Reference: IRS Code Secs 61(a) and 102(a)

At this point, there isn’t a lot of specific regulation written on the topic of crowdfunding. IRS guidance is based on intent and use of the funds as well as common reporting from the funding sites.

Business: Funds raised for business purposes, such as to provide “seed capital” for emerging businesses are often reported by the funding sites on the IRS Form 1099-K as receipt of funds by party for business purposes (regardless of whether personal property changed hands or not). In such situations, the amounts raised should be reported as taxable business income under IRC Sec 61(a).

Individual/medical/personal funding: Sites are often set up to raise money for individual life-events such as medical needs, burial needs, or other specialized individual (non-business) events. Typically such are treated as gifts from one party to another and aren’t taxable to the recipient under IRC Sec 102(a). Note that if a gift is over $15,000 (2019 limit) from a single individual , then the grantor (not the recipient) will be required to file a gift tax return.

Ref: IRS Publication 463

It’s “cruise season.” A good time to reflect on the IRS rules for deducting attendance at training / seminar on a cruise ship. If the primary reason for the cruise is the seminar/training, the a deduction is allowed up to $2,000 per year for the attendee (not their family/companion) only IF all of the following are true and well documented:

1. The convention, seminar or meeting is directly related to your trade or business.
2. The ship is registered in the United States
3. All of the cruise ship’s ports of call are in the United States or a possession of the United States
4. You attach to the return a signed /written statement with detail including a log of the number of hours each day attending the meetings and a program of the business activities.
5. You attach to your return a signed written statement signed by an officer of the organization sponsoring the conference that includes the daily schedules and the number of hours you actually attended (from their attendance rolls).

This is a VERY DIFFICULT deduction to qualify for and one which will receive scrutiny or the taxing authorities.

Reference: Rev. Proc. 2019-08 and IRC Sec 168(e)(6)

Limits on Section 179 election to immediately expense property placed in service after 2017 have been greatly expanded under the Tax Cuts and Jobs Act. Rev. Proc 2019-08 further clarifies that the following asset types qualify as Qualified Improvement Property (QIP) and can use Sec 179 within its limits:

1. Any improvement to an interior portion of a nonresidential real property;
2. Roofs
3. Heating, ventilation and air-conditioning property
4. Fire protection and alarm systems
5. Security systems.

The following are NOT allowed:

1. The enlargement of the building;
2. Any elevator or escalator
3. The internal structural framework of the building.