Displaying items by tag: income

Personally earned income can’t simply be reported on a corporation, partnership, etc. tax return, or vice versa. Compensation for services (whether wages, salaries, commissions, profit-sharing, pension, etc.) is taxable to the person who earns it. You can’t escape taxation by arrangements and contracts to share earnings
or to have them paid to someone else.

In a recent case, the taxpayer maintained that commissions were his S corporation’s income–not his sole proprietor income. The Court found that the taxpayer failed to carry his burden of establishing that he had a valid business arrangement with the S corporation under which he was required to, and did, pay the commissions to the corporation.

If a debt you owe is forgiven by the creditor, or you settle the debt for less than the
full amount, the canceled portion is taxable income to you. However, there are exceptions and exclusions. Canceled Debt that Qualifies for Exception to Resulting in Gross Income:
● Amounts specifically excluded from
income by law such as gifts or bequests
● Cancellation of certain qualified student
loans
● Canceled debt that if paid by a cash
basis taxpayer is otherwise deductible
● A qualified purchase price reduction
given by a seller
Canceled Debt that Qualifies for Exclusion
from Gross Income:
● Cancellation of qualified principal
residence indebtedness
● Debt canceled in a Title 11 bankruptcy
case (Chapters 7, 11, 12, and
13)
● Debt canceled due to insolvency
● Cancellation of qualified farm indebtedness
● Cancellation of qualified real property
business indebtedness (other
than C corporations)

Banks, other financial institutions, and certain government agencies generally must
report debt discharges (partial or complete) on Form 1099-C, Cancellation of Debt, if the discharge is $600 or more.