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Generated by the Signal deterministic engine. Signal is self-preparation software; the taxpayer is the filer.
Sample — hardcoded demo data
Taxpayer: [Sample]Tax Year: 2025Filing Status: Single
Purpose of This Report
This report documents the tax positions taken or recommended on the taxpayer's federal income tax return. Each position is supported by specific Internal Revenue Code sections, Treasury Regulations, Revenue Rulings, and other authoritative guidance. This documentation is intended to provide substantial authority for each position in the event of an IRS examination pursuant to IRC §6662.
All positions documented herein meet the substantial authority standard under Treas. Reg. §1.6662-4(d) or, where applicable, the reasonable basis standard under Treas. Reg. §1.6662-3(b)(3) with adequate disclosure.
Summary of Amended Return Positions
$2,560
Total Tax Benefit
4
Documented Positions
4/4
Positions meeting substantial-authority standard
Detailed Position Documentation
Position 1
Home Office Deduction — Actual Expense Method
IRC §280A(c)(1); Treas. Reg. §1.280A-2
+$720
Substantial authority
Methodology & Calculation
Taxpayer maintained a dedicated 200 sq ft home office used regularly and exclusively for self-employment activities. Actual expenses allocated based on square footage percentage (200/1,800 = 11.1%): mortgage interest ($2,400 allocated), utilities ($840 allocated), insurance ($360 allocated), depreciation ($1,200 allocated). Total deductible: $4,800. Depreciation recapture accounted for under §280A(e).
Legal Basis & Authority
IRC §280A(c)(1) permits deduction for business use of home when the space is used regularly and exclusively as the taxpayer's principal place of business. Soliman, 506 U.S. 168 (1993) clarified the principal place of business test. The dedicated room satisfies both the regular-and-exclusive use test and serves as the principal place of business for the taxpayer's Schedule C activity.
Supporting Documentation
📄Floor plan with measured office dimensions (200 sq ft of 1,800 sq ft total)
📄Mortgage interest statement (Form 1098)
📄Utility bills for the tax year
📄Homeowner insurance declarations page
📄Photographs of dedicated office space
Position 2
State and Local Tax — Pass-Through Entity Election
IRC §164(a); IRS Notice 2020-75
+$480
Substantial authority
Methodology & Calculation
Taxpayer is a member of an S corporation that made a valid state-level pass-through entity (PTE) tax election. The PTE tax of $12,400 paid at the entity level is deductible by the entity as an ordinary business expense under §164(a), bypassing the $10,000 SALT cap imposed by §164(b)(6). The taxpayer receives a corresponding state tax credit to avoid double taxation.
Legal Basis & Authority
IRS Notice 2020-75 announced the IRS's intention to propose regulations confirming that specified state income tax payments made by pass-through entities are deductible by the entity. This deduction is not subject to the §164(b)(6) $10,000 SALT limitation because it is an entity-level, not individual-level, deduction. Multiple states have enacted PTE election statutes consistent with this guidance.
Supporting Documentation
📄S corporation K-1 (Schedule K-1, Form 1120-S)
📄State PTE election form and confirmation
📄State PTE tax payment confirmation
📄State individual income tax credit documentation
📄S corporation operating agreement
Position 3
Lifetime Learning Credit for Professional Development
IRC §25A(c); Treas. Reg. §1.25A-4
+$800
Substantial authority
Methodology & Calculation
Taxpayer incurred $4,200 in qualifying tuition and fees for professional development courses at an eligible educational institution. Credit calculated at 20% of $4,200 = $840, reduced by phase-out amount of $40 based on MAGI. Net credit: $800. Nonrefundable credit applied against tax liability.
Legal Basis & Authority
IRC §25A(c) provides a credit equal to 20% of up to $10,000 of qualifying tuition and related expenses. Per Treas. Reg. §1.25A-4(c)(1), qualifying expenses include courses taken to acquire or improve job skills, even if the courses are not part of a degree program. The educational institution is an eligible institution under §25A(f)(2) (accredited and eligible for Title IV federal financial aid).
Supporting Documentation
📄Form 1098-T from educational institution
📄Tuition payment receipts totaling $4,200
📄Course descriptions and syllabi demonstrating professional relevance
📄Employment records showing connection to current profession
Position 4
Tax Loss Harvesting — Capital Loss Offset
IRC §1211; IRC §1091; 26 CFR §1.1091-1
+$560
Substantial authority
Methodology & Calculation
Taxpayer held three securities positions with aggregate unrealized losses of $2,800 that could be harvested to offset $3,200 in realized short-term capital gains. After harvesting, net short-term gain reduces to $400. No wash sales occurred — taxpayer did not purchase substantially identical securities within 30 days before or after the sales. Net tax savings at 24% ordinary income rate (short-term gains) minus avoided long-term rate: $560.
Legal Basis & Authority
IRC §1211(b) allows individual taxpayers to deduct capital losses against capital gains, plus up to $3,000 against ordinary income. IRC §1091 disallows loss deduction if substantially identical securities are purchased within a 61-day window. 26 CFR §1.1091-1 defines substantially identical. Because no replacement purchases occurred, all harvested losses are fully deductible.
Supporting Documentation
📄Brokerage statements showing positions with unrealized losses
📄Trade confirmations for loss-harvesting sales
📄30-day transaction log showing no wash sale triggers
📄Form 1099-B showing realized gains to be offset
📄Cost basis documentation for each lot
Penalty Protection Statement
Each position documented in this report meets the substantial authority standard under IRC §6662(d)(2)(B) and Treas. Reg. §1.6662-4(d). Substantial authority exists when the weight of authorities supporting the treatment is substantial in relation to the weight of authorities supporting contrary treatment.
For any position that does not meet the substantial authority standard, the position is disclosed on Form 8275 or Form 8275-R, as applicable, and meets the reasonable basis standard under Treas. Reg. §1.6662-3(b)(3), thereby providing protection from the accuracy-related penalty under IRC §6662(a).
Authorities Referenced
✓Internal Revenue Code (IRC)
✓Treasury Regulations (26 CFR)
✓Revenue Rulings and Revenue Procedures
✓IRS Notices and Announcements
✓U.S. Supreme Court Decisions (e.g., Soliman, Mayo Foundation)
✓Tax Court Memoranda and Opinions
How Signal's output gets reviewed
Signal is self-preparation software. The bands and citations above are deterministic scores against the authority stack — not legal advice and not a preparer opinion. Positions scored yellow, red, or black are surfaced so the filer can decide whether to engage an independent CPA or tax attorney for a second look before filing. Signal does not prepare returns for compensation, does not e-file, and does not choose filing positions on the filer's behalf. See terms.