Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

3 income tax questions: US/NY resident. 1. My wife is a

university professor, on loan for...
3 income tax questions: US/NY resident. 1. My wife is a university professor, on loan for the year to a federal agency in DC. She is paid by her university but receives a per diem from the federal government for time spent in DC. We bought a condo in DC. How do I account for the per diem and the mortgage interest in our taxes? Is it one or the other? ie either take the deduction for the mortgage interest and claim the per diem as income, or vice versa? It strikes me that doing both may be double counting deductions. 2. I am a W-2 employee but my income is 100% commissions (no salary) and I pay my own expenses. In 2016 I bought part of a colleague's business for cash. The income from that business will be part of W-2 income. How do I account for the expense of buying his business? Is it expensed as a cash outlay or is it an investment? 3. I received stock in a foreign company in 2016 as payment for a consulting assignment that I did 7 years ago. Do I recognize this as 2016 income or do I recognize it only when I sell the shares (as LT gain)? If income in 2016, how do I show it in the forms?
Show More
Show Less
Ask Your Own Tax Question
Answered in 24 minutes by:
3/26/2017
ABC Accounting Group
ABC Accounting Group, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 714
Experience: Business Consultant/Accounting Manager
Verified

Hi. Great Questions.

1. On the per diem, here are the rules:

You can deduct per diem or actual job related expenses, like meals, lodging, air fare, cabs, dry cleaning, etc., if your assignment away from your main workplace is temporary (expected to last, and does last, for one year or less). If your assignment is indefinite (expected to last for more than one year) then your new workplace becomes your tax home and you cannot deduct your job related expenses. However, the mortgage interest and property taxes - you would deduct on your Schedule A.

The amount claimed must be reduced by any amount that is reimbursed by the employer.

If you are an employee, your allowable travel expenses are figured on Form 2106 or Form 2106-EZ. Your allowable unreimbursed expenses are carried from Form 2106 or Form 2106-EZ to Form 1040, Schedule A (PDF), and are subject to a limit based on 2% of adjusted gross income. Refer to Topic 508 for information on the 2% limit. If you do not itemize your deductions, you cannot deduct these expenses.

2. Is the business a sole-proprietorship or an S-Corp?

3. Hi. You recognize the income when you sell, since it is not worth any income, until you sell it.

Ask Your Own Tax Question
Customer reply replied 7 months ago
1. Travel expenses: My wife runs a lab at her university in NY. So does that mean that every time she takes an unreimbursed trip back to NY from DC to supervise her lab, the cost of the trip is an allowable travel expense, even if her tax home is NY?
2. Neither. I am a W-2 employee. I am employed as an investment manager/advisor so my compensation is 100% commission. No salary. I bought a future cash flow from another investment advisor.
3. With all due respect, that makes no sense to me: I received, say $25K in public stock in 2016. I assumed that this would be a business income when received. If I sell the stock in 2 years, for say, $30K, then the difference would be $5K in capital gains in year 2018. How is this interpretation incorrect? Why would the IRS allow me to receive a current income benefit of $25K and defer taxation on it until an indefinite future date?

1. Yes - from her lab to DC. As long it is not from her home - then, it would be considered commuting expenses.

2. Ok - not taxed until start receiving revenues, if applicable, or sell.

3. It appeared that you stated Stock options, which are not vested. Because there was actual stock received for services, this income is subject to the self-employment tax. When you sell it, you have to claim a capital gain.

Ask Your Own Tax Question
Customer reply replied 7 months ago
I'm sorry -- Where did I say stock options and that it was unvested?
Customer reply replied 7 months ago
On Q .2., my question isn't how I account for the revenue. That is handled by the fact that I am a W-2 employee. My question was, how do I handle the expense?

#2 - sounds like a capital investment - at some interval, whether it is monthly, quarterly, semi-annually or annually, you will receive regular cash distributions from your investment. It would be considered a "dividend" when you receive the distributions.

Ask Your Own Tax Question
Customer reply replied 7 months ago
I'll be more specific with actual figures: I am a W-2 employee. So is the other guy. We are both paid entirely on the basis of fees and commissions qwith zero salary. I paid him $60K in 2016 for a piece of business. There are no guarantees whether that business will generate commissions, how much or for how long. However, my pricing was based on the assumption that it will generate approx. $25K per year pre-tax. Whether it actually does that or not, only time will tell. That $25K -- if it actually pays -- will come to me as W-2 commission income.
Customer reply replied 7 months ago
I hope it is clear from my description that the payments cannot be characterized as a dividend because they are paid as W-2 regular income. They are also not distributions.
Commissions on W2 go on line 1 of your 1040
Ask Your Own Tax Question
Customer reply replied 7 months ago
Once again, you appear to be answering a question I didn't ask. I already know what happens to the revenue side. My question was and remains, how do I characterize and report the $60K that I paid for the business???? Sorry. I'm getting frustrated because this is the third time that I am trying to get you to address my actual question.

Sometimes what is written can be interpreted differently by the receiver - sorry for any confusion.

Before we get to the characterization of the amount - I will need to know the type of business (is it a sole proprietorship, an s-corp, or a c-corp?).

Thank you.

Ask Your Own Tax Question
Customer reply replied 7 months ago
None of the above. I am a W-2 employee of a global corporation with offices in 40 countries. My direct employer is the US subsidiary. As I indicated previously I am an investment advisor/portfolio manager. I am an employee but draw no salary.
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,859
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified

Hi. My name's Lane. your previous expert opted out of the question.

...

It looks as if all questions have been answered (tell me if I'm wrong, the convoluted nature of the conversation makes it a little hard to follow - not your fault) except how to treat the $60K you paid someone for what you called "a piece of business."

...

When one purchases a business, that's an investment (It's either treated as a purchase of stock in the business or as purchasing the assets of a business) but, either way, it's not an expense. It's an investment.

...

Just as with the stocks you buy and sell for your customers, (although this is a private transaction) buying the investments is not taxable. The tax comes when it's sold (if sold for a gain) and with any income generated by it.

...

Please let me know if you have more questions

...

Lane

I hold a law degree, concentrating in Tax Law, Estate law & Corporate law, an MBA, with specialization in finance, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice on three continents, since 1986

Ask Your Own Tax Question
Customer reply replied 7 months ago
Thanks Lane. I think this is closer to what I was looking for. Let me draw two (I think) plausible interpretations of the facts and ask you which, if either, is consistent with how IRS would view the situation: 1. Cost of buying a stream of W-2 income could be construed as an unreimbursed employee expense and therefore deducted in the year of the expenditure, or 2. Cost is treated as an investment, in which case it is depreciated over time. Its resale value is nil so at some point it is likely to end, worthless. I assume that means it would generate a capital loss at some point in the future. (Because the income in the meantime comes as W-2 income and is taxed as such, I don't think you can treat it as a an investment that depreciates by the amount of the income it generates each year.) This second treatment strikes me as extraordinarily complicated and as something where it is nearly impossible to accurately fit the tax treatment to the facts.
Customer reply replied 7 months ago
Lane -- To draw my example out further: If I buy an airline ticket for $2K to visit a client and end up with an order than increases my W-2 income by say $500/yr, I believe it is pretty clear that the $2K can be claimed as an unreimbursed employee expense, right? By comparison, if I write a check for $2K to another vendor in return for a $500/yr boost in my W-2 income, why would that $2K expense not be treated the same way?

One cannot buy w-2 income. W-2 income denotes (IS) controlled by the employer...who can (in the absence of an employment contract) and where the IS an employment contract, in most cases BECAUSE of the contract, fire at will.

...

Employment is something that is controlled by the employer. See this: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

...

Said differently, W-2 income is not the seller's to sell.

...

Your last point is spot on. Employee business expenses need only be helpful in generating income. See this: https://www.irs.gov/uac/employee-business-expenses-1

Ask Your Own Tax Question

As I'm sure you'll get, I'd really appreciate your rating me positively, using those stars on your screen. JustAnswer will not credit me for the work unless you do.

...

This is analogous to something that I'm sure you understand; asking for the check.

Ask Your Own Tax Question
Customer reply replied 7 months ago
Hi Lane -- I'm happy to rate you well and you have been very responsive unlike the previous person. However, as a point of accuracy, you are wrong when you say that one cannot buy W-2 income: I am a financial advisor/portfolio manager. 100% of my income is derived from fees paid on assets under management. If my UAM fees increase, my W-2 income increases and conversely. Under my contract my employer has no discretion to set my compensation. Therefore, when I arrange with another FA to transfer AUM from him, to me, I am effectively buying W-2 income. Now, one can quibble with whether this is legitimately classified as a employee/employer relationship and I wish it were not. However, that's beyond the scope of this discussion. For our purposes, the question remains, if I am purchasing W-2 income (via transfer of AUM), is it legitimate to classifiy the cost as unreimbursed employee expense? Yes or no?
Customer reply replied 7 months ago
34;AUM", not UAM -- sorry

No, what you're missing here is the property law issue. You can't buy something that is not owned.

Ask Your Own Tax Question
Customer reply replied 7 months ago
Once again, it is in my contract explicitly, and the other person's that we own the clients and AUM. Indeed, while the company can fire us, that would have virtually no impact on my compensation, since I can take my clients and AUM with me when I leave. How is that not a legal right to the property?

It just isn't. You can ask the client to move with you to a new custodian, B/D, insurance company, but you cannot control the client. You can make any arrangement you like but you're an employee.

...

You have no legal title (as your customers do, for example to the assets in their accounts).

...

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,859
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Lane Your Own Question
Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,859
12,859 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

Lane is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I am a Card holder planning to sell foreign assets (property
Hi....I am a Green Card holder planning to sell foreign assets (property in India)...I am aware that I will have to pay the higher of the 2 tax liabilities (either Indian or American)..I expect my US … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
Form 886-A Deductible Home Mortgage Interest Taxpayer has
Form 886-A Deductible Home Mortgage Interest Taxpayer has $1,000,000 in Grandfathered debt. Line 9 Form 886-A - is this line amount after deducting the garandfathered debt… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,859 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,859 satisfied customers
What does "Distributions Other Than Dividend Distributions"
what does "Distributions Other Than Dividend Distributions" mean on a corporate tax return? Was the amount listed actually giving to the shareholder? … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
My brother in-law is a non US citizen, non-resident. He
Second opinion] My brother in-law is a non US citizen, non-resident. He would like to gift my wife and adult children $100K each. He would like to use money he has invested in the US. Would he have to… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
I had some self employment income where I was paid in
I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expen… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
727 satisfied customers
Two questions on federal tax deductibility: 1. We personally
Two questions on federal tax deductibility: 1. We personally paid legal fees for our manufacturer C Corp. The fees were for assistance in preparing a Research & Development tax credit application. Can… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,859 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I am receiving some income from a foreign government "social
I am receiving some income from a foreign government "social security-type" benefit program. Where should I report this income in my Tax Return? Should I report it as "Other Foreign Financial Assets"?… read more
abci168
abci168
Principal
27 satisfied customers
Does a foreign government type "social security" benefit
Does a foreign government type "social security" benefit plan need to be reported on an FBAR as a Foreign Financial Account?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,466 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
Can house maintenance and property taxes be deducted on form
Hello. Can house maintenance and property taxes be deducted on form 1041 for a house owned by decedent prior to the Executors selling it? … read more
Lane
Lane
JD, CFP, MBA, CRPS
12,859 satisfied customers
Same question on the taxation of interest and dividends (on
Same question on the taxation of interest and dividends (on mutual funds) earned inside a disclaimed portion trust ... disclaimer trust . The original owner of a trust passed and the spouse declined a… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,217 satisfied customers
A taxpayer, Form 1040 Schedule C, is on the cash basis. The
A taxpayer, Form 1040 Schedule C, is on the cash basis. The average revenue for the last 5 years is $5,100,000. There is no inventory. The NAICS is 423600Can he remain on the cash basis?… read more
Lane
Lane
JD, CFP, MBA, CRPS
12,859 satisfied customers
Rules on Rollovers (Return of a non-taxed IRA Distribution).
Rules on Rollovers (Return of a non-taxed IRA Distribution). Over 70-1/2 years old) … read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
My daughter-in-law receives a W-2 form from her employer,
My daughter-in-law receives a W-2 form from her employer, this is her only income. The Medicare income is $53,903 but her NJ State income is $60,053. How is that possible? No investment or interest in… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Can lost profit be used as a deduction for federal income
Can lost profit be used as a deduction for federal income tax? … read more
Rick Martin
Rick Martin
MBA
92 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x