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Federal Tax Update — June 2018

from By David S. De Jong, Esq., CPA, Stein Sperling Bennett De Jong PC

In Johnson v. Commissioner, TC Summary Opinion 2018-31, the Tax Court stated that the test as to primary physical custody between divorced parents as to dependency allowances is based on a comparative number of nights as opposed to comparative time with the children.

In Palsgaard and Kelly v. Commissioner, TC Memo 2018-82, the Tax Court rejected two arguments of a disabled physician that social security disability benefits are excludable from income — as akin to workers compensation or payments on account of physical injury.

In Leslie v. Commissioner, 121 AFTR2d 2018-1991, the Ninth Circuit Court of Appeals agreed with the Tax Court that a lump sum payment to a spouse was additional alimony as it was called “spousal support” although placed in a section of the separation instrument entitled "division of community and co-owned property." The court noted that under California law, alimony payments stopped necessarily on the death of the recipient notwithstanding lack of specific language in the document.

In Singh v. Commissioner, TC Memo 2018-79, the Tax Court disallowed tens of thousands of dollars of claimed itemized deductions and hundreds of thousands of dollars in claimed business expenses that could not be substantiated. The couple alleged that records were lost for multiple reasons including the death of the accountant, seizure by local officials and destruction in a fire. more

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