The Tax Professionals Blog

Where a taxpayer receives payments for losses, damages, adjustment of purchase price, etc., for a capital asset (Sec 1221), those payments are not taxable to the extent the basis of the capital asset can be reduced (IRC Sec 1016(a)(1)). However the basis can only be reduced to zero and any amount in excess would represent a capital gain. 

A little known tax benefit for new qualified small businesses is the ability to apply a portion of its research credit, but no more than $250,000, to pay the employer’s share of the employees’ FICA withholding requirement (the 6.2 percent payroll tax).  That can be quite a benefit, since in their early years, start-up companies generally do not have any taxable profits for the research credit to offset, and quite often it is the early years when there are expenditures that will qualify for the research credit.  This can substantially help the cash flow for these young companies.

If a debt of a taxpayer is cancelled after the death of the taxpayer, the cancellation of debt (COD) income is income to the estate or the non-grantor trust of the decedent and reportable as income on the 1041 return for the estate or non-grantor trust (Reg. 1.108-9(c)(2)) to the extent the estate or non-grantor trust is solvent.  

A benefit under Canadian social security legislation paid to a resident of the U.S. is taxable in the U.S. as though it were a benefit under the U.S. Social Security Act (Canadian Treaty, Art. XVIII(5)(b))

If a taxpayer died before filing a return, the taxpayer's spouse or personal representative can file and sign a return for the taxpayer.  In all such cases enter “Deceased,” the deceased taxpayer's name, and the date of death across the top of the return (2016 1040 instructions, Pg. 92). Generally, your software will include a provision for this by entering the date of death.