Michael Gray, CPA's Tax and Business Insight

October 5, 2017

© 2017 by Michael C. Gray

ISSN 1539-395X

A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!

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Minerva Siemer at Sanborn Park.
Minerva Siemer at Sanborn Park

Boo! The year is almost over!

Halloween is already almost here! And after Halloween, the year roars to a close with the holiday season. Hope your year has been a good one.

Did you know Halloween is the second most popular holiday in the United States? It's a great one for business promotions and just having fun!

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Family celebrations.

My wife, Janet Gray, celebrates her birthday during October. Janet is a great blessing to me and our family. Happy birthday!

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Extended individual income tax returns are due October 16.

Does your tax return preparer have your information to prepare your income tax returns yet? (Congratulations to those who have already filed their income tax returns!)

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Republicans issue tax reform framework.

The Trump Administration and the Republican leadership in Congress have released a framework for tax reform on September 27. The framework is still very sketchy. I have written an article, Are you a winner or a loser under tax reform?, which is included with the print edition of this newsletter. Here is the URL for the blog post. www.michaelgraycpa.com/posts/winner-loser-tax-reform/

(Unified Framework for fixing our broken tax code.)

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Congress and President enact hurricane relief.

Congress has passed and President Trump has signed legislation providing tax relief to victims of the recent hurricanes. Among other provisions, the Act allows qualified taxpayers to deduct personal casualty losses without regard to the 10% floor and allows the deduction to those who claim the standard deduction. The Act also waives the early distribution penalty for qualified taxpayers withdrawing funds from their retirement accounts.

(Disaster Relief Act of 2017.)

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New per diem rates announced.

The IRS has announced per diem travel rates, generally effective for travel on or after October 1, 2017. The per diem rate for lodging and meal and entertainment expenses in high cost areas is $284 per day, and $191 for other areas. The per diem rate for meals and incidental expenses is $68 per day for high cost areas and $57 for other areas within the continental United States. The per diem rate for incidental expenses, such as tips for porters and baggage carriers, is $5 per day.

(IRS Notice 2017-54, September 25, 2017.)

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Rental income wasn't self-employment income.

The Tax Court ruled against the IRS's claim that rental income received by a farmer was self-employment income. The Tax Court said there wasn't a "nexus" between payments from renting farmland and the agricultural arrangement requiring the farmer's material participation.

(Martin v. Commissioner, 149 TC No. 12, September 27, 2017.)

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Medical deduction disallowed for surrogate in-vitro fertilization.

The Eleventh Circuit Court of Appeals upheld the Tax Court in disallowing in-vitro fertilization for a surrogate pregnancy. The taxpayer claimed the expense related to a physical condition because a same sex couple couldn't reproduce. The court said since the procedure didn't involve the taxpayer's own body, it wasn't an allowable medical expense.

(Morrissey v. United States, U.S.T.C. 50,140, December 22, 2016.)

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U.S. helicopter pilot could exclude foreign income earned in Iraq.

The Tax Court ruled against the IRS and allowed a U.S. helicopter pilot to exclude income earned flying helicopters in Iraq. The court found the taxpayer's tax home was in Iraq. That's where he was employed, he lived there two-thirds of the year, maintained living quarters there and visited local markets and restaurants. The taxpayer testified that he began working in Iraq with the intention of doing so indefinitely.

(Linde v. Commissioner, TC Memorandum Decision 2017-180, September 18, 2017.)

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IRS exam staffing falls, resulting in fewer tax audits.

The Treasury Inspector General for Tax Administration has reported the number of auditors employed by the IRS during 2016 reached a 20-year low. Fewer auditors results in fewer audits.

The examination staff level was 8,847 employees for 2016, 23% lower than 11,432 employees for the fiscal year 2012.

(TIGTA Ref. No. 2017-30-072.)

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Investment Advisor's payment for client merger was deductible.

The IRS privately ruled that a payment made by an investment advisor to the shareholders of Target Corp. was a currently deductible business expense, and wasn't required to be capitalized. The payment was a financial inducement commonly used to attract and retain investors, and didn't create a separate and distinct intangible asset.

(IRS Letter Ruling 201736002 June 8, 2017.)

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Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm. Some of the sites where you can share your experiences include yelp.com and siliconvalley.citysearch.com.

We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.

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Farewell to Financial Insider Weekly.

After eight years of production, I am discontinuing producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes are catalogued under "past episodes" at www.financialinsiderweekly.com.

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Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

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Visit our new article!

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Follow me on Social Media!

Want to see new episodes of Financial Insider Weekly as soon as they're posted on Youtube? Want to see Michael Gray's blog posts as soon as they're live? We post them (and more) on social media!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

I'm also on Facebook, LinkedIn, and Google+.

you can also follow me on other social media sites, Facebook, LinkedIn, and Google+.

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If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

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Real estate investors, have you subscribed to Michael Gray, CPA’s Real Estate Tax Letter at no charge or obligation?

For details, visit www.realestatetaxletter.com

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Check out my blog.

I have also started a blog at www.michaelgraycpa.com. Check it out!

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P.S.

My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.

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Michael Gray, CPA
2190 Stokes St. Ste. 102
San Jose, CA 95128
(408) 918-3162
FAX: (408) 998-2766
Hours: 8am - 5pm PDT Monday - Friday

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