Payment for Injured Mailman

Technical topics regarding tax preparation.
#21
Nilodop  
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Reckless spelling wreaks havoc sometimes.

That PLR is pretty interesting.
 

#22
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Re: the Dolan case, we have discussed that one before, actually. Nilodop has a memory like an elephant.

viewtopic.php?f=8&t=5841&p=58446&hilit=dolan#p58446

Reckless spelling wreaks havoc sometimes.


In this case, though, the spelling was wreckless.

That PLR is pretty interesting.


Indeed. Voluntary restitution, kind of. But it was part of a plea deal, and accordingly, created some finality to the matter. In other words, the potential obligation was acknowledged, rendering it a real obligation, then it was paid, and that’s that.

In my client’s case, though, the more I think about it, there’s no finality to it. The mailman could still sue, I would think. Does that raise any prepayment issues?

In the PLR, the criminal’s payment wasn’t really out of a moral obligation. It was a condition of the plea agreement. In my client’s case, seems a moral obligation was involved, based on an implicit admission of fault. That moral obligation led to a cash payment. But like I said in the OP:

but he proceeded to walk underneath him to deliver the mail. Client says that the mailman even made an effort to catch him.


I guess my point is this: Is one’s satisfaction of a moral obligation, with money, enough to create a tax law liability, such that the payment of it gives rise to a tax deduction – even if the payor might not even be at fault?

What comes to mind are these fake slip-and-falls at grocery stores. These are often paid by the store just to dispatch with the matter. In these cases, there isn’t even a moral obligation, but I would think those payments are nonetheless deductible.
 

#23
keiser  
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You might enjoy the discussion of profit-making activities in this 2019 unpublished 5th Cir. opinion: https://casetext.com/case/cavanaugh-v-c ... al-revenue
 

#24
Jake  
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Is anyone ever going to ask if the windows you were cleaning was to your home office. I would have turned that over to my Homeowner's insurance, and anything over the basic coverage would have been covered by my $2 mil Umbrella Insurance. As for "Farmers Insurance", I shake my head when I read a case where they have attempted to dodge paying a claim.
 

#25
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Keiser, you’re on a roll.

It’s funny you bring that case up. It crossed my mind in trying to evaluate my client’s situation. I do think a corporate executive and his girlfriend (which is the one who died), and other corporate employees, who are on vacation are acting in their personal capacities, not on behalf of the corporation (and not with respect to any business matter of the corporation). I think the window washer’s situation is distinguishable.

But I wonder in that Jani-King case…what if the corporate executive had instead been entertaining, say, a potential franchisee. Perhaps the result would have been different?
 

#26
keiser  
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Unless the TP's home office is used to run a window washing service, I think window washing is not a profit seeking activity. :) Rather, it is an activity of a homeowner.
Hence, the claim should have been tendered to the homeowner's insurance carrier.
Why was the claim not tendered?
 

#27
Nilodop  
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Keiser, you’re on a roll. took me two readings to get it. Belongs in the running for an ongoing contest TPT should establish for best puns. It could be the Spell Czech Memorial Pun Contest.

As to your client, let's bring this issue to a conclusion by weighing the client vs the mailman the tax issues and reaching an answer we can sanction.
 

#28
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Unless the TP's home office is used to run a window washing service, I think window washing is not a profit seeking activity. Rather, it is an activity of a homeowner.


The window in question was in the OP’s home office, as stated in the OP.

Why was the claim not tendered?


I spoke of the moral obligation above. There is a chance the insurance company might dig into this and take the position that it was the mailman’s fault, given that the mailman did not alter his approach to the home and even tried to catch the sole-proprietor when he fell.
 

#29
Nilodop  
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There is a chance the insurance company might dig into this and take the position that it was the mailman’s fault, given that the mailman did not alter his approach to the home and even tried to catch the sole-proprietor when he fell.. So you are saying he weighed the chance of reimbursement and it fell short of being reasonable?
 

#30
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Jeff-Ohio wrote:
Unless the TP's home office is used to run a window washing service, I think window washing is not a profit seeking activity. Rather, it is an activity of a homeowner.


The window in question was in the OP’s home office, as stated in the OP.

Why was the claim not tendered?

l.


I can see the "origin of claim test" applied here if the window was solely used for his office.

So what if a contractor falls off a roof he his working on and lands on a mailman. If contractor was sued and personally liable would it be a business deduction? If he paid the medical bill without going to court would that still be deductible?

Go a step further, what if contractor was cleaning the eaves on his shop used exclusively for business when he fell on mailman, why would that change the outcome? He was engaged in an ordinary and necessary maintenance procedure. How would this scenario be different from a tax point of view from yours?
 

#31
keiser  
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It was normal maintenance for a homeowner.
Are tenants in second floor offices "ordinarily" required to clean the outside of windows?
Payment of a claim based on a "moral obligation" likely would not be "necessary" under the tax code.
I would not assure the TP that the deduction is "ordinary and necessary" if audited.
 

#32
sjrcpa  
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keiser wrote:Are tenants in second floor offices "ordinarily" required to clean the outside of windows?

Probably not.
But building owners should do it as part of routine cleaning and maintenance. They can do it do it themselves or hire window cleaners.
 

#33
keiser  
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Of course.
But the building owner in this case is the homeowner, not the business operated in a home office using 10% of his house.
 

#34
Nilodop  
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Payment of a claim based on a "moral obligation" likely would not be "necessary" under the tax code.. Are there authorities on this point? Generally a business management decision isn't challenged in "not ordinary and necessary" grounds.

The Supremes in Duberstein are cited frequently in cases deciding a gift-or-compensation issue, where they said
U.S. Supreme Court


The course of decision here makes it plain that the statute does not use the term "gift" in the common law sense, but in a more colloquial sense. This Court has indicated that a voluntarily executed transfer of his property by one to another, without any consideration or compensation therefor, though a common law gift, is not necessarily a "gift" within the meaning of the statute. For the Court has shown that the mere absence of a legal or moral obligation to make such a payment does not establish that it is a gift. Old Colony Trust Co. v. Commissioner, 279 U. S. 716, 279 U. S. 730. And, importantly, if the payment proceeds primarily from "the constraining force of any moral or legal duty," or from "the incentive of anticipated benefit" of an economic nature, Bogardus v. Commissioner, 302 U. S. 34, 302 U. S. 41, it is not a gift. And, conversely, "[w]here the payment is in return for services rendered, it is irrelevant that the donor derives no economic benefit from it." Robertson v. United States, 343 U. S. 711, 343 U. S. 714. [Footnote 7] A gift in the statutory sense, on the other hand, proceeds from a "detached and disinterested generosity," Commissioner v. LoBue, 351 U. S. 243, 351 U. S. 246; "out of affection, respect, admiration, charity or like impulses." Robertson v. United States, supra, at 343 U. S. 714. And, in this regard, the most critical consideration, as the Court was agreed in the leading case here, is the transferor's "intention."
Last edited by Nilodop on 3-May-2021 5:52pm, edited 1 time in total.
 

#35
keiser  
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I was being slightly sarcastic with "moral obligation" which might equate to a charitable contribution.
Settlement of a legal claim by the mail carrier is not a "moral obligation" and need only be "ordinary and necessary."
 

#36
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But the building owner in this case is the homeowner, not the business operated in a home office using 10% of his house.


Yeah, well, the “business operated in a home office” is owned by the homeowner, but in the homeowner’s capacity as a sole-proprietor. The home office space is clearly defined, rendering it business property.

Go a step further, what if contractor was cleaning the eaves on his shop used exclusively for business when he fell on mailman, why would that change the outcome? He was engaged in an ordinary and necessary maintenance procedure. How would this scenario be different from a tax point of view from yours?


It wouldn’t, as far as I’m concerned. But Keiser is cutting off the business connection because we are dealing with a residence.
 

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