Taxpayers seeking to defer gain or loss on business-use property may be able to do so by agreeing to a “like-kind exchange.” That’s when two parties exchange the ownership of business-use property, including the associated risks. The IRS rejected an agreement between a power company and two tax-exempt entities, because the power company wasn’t required to assume the “benefits and burdens” of ownership. The 7th Circuit Court of Appeals agreed, stating the agreement was closer to a low-risk loan than a like-kind exchange for the power company.
Tips received by food servers, bartenders, taxi drivers and others in service industries are subject to employment taxes. Yet the IRS estimates that 10% of one year’s individual income tax underreporting tax gap was due to unreported tip income by employees. A Treasury Inspector General for Tax Administration audit also found that, while the IRS enters into “tip agreements” with employers to help ensure accurate tip reporting, they’re generally not enforced. The report makes recommendations for improving compliance. See the full report at https://bit.ly/2C7BOq1.