Progressive Farmer: Firefighters don't owe tax on gambling fund-raiser

Money and Taxes

Recently the U.S. Tax Court found that the income one volunteer fire department received from a gambling device in a tavern was not taxable. The tax-exempt department had placed what are known as tip jars in local taverns, then split the income with the taverns.

The IRS had initially ruled that the income was taxable because the devices were unrelated to the fire department's tax-exempt purpose.

The U.S. Tax Court disagreed, finding that the activity didn't reach the level of operating a trade or business that was unrelated to their original purpose. The citation for this case is Vigilant Hose Co. of Emmitsburg, DC MD, 2001-2 USTC 50,458.

CHILD CARE

Gift Tax Exclusion To Rise

Beginning in 2002 the annual gift tax exclusion will go up to $11,000 annually from $10,000. The change is a result of the 1997 tax law, which finally indexed the exclusion to inflation but could only go up in $1,000 increments. Until this year, inflation hasn't been enough to move that $10,000 figure.

The change means that any individual can give up to $11,000 annually to anyone else without having to pay a gift tax-or using up any of their now $1 million lifetime gift tax exemption.

COURT CASE

Lease Payments With Farmers In Bankruptcy

In a recent case, a federal appeals court ruled that a bankruptcy court needed to place more value on the rent that several farmers owed to their two landlords.

The case involved several farmers who filed for Chapter 7 bankruptcy (liquidation) ofter they had already leased land for the season from two landlords. The landlords later disagreed with the bankruptcy court, which figured the rent owed the landlords based on the full year's rental rates divided by 365 days. The federal appeals court disagreed with that decision, finding that the landowners were owed more money because the days during the growing season are much more valuable than those in the nongrowing season.

The synopsis of this case comes courtesy of the Farmers Legal Action Group, and the citation for the case is In re Wedemeier, 237 F.3d 938 (8th Cir. 2001).

PROBLEM SOLVER

New Guide For IRS Help

There is a new booklet from the IRS that is supposed to help you use the Taxpayer Advocate's office. That office was formed to help people resolve problems with the agency.

The taxpayer advocate is to be used to solve administrative problems, such as lost refunds or miscredited payments, that haven't been solved through typical channels. You also can seek the office's help if an IRS lien or levy would cause serious hardship as a result of IRS action.

You can get a free copy of "The Taxpayer Advocate Service of the IRS: How to Get Help with Unresolved Tax Problems" by calling 1-800829-3676 and asking for Publication 1546 or by visiting the web site at www.irs.gov.