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PostHeaderIcon Tax News – July 24, 2013

There’s quite a bit of tax news on the internet today with the first story near and dear because I work with a lot of real estate investors.  A recent tax court case found in favor of the IRS in that a husband and wife who owned three rental properties weren’t considered real estate professionals because they lacked quality documentation to fulfill the time requirements.  For more information on qualifying as a real estate professional, I recommend you read the series I did on this subject last year.

The IRS continues in its crackdown of taxpayers trying to hide income overseas and their latest target is going after what’s been called “stateless income.”  In more plain English, this means companies use a complex legal structure so income falls through the cracks and avoids US taxes.  For now, it’s legal but with the IRS looking at this more closely, you could see the loophole close soon.

Computer maker Dell is looking to go private soon and as part of the buyout, they considered changing to a different tax jurisdiction to avoid US taxes.  Image appeared to be one of the reasons they didn’t pursue the strategy.

Do you know what Apple’s effective tax rate is?  It’s okay if you don’t because at this point in the year, it’s subject to interpretation.

Finally, a common strategy of high income taxpayers to get out of paying higher taxes is to try to shift some of their income to their kids.  While the kiddie tax can prevent this, you can still shift income to get out of some of the other phaseouts by not taking your kid as a dependent.  You don’t avoid the kiddie tax, but you may be able to push yourself into a situation to claim those credits with a phaseout or even the AMT.