to the state.

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Tax Issues When Converting a Home to a Rental

Posted by Lee Reams Sr. on

When a taxpayer converts their home to a rental, there are a number of tax issues that come into play.  The following are key tax circumstances that should be considered before making the decision to convert.

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