Is this the guy you want advising you?

If you’re disappointed with your accountant, the two winners
below are probably looking for new clients.

Is this the guy you
want advising you?

This CPA reported $21,553 profits from accounting
services,  and $83,451 from
gambling activity, all of which was offset by gambling losses. Instead of
settling with the IRS he took the case to court to maximize his public
embarrassment. He lost because he didn’t demonstrate that the primary purpose
of his gambling activities was to earn a profit. Ah shucks. That’s because he only
spent 17 hours/week gambling.  You can
be considered in the trade or business of gambling if you gamble with “continuity
and regularity” and your “primary purpose” is to earn a profit. So if this guy
won, his clients would have really been inspired. A sporadic hobby doesn’t
qualify. Since our CPA was only a sporadic gambler the Court held that his
gambling wasn’t a business. The result, his gambling losses were only
deductible as an itemized deduction.  Mohammadpour,
TC. Summary Opinion 2007-163

Why waste the client’s money?
For
some transactions it’s advisable to seek advance IRS approval (private letter
ruling). In this case, it was just embarrassing. PLR 200729004. The client subdivided
a property into two parts, then transferred one to a qualified personal
residence trust (QPRT).  The client
restricted the second part with a conservation easement.  The tax adviser submitted three
questions to the IRS: (1) was the first part a “personal residence”,
(2) did the trust qualify as a QPRT, and (3) was the interest retained by the client
a “qualified interest”. The IRS issued the requested ruling, and took
the client’s payment for the request, but didn’t answer the last two questions,
referring the adviser to Rev. Proc. 2003-42, 2003-1 CB 993 which provides sample
trust language for QPRTs. The IRS said that if the client follows the cookbook
provided they “can be assured” that the IRS will recognize the trust
as a QPRT, provided that the trust is operated in accordance with the terms of
the trust, and is a valid trust under local law. In other words, tax adviser,
read what we publish before asking the same question.