IRS Issues Relief Provisions on Repair Regulations/Form 3115
I will post more details shortly, but the IRS has issued revisions to the applicability of the tangible property/repair rules for "small businesses" in Revenue Procedure 2015-20.
Read MoreFunds Deposited to Taxpayer's Account Were Held in Trust for Her Boss, Amounts Generally Not Taxable to Her
The credibility of a taxpayer when testifying can often make or break a case at the Tax Court. That is especially true when the taxpayer is claiming certain defenses—such as the claim that funds the taxpayer deposited into her bank account were not truly her income, but that of her employer.
In the case of Na v. Commissioner, TC Memo 2015-21 the taxpayer’s testimony was found to be credible.
Read MoreFailure to Collect Rent From Daughters Rendered Their Use Personal to Mother Despite Fact Stated Rent was Fair Value
Merely charging your daughter a monthly rent that is at or above fair rental isn’t enough if you actually don’t do much to attempt to collect the rent. This lesson was learned by the taxpayer in Savello v. Commissioner, TC Memo 2015-24.
Read MoreIRS to Disallow All Pending Claims for Payroll Tax Refunds on Severance Pay, Implementing Supreme Court Decision in Quality Stores
The U.S. Supreme Court resolved a split among lower courts regarding whether severance payments under a severance plan are subject to FICA, overruling the holding of the Sixth Circuit Court of Appeals in the case of United States v. Quality Stores, 113 AFTR 2d 2014-1326 reversing CA6, 110 AFTR 2d 2012-5827. The IRS, nearly eleven months later, officially announced [Announcement 2015-8] that based on that decision the agency was going to deny all pending claims for refund.
Read MorePreparer's Use of Forms 1099C as "Collection Technique" Discussed by Office of Professional Responsibility
The IRS Office of Professional Responsibility has issued Alerts from the Office Professional Responsibility Issue 2015-02 that discusses the implications of a preparing using Form 1099C as a “collection tool” to encourage clients to pay the balances due to the professional.
The alert specifically avoids giving a direct answer on whether the proposed conduct violates federal law and/or provisions of Circular 230, but certainly raises areas of concern.
Read MoreSocial Security Beneficiaries May Obtain Copy of Form 1099SSA Online
Clients are known to misplace tax related documents which can complicate the process of getting their tax returns completed. However, over time more and more organizations have established processes to let taxpayers download additional copies of tax documents online.
Now the Social Security Administration has joined that group. In a News Release the Social Security Administration announced that social security beneficiaries will be able to obtain a copy of their Form 1099-SSA from the agency’s website.
Read MoreIRS Announces Depreciation and Lease Inclusion Amounts on Vehicles for 2015
In Revenue Procedure 2015-19 the IRS released the limits on depreciation for vehicles subject to the limitations of §280F(d)(7)(B)(i) for items placed in service in 2015, as well as the revised limits for 2014 for autos qualifying for bonus depreciation under IRC §168(k). The latter revisions were needed since Congress finally extended the bonus depreciation rules through the end of 2014 in the Tax Increase Prevention Act of 2014, signed into law on December 19, 2014.
Read MoreDaughter Not in Valid Texas Common Law Marriage, Mom Allowed to Claim as Dependent
The case of Saenz v. Commissioner, TC Summary Opinion 2015-6, turned on whether Leticia Saenz’s daughter, who filed a joint return for 2011, was actually married to the person she filed a joint return with.
Read MoreReal Estate Received Due to Business of Acquiring Tax Liens Was Inventory, Gains on Sale Not Capital
In the case of SI Boo v. Commissioner, TC Memo 2015-19 the proper tax treatment of real property sales from property obtained by the taxpayer due to their business of acquiring Illinois tax liens was in question.
Read MoreCapped Cost-Plus Contracts Amounted to Funded Research, Research Credit Denied
The Eleventh Circuit Court of Appeals took a look at what constitutes research funded by a third party in the case of Geosyntec Consultants, Inc. v. United States, CA 11, 115 AFTR 2d ¶ 2015-384.
Read MoreIRS Announces It Will Not Follow Tax Court's Decision on Partners Eligibility for Cancellation of Debt Income Relief in 2004 Cases
In Action on Decision 2015-01 the IRS announced that it will not follow the Tax Court’s decision in four cases that were decided on the same day in 2004 that involved the interaction of the bankruptcy code and taxation of partners on cancellation of debt income.
Read MoreLLC Issusance of Preferred Interests to IRA and Issuance of Other Classes of Interest Terminated S Election, IRS Grants Retroactive Relief in PLR
When a LLC “checks the box” by filing a Form 2553 to elect to be treated as a corporation and simultaneously elect S status, it must live by all the S corporation restrictions. That includes the restriction on only having one class of “stock” issued by the entity during the time it wishes to remain an S corporation.
In reality, there is no such federal tax entity as an “LLC”—the structure was originally designed when the first statute was adopted by Wyoming decades ago to be an entity for which there was no federal tax treatment specifically mandated. To this day the IRC does not have provisions outlining the tax treatment of “LLCs” but rather, under the check the box regulations found at Reg. §301.7701‑2 the entity is treated for federal tax purposes as one of the entities that the IRC knows about.
Read MoreBuilding Placed in Service When Substantially Complete and Available for Use Even Though Not Open
The concept of “placed in service” for purposes of beginning to deduct depreciation is often a tricky one to deal with in real life, and the date of placing an item in service may not be as simple as some might believe. Certainly, in the case of Stine, LLC v. United States, 115 AFTR 2d ¶ 2015-381, DC LA, the IRS’s view of a “bright line” test based on a when a building was open for business was rejected by the Court.
Read MoreTIGTA Warns of Phone Scams Related to IRS
In press release TIGTA 2015-01 J. Russell George, Treasury Inspector General for Taxpayer Administration (TIGTA) warned of the threat of phone scams where the individual claims to represent the Internal Revenue Service in order to defraud individuals.
Phone scams have become the new favorite tool for those running scams since some individuals may mistakenly believe they are safe from scams and financial risks if they avoid online interactions. The criminal generally uses information obtained about the mark from various sources to convince them that they represent the IRS and, often, that unless the mark does something immediately (like give a credit card number, buy a prepaid debit card to send to the government, etc.) some dire result will occur.
Read MoreRelief from Late Payment and Underpayment of Estimated Tax Penalties Offered for Repayment of Advance Premium Credit for 2014
The IRS announced relief for certain taxpayers who end up having to repay amounts related to advance payment of the premium tax credit in Notice 2015-9. The IRS announced that the relief will apply to liabilities under IRC §6651(a)(2) for late payment of a balance due for taxpayers unable to pay the balance due and under IRC §6654(a) for underpayment of estimated taxes. The relief will only apply to 2014 taxes.
Read MoreLate Rollover Allowed When Custodian Transferred Funds to State Agency Without Taxpayer's Knowledge
What happens if your IRA runs afoul of (or your custodian believes it runs afoul of) your state’s unclaimed property law and the account is forwarded to the state? Well, technically your funds are no longer held by an IRA custodian—a problem, as that creates a deemed distribution of the funds in the IRA.
This problem appears to be what confronted the taxpayer in PLR 201504021. The facts indicate that the IRA custodian, without the taxpayer’s knowledge, transferred the taxpayer’s account to “Division M of State N.” While the exact details are, as required, redacted, it seems reasonable to assume that “Division M” was the state’s unclaimed property department.
Read MoreUniform Capitalization Rules Do Not Apply to Sellers and Producers of Marijuana
The IRS, in Chief Counsel Memorandum 201504011, decided that a class of taxpayers is effectively “exempt” from the provisions of IRC §263A. But it turns out not to be a win for these taxpayers.
Because the group of taxpayers who are found to not be subject to the rules of §263A are those who are growing marijuana under various state laws that make their business legal at the state law level, although the production and sale of the product remains illegal at the federal level.
Read MoreNational Office Memorandum Holds That Licensed Mortgage Brokers Are Not Performing Services that Qualify as Real Estate Trade or Business
In order to qualify for “real estate professional” status for the taxpayer’s rental properties, the taxpayer must meet certain participation requirements in a real estate trade or business.
Read MoreCompensation for Undergoing Procedures to Donate Eggs to Infertile Couples Not Excludable Under §104(a)(2)
In the case of Perez v. Commissioner, 144 TC No. 4, the Tax Court took care immediately upon starting the opinion section by explaining what it wasn’t deciding, a somewhat unusual step. But, then again, this was a somewhat unusual case.
The issue in this case was whether Nichelle Perez had taxable income for payment she received for undergoing procedures to donate her eggs to infertile couples.
Read MoreMajority Owner of Accounting Firm Found to Have Willfully Issued Erroneous Information Returns, Subjected to Penalties
As Neil Sadaka crooned, breaking up is hard to do. And it certainly proved so for an accounting firm. The acrimonious breakup did result in a tax case, this time looking at liability for filing a false information return under IRC §7434.
The Sixth Circuit court of appeals was called by both parties to review decisions of the U.S. District Court in the case of Pitcher and Enders v. Waldman, et al, CA6, Case Nos. 14-3369/14-3392, on appeal from the U.S District Court for the Southern District of Ohio.
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