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Fort Worth Tax Law Blog

Deducting expenses for pets: Is it ever allowed?

The tax code allows for many different types of deductions, including home mortgage interest, charitable contributions and many more.

All of these deductions seek, in various ways, to encourage some form of desirable social activity.

What about deductions for taking care of pets? Are there circumstances in which a deduction could be allowed? In this post, we will address that question.

Collateral consequences flow from tax fraud charges

Tax law is complex. Only a handful of people fully understand it and taxes are often controversial. While they pay for various services, who pays and how much are tricky policy questions. Tax laws, like any laws are violated for various reasons. Sometimes, the violations are motivated by greed, but it isn't always that simple.

While there may be criminal charges if someone is accused of tax fraud or tax evasion, in some cases it is the civil penalties that hit the hardest. They can impact far more than a single person's life. In this post, we illustrate some of these cascading consequences.

Gambling and taxes, part 2: How are wins and losses treated?

Opinions on gambling run the gamut. Some say it's not gambling if you don't lose. Others say that gambling usually involves getting nothing for something.

Regardless of how you view it, however, gambling has tax implications. In the first part of this post, we discussed the tax aspects of fantasy sports leagues.

In this part of the post, let's look more generally at how gambling income and losses are treated for tax purposes.

Embezzlement charges can go hand-in-hand with tax crime allegations

Legendary crime boss and Mafioso Al Capone learned the hard way that the tax man always cometh. Even "Scarface" himself wasn't immune to the eventualities of life: death and taxes. Despite being a known gangster and bootlegger, openly running illegal gambling operations and brothels, extorting countless and being responsible for the deaths of dozens of people (either by his own hand or on his orders), his only sizable prison term (a 10-year sentence, of which he served only seven before being released) was for tax crimes.

Specifically, Capone was convicted on tax evasion for not paying taxes on his ill-gotten millions and for failure to file several years' worth of tax returns. After Capone's sensational trial and conviction in 1931, the IRS found itself on the receiving end of a windfall of back tax payments from some of the best-known names in the criminal underworld.

The difference between tax avoidance and tax fraud

No one wants to pay taxes. But some people seek creative approaches to lower the amount that they owe. The problem is that many cross the fine line that separates tax avoidance and tax fraud.

When does nonpayment or underpayment of a tax bill become criminal? To start this discussion, let's turn directly to the IRS to look at the definition of each term:

  • Tax Avoidance: Actions designed to limit the amount of tax owed
  • Tax Evasion: Deliberate nonpayment or underpayment of taxes owed

The rest of this post will provide examples and discuss willfulness.

    Gambling and taxes, part 1: fantasy sports leagues

    In Texas and across the country, the "Friday night lights" are back on. Colleges and the NFL have kicked off new seasons as well, as football again takes center stage in many people's leisure activities.

    Of course, football-following fever goes way beyond going to a stadium or watching games on TV. Internet-based sites now enable the creation of fantasy leagues that pay out real dollars to the winners.

    Are these fantasy leagues a form of gambling? We will address that question in the first of a two-part post on gambling and taxes.

    Marital status and taxes, part 2: a Q & A divorce and separation

    Let's continue the discussion we began last week of the impact of marital status on taxes.

    In the first part of the post, we noted that married people don't necessarily get better tax treatment than unmarried people. For example, an unmarried couple can come off better than a married couple when it comes to deductions for home-mortgage interest.

    In this part of the post, we will use a Q & A format to look at the effect of divorce or separation on taxes.

    Marital status and taxes, part 1: mortgage deductions

    About a year ago, we devoted a post to the impact of marriage on taxes.

    In that post, we asked whether there really is a "marriage penalty," by which married couples may end up paying more in federal income tax than they would have if they had filed separately. We noted that the answer depends on several factors, particularly the couple's income.

    In this two-part post, we will look at two other aspects of how marital status affects taxes. Part one will look at the mortgage deductions for non-married partners. Part two will discuss the tax effects of separation or divorce.

    Not paying energy-related taxes can result in evasion or fraud charges

    As high-profile energy industry investor Morris Zuckerman can attest, failure to pay taxes on money earned through energy production can result in serious criminal tax evasion or fraud charges. The Zuckerman case is a complicated one, involving a number of years and myriad investments on behalf of his Manhattan-based M.E. Zukerman & Co. (MEZCO).

    Zukerman's firm allegedly used false statements to accountants, backdated promissory notes, a fraudulent board resolution, shell corporations, family trusts and the purchase of high-value artwork in an attempt to evade taxes on more than $130 million in profits from the sale of a subsidiary company's stake in the infamous Cortez oil pipeline. He is facing federal criminal charges including tax evasion, wire fraud and obstructing the IRS relating to these actions and others that helped him avoid paying tens of millions of dollars in corporate and personal taxes.

    Tax inversion transactions, part 2: Lawsuit challenges new rules

    Let's continue the discussion of tax inversion transactions that we began in a post last week.
    As we noted, transactions by which a U.S. company acquires a partner abroad and avoids U.S. taxes by reincorporating have attracted increasing attention from federal regulators.

    Last spring, the Treasury Department put into effect new regulations to remove the tax benefits of these transactions.

    In this part of the post, we will update you on a lawsuit filed against these rules by business groups.

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