Tax Facts About The Home Office Deduction

With technology making it easier than ever for people to operate a business out of their house, many taxpayers may be able to take a home office deduction when filing their 2009 federal tax return next year.

Here are five important things the IRS wants you to know about claiming the home office deduction.

1. Generally, in order to claim a business deduction for your home, you must use part of your home exclusively and regularly:

• As your principal place of business, or
• As a place to meet or deal with patients, clients or customers in the normal course of your business, or
• In the case of a separate structure which is not attache d to your home, it must be used in connection with your trade or business

For certain storage use, rental use or daycare-facility use, you are required to use the property regularly but not exclusively.

2. Generally, the amount you can deduct depends on the percentage of your home that you used for business. Your deduction for certain expenses will be limited if your gross income from your business is less than your total business expenses.

3. There are special rules for qualified daycare providers and for persons storing business inventory or product samples.

4. If you are self-employed, use Form 8829, Expenses for Business Use of Your Home, to figure your home office deduction. Report the deduction on line 30 of Schedule C, Form 1040.

5. Different rules apply to claiming the home office deduction if you are an employee. For example, the regular and exclusive business use must be for the convenience of your employer.

For more information see IRS Publication 587, Business Use of Your Home, available on IRS.gov or by calling 800-TAX-FORM (800-829-3676).

IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud

IR-2009-69, July 29, 2009
WASHINGTON — The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.
On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal20tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.
To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.
“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”
Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.
First-Time Homebuyer Credit
The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a pr imary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.
Different rules apply for homes bought in 2008.
Full details and instructions are available on the official IRS Web site, IRS.gov.

Deductibility of Alimony

An issue that is frequently the subject of tax court litigation is the tax treatment of alimony payments. For alimony to be deductible it must truly be alimony - as opposed to child support or property division and, for purposes of I.R.C. § 71 and I.R.C. § 215, the support must terminate on ex-wife’s death.

Recent cases that focus on this issue include:

In Sperling v. Commisioner, T.C. Summary Opinion 2009-141 (June 16, 2009) the Court held that the former spouse’s payments for his ex-wife’s attorney’s fees and condominium fees were not deductible because his liability for the payments did not terminate upon her death. The parties’ settlement agreement failed to provide for termination of husband’s liability for the payments upon wife’s death. The mere fact that husband made the payments before entry of the final judgment and decree of divorce and prior to execution of the settlement agreement was not dispositive. The Court stated that the determining factor is the survival of husband’s liability for making payments after former spouse’s death, not when the payments are actually made.

The Court in Swening v. Commissioner, T.C. Summary Opinion 2009-7 (Jan. 8, 2009) held that ex-husband's unallocated support payments were not deductible because they lacked the essential terms required by §§71 and 215, and the state's divorce statutes did not supply the missing terms.

A recent tax court opinion notes that, in order to take the deduction, the obligated party must have actually paid the alimony. In Jonas v. Commissioner, T.C. Memo 2009-49 (March 5, 2009) the former spouse was ordered to pay support to his ex-wife. Despite not making those payments for two years, he did take deductions for alimony. The court upheld the disallowance of those by the IRS, ruling that ex-husband had not made a "payment" by virtue of the fact that his property, which had been subject to a lien to secure the alimony, was sold and the proceeds placed in a trust securing the alimony.

Finally, a California court addressed the issue arising when one party agrees to pay the other’s tax liability associated with the receipt of alimony payments. Specifically, when a settlement agreement, incorporated into a divorce decree, requires ex-husband to pay half of ex-wife's tax liability attributable to receipt of alimony, does ex-wife have a duty to select the filing status that will result in the lowest tax liability? The California Court of Appeals, holding that it would not imply such a requirement, ruled there was not an implied contractual duty of fair dealing in a settlement agreement incorporated into a final judgment and decree of divorce. Corona v. Corona, (California Court Appeals April 7, 2009)

Please count on Alternative Resolution Methods, Inc. as a resource for your valuation, mediation and litigation support needs. Marty is available for valuations, expert witness testimony and mediation. Sue is available for litigation support, trial preparation, and mediation. Our team is happy to assist you and your clients with forensic accounting. We look forward to working with you.

Alternate dispute resolution can save time and money

The construction industry is one in which disputes are unavoidable, with each side wanting an outcome that satisfies their position and their needs. Until recently the only method of resolving disputes was through litigation.In 1994, an advisory committee to the Ontario Attorney General recommended:

• that the construction industry, and construction lawyers, should become familiar with alternatives to the court process, including mediation and arbitration;

• that alternative methods of dispute resolution be included in construction contracts;

• that construction litigants should be required to participate in private mediation as early in the litigation process as practical.

Since the time, nothing much has changed with too many disputes still being directed to the traditional method of litigation. In Ontario the cost of litigating a construction claim with a value of $100,000 or less will almost always exceed the value of the claim. Often the time required to get the matter to trial and obtain resolution will exceed the time required to complete the project.

Increasingly people, including attorneys, recognize the adversarial approach of the traditional legal system does not effectively, efficiently or satisfactorily resolve some types of disputes. Many judges look favourably on private dispute resolution as it reduces their caseloads and provides a positive public image that the courts are willing to engage in more efficient methods of settling disputes. The courts can only focus on the legal issues brought forward with no consideration given to the particular interests of either party. As a consumer of legal services, it has become important for you to become well-informed as to alternatives to the litigation process. When it is not necessary to set a precedent, there is an alternative to the time consuming and costly method of litigation.

Construction projects are time sensitive and when a dispute arises a contractor could be faced with looking at several months or years of working through the court system before a settlement is reached or a judgment rendered. When time is of the essence, going the ADR route could achieve a settlement in no more than a few weeks.

The most common and expeditious alternative is the participation by all of the parties in a private dispute resolution process. By utilizing a private dispute resolution process, constructors are able to address contract and service provision disputes in a manner that minimizes costs and maintain confidentiality of business information. Utilizing the courts to settle a dispute often places a company at a disadvantage through the public disclosure of internal documents. Confidentiality does not exist in all court courts and documents, including bid / tender information, can and may be subject to public disclosure to anyone requesting access to the documents.

It is important to understand that professional dispute resolvers such as facilitators, mediators, and arbitrators do not advocate for or provide legal advice to the parties. Unlike judges who are trained in the law, but might not have any knowledge of your specific industry, professional dispute resolvers, generally bring some level of industry knowledge, and are trained to help seek resolution through a collaborative, non-adversarial process.

A simple way for you to determine if private dispute resolution should be applied to a particular dispute is to look at the dispute from the worst possible outcome – you are not successful at litigation and you are ordered to pay costs. Then work backwards through various less costly possibilities, including private dispute resolution processes and you will ultimately be able to focus on your interests and how they might best be met.

Dispute resolution is not a process of forcing a settlement, but is rather an undertaking by the parties in finding common interests and ultimately a resolution. It is nothing more complicated than a process of assisted negotiation between the parties in the dispute.

It is worth noting the comments of the renowned jurist, Justice Sandra Day O’Connor who stated: “The courts should be a last resort for the resolution of disputes, not the first.”

Christine Passnick has more than 30 years of experience in the areas of ICI, development, environmental and regulatory issues. She is the founder and principal of CEPASSOC.

US Supreme Court Holds Age Discrimination Claims Can Be Forced Into Arbitration Under Collective Bargaining Agreements

In April 2009 the US Supreme Court upheld a provision of a collective bargaining agreement that “clearly and unmistakably” requires union members to arbitrate claims under the Age Discrimination in Employment Act. In 14 Penn Plaza LLC v Pyett, 186 LRRM 2065 (April 1, 2009), the Supreme Court held that since the parties had freely negotiated the terms of the collective bargaining agreement the arbitration provision must be honored. In cases where the collective bargaining agreement does not specifically require arbitration, filing of a lawsuit is still an option for disgruntled union member employees. This decision opens the door for litigants to compel arbitration of statutory claims under a collective bargaining agreement that unmistakably contains language waiving the right to a judicial forum. The state courts will have to determine what language is “unmistakable and clear” in waiving this right. Further, future negotiations of collective bargaining agreements that do not already contain this language will likely encompass discussions regarding the clear requirements to submit claims to arbitration.

Budget means a rise in litigation, says Hammonds

Apr 28 2009 by Tom Scotney, Birmingham Post

The bleak picture of the financial year ahead painted by the Budget will lead to a dramatic increase in litigation, lawyers from Hammonds have claimed.

The chancellor has said that the next financial year will be the worst in terms of economic performance since the Second World War. And as the financial pressure increases, businesses will want to recoup and prevent losses as quickly as possible, which in turn will lead to an increase in disputes.

But the firm said taking a matter to court is not always the best option for trying to resolve the dispute and continue a business relationship. Not only can litigation damage business relationships, but the outcome is never certain and it detracts key employee time and some of the business’ financial resources away from the focus of the business.

Amanda Beaton, from the dispute resolution department at Hammonds in Birmingham, said: “A skilled lawyer can greatly assist in reducing litigation costs by effectively managing the dispute and in doing this alternative dispute procedures must be considered.”

One of the alternative dispute resolution procedures commonly used by litigators is mediation.

Erica Simpson, also from the firm’s dispute resolution team, said: “This is a highly effective method of resolving disputes. It is a structured negotiation which is assisted by an independent third party and normally takes place over the course of a day. Clients are more comfortable with it than with more formal dispute resolution procedures as they have control over the process and are familiar with negotiation.”

And mediation can help salvage business relationships which would flounder if the dispute proceeded to trial. Ms Beaton said: “As it is a relatively quick process and does not need as much preparation as would be needed if a more formal method of dispute resolution were undertaken, it is cost effective which is in the interests of every client.”

Mediation is also being encouraged by the courts who can penalise parties if they have not considered other alternative dispute resolution methods. Ms Simpson added: “When businesses consider the benefits of mediation, it is easy to see why it is becoming more popular than ever and most businesses want to consider meditation to resolve the dispute.”

Breastfeeding Not A Defense to Joint Physical Custody Canadian Court rules if you can’t wean, get a machine…

JUSTICE:ACCESS DISPUTE
Judge rules mom is milking her parental rights with breastfeeding defence

KIRK MAKIN

April 27, 2009

JUSTICE REPORTER

If you refuse to wean, then get a machine, an Ontario Superior Court judge has told a mother who used her breastfeeding schedule as a technique to deny access to her baby's father.

Jennifer Johne and Carl Cavannah met at a wedding on Aug. 27, 2005. Their brief affair resulted in a baby girl being born on June 16, 2006.

After the child was born, Mr. Cavannah quit his job teaching special-needs children and moved to Collingwood, Ont., to be closer to his daughter. He started making voluntary child-support payments, took parenting courses and pored over baby books.

However, Mr. Cavannah's intensive efforts to become a fully involved parent were thwarted, in part, by a rigorous breast-feeding schedule imposed by Ms. Johne.

"The child is now more than 29 months of age and is still being breastfed," Mr. Justice Alan Ingram wrote in an eight-page ruling.

"Jen believed strongly - through medical advice - in the merits of breastfeeding. However, the breastfeeding has a secondary impact upon Carl in that it is used as an excuse to restrict his access."

Judge Ingram quoted from an e-mail that Ms. Johne, a 35-year-old artist, sent to Mr. Cavannah shortly after the baby was born.

"A baby belongs with its mother, and if you had an understanding of the needs of a fully breast-fed baby and truly had [her] interests at heart, you would not be bringing this subject up again," she stated in the e-mail.

Given her intransigence, Judge Ingram said that Mr. Cavannah, 42, had been remarkably patient.

"Jen has been unwilling to give a timetable as to when the breastfeeding will end," Judge Ingram said. "But now, the time has come for Jen to have greater consideration for the relationship between the child and Carl. If she used a breast pump and provided the milk to Carl, he would be willing to give it to [the child]."

The judge also praised the child's parents. "She has two parents who have made her the centre of their lives, unusual in that this was an unplanned pregnancy between two parents who had a brief relationship and had not committed to having children," he said.

Under the Children's Law Reform Act, a mother and father are equally entitled to custody of a child. When an access dispute breaks out, judges use a list of criteria to determine whether or not to depart from an equal-access regime.

Judge Ingram ruled that Ms. Johne and Mr. Cavannah's child would be best served by a 50/50 access arrangement.

"As soon as Jen realizes that she is one of two equal parents and the parties find a form of communication, they should be able to get on with their common goal of facilitating and encouraging [the child] to reach her full potential," he said.

Phil Epstein, a family lawyer expert, described the ruling as "one which will be of comfort to involved fathers who wish to be equal parents."

Mr. Cavannah declined to discuss the case, and Ms. Johne could not be reached for comment.

However, Ms. Johne's lawyer, Carol Allen, noted in an interview that it is very difficult to argue in favour of a continuation of breast-feeding after a child is two years old since pumping is a viable alternative.

Ms. Allen said that her client may soon be returning to court because she is dissatisfied with Judge Ingram's solution to the access issue.

"The schedule allowed the father to work four days a week, and then have the child from Thursday to Sunday or Monday night," Ms. Allen said. "That leaves the mom with no weekend time. It is probably going to have to be revisited. It's unfortunate."

Ms. Johne lives in a small town about 20 minutes from Collingwood, where she helps her mother operate a small daycare.