My responses in bold.
To:
Sent: Wednesday, May 28, 2008 12:41 PM
Subject: [cdcbaa] RE: 707(b) income questions
> Several 707(b) income questions for the group regarding a self-employed client:
>
> 1) Are business expense reimbursements considered income under 707(b)?
If the client is self-employed, who is reimbursing him/her? In any event, if it is truly an expense reimbursement it is NOT income. One of two things will be true: Either you include the reimbursement as part of the gross income then subtract out the actual corresponding expenses, or you don't include it at all (assuming that the expenses are exactly reimbursed in the amount expended). Either way, the net result is the same for 707(b) but MAY make a difference on the means test as to whether the debtor is above median or below median. I asked this question at the meeting we had with the OUST staff and didn't get a straight answer from them on it. I believe they deferred to their default position which is that it's ALL income to be included, but netted out in a self-employment case above the line (in a Chapter 7 anyway--there's a recent opinion about the Chapter 13 Form 22C requiring the expenses to be subtracted below the line). The bigger question is in a regular wage-earner case that receives reimbursements since there is no place "below the line" to subtract it (except in the "other" section).
> 2) Is repayment of a loan from the debtor's company to the debtor considered income under 707(b)?
I don't think so, but I'll abstain on this one.
> 3) Is money received from cashing in an IRA account considered income under 707(b)?
I've never fully understood the arguments on this, but I believe that for a 401k and IRA it would be, and for a ROTH IRA it would not be (or maybe I got that backwards). Has to do with whether it was ever income received in the first instance (notwithstanding taxability).
______________________
Mark J. Markus
Law Office of Mark J. Markus
11684 Ventura Blvd. PMB #403
Studio City, CA 91604-2652
(818)509-1173 (818)509-1460 (fax)
Toll Free: 1-866-576-6275
web:
http://www.bklaw.com/
This Firm is a Qualified Federal Debt Relief Agency
___________
NOTICE: This Electronic Message contains information from the law office of Mark J. Markus that may be privileged. The information is intended for the use of the addressee only. If you are not the addressee, note that any disclosure, copy, distribution or use of the contents of this message is prohibited.
IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communicat>
My responses in bold.
----- Original Message -----
href"mailto:
jim@wsrlaw.net">
jim@wsrlaw.net>
To: <
cdcbaa@yahoogroups.com>
Sent: Wednesday, May 28, 2008 12:41 PM
Subject: [cdcbaa] RE: 707(b) income
questions
> Several 707(b) income questions for the group
regarding a self-employed client:> > 1) Are business expensereimbursements considered income under 707(b)?
If the client is self-employed, who is reimbursing him/her? In any event,
if it is truly an expense reimbursement it is NOT income. One of twothings will be true: Either you include the reimbursement as part of the
gross income then subtract out the actual corresponding expenses, or you don't
include it at all (assuming that the expenses are exactly reimbursed in theamount expended). Either way, the net result is the same for 707(b) but
MAY make a difference on the means test as to whether the debtor is above median
or below median. I asked this question at the meeting we had with the OUST
staff and didn't get a straight answer from them on it. I believe they
deferred to their default position which is that it's ALL income to be included,
but netted out in a self-employment case above the line (in a Chapter
7 anyway--there's a recent opinion about the Chapter 13 Form 22C requiring the
expenses to be subtracted below the line). The bigger question is in a
regular wage-earner case that receives reimbursements since there is no
place "below the line" to subtract it (except in the "other"
section).
> 2) Is repayment of a loan from the
debtor's company to the debtor considered income under 707(b)?
I don't think so, but I'll abstain on this
one.
> 3) Is money received from cashing in an IRA account considered
income under 707(b)?
I've never
fully understood the arguments on this, but I believe that for a 401k and IRA it
would be, and for a ROTH IRA it would not be (or maybe I got that
backwards). Has to do with whether it was ever income received in thefirst instance (notwithstanding taxability).
______________________Mark J. MarkusLaw
Office of Mark J. Markus11684 Ventura Blvd. PMB #403Studio City, CA91604-2652(818)509-1173 (818)509-1460 (fax)Toll Free:
1-866-576-6275web:
http://www.bklaw.com/This Firm is aQualified Federal Debt Relief Agency___________NOTICE: This Electronic
Message contains information from the law office of Mark J. Markus that may be
privileged. The information is intended for the use of the addresseeonly. If you are not the addressee, note that any disclosure, copy,
distribution or use of the contents of this message is prohibited.IRS
CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the IRS,
we inform you that any U.S. tax advice contained in this communication (or in
any attachment) is not intended or written to be used, and cannot be used, for
the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any transaction or
matter addressed in this communicat>
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