I owe back taxes and late payment penalties on land for 2017 and 2018.
I will pay them in 2019. I will also sell the property in 2019.
When I file my 2019 taxes, can I also take the election under Code 266 for the back
taxes and penalties? This would reduce my capital gains tax.
And does it matter if I sell the property before I pay the back taxes?
The IRC Section 266 election deals with the capitalization of acquisition costs for capital plant and equipment. It does not apply for someone who owes back taxes.
Ms. Willi is a tax attorney, CPA, and Ohio-Certified Specialist in Estate Planning, Trust & Probate Law, with offices in Westerville, Ohio. She serves client families and private business owners throughout Ohio. Ms. Willi responds to Avvo questions as a public service to help educate and provide general guidance to questioners, but her responses are not legal advice and do not create an attorney-client relationship. Her posts are provided for informational purposes only and are not a substitute for advice provided by an attorney or licensed tax professional. Her phone number is 614-890-0500 and her website is www.willilaw.com.
You should work with a tax attorney regarding your tax liabilities and assets to determine if you should attempt to negotiate down your debt before you sell any properties. I think you may be confusing your individual accounting and what gets reported to the IRS. An experienced tax attorney will be able to straighten everything out for you. Best part is that because the debt is federal, you can work with an attorney for anywhere. Choose someone who specializes in tax controversy and resolutions. Best of luck!
This question is too complex to be responded to in this forum. You should contact a tax attorney to review your situation.
Disclaimer: Please note that my response is meant for informational purposes only and does not constitute legal advice in any manner. My response does not form an attorney-client relationship with you and I am not your attorney. All legal claims have a statute of limitations, which may be extremely short, so to protect yourself you should contact an attorney immediately.
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