Love, Marriage & Self-Employment Tax
How far are you willing to go to help your spouse when their business isn’t doing so well? One married couple operated separate proprietorships, but the wife’s business was going well while the husband’ was more akin to a sinking ship.
That’s when they decided that it would be wise of them to offset his losses against her income in order to wipe any self-employment tax liabilities.
The IRS wasn’t impressed by their love and devotion and said that his losses could not be used to reduce her self-employment tax bill on her income since he had no hand in running her firm. While they may have discussed details about their businesses over lunch and dinner, that doesn’t mean he had any role in her success. The Tax Court agreed with the IRS, surprising nobody!
Payment for an Affair
Affairs are devastating, but you probably wouldn’t think of using your spouse’s misstep as an excuse to pay fewer taxes.
When a police officer found out his wife was cheating on him with her doctor he was rightfully enraged and threatened the doctor with a lawsuit. In order to settle the matter, he agreed to pay $25,000.
What did the police officer do? Yep, he claimed the $25,000 was a tax-free gift. Since the money was used in order to settle the physician’s misconduct, the Tax Court did not agree with the police officer’s assessment of the matter.