Keeping CPAs Up to Date on Tax Matters
A site devoted to articles on current developments in federal taxes geared toward CPAs in tax practice.
The IRS addressed the period during which a penalty may be assessed against a preparer under IRC §6694 for having prepared a claim for refund that contained a meritless position in Chief Counsel Advice 201514008. As well the memo addressed the statute of limitations for the preparer to claim a refund of such a penalty.
Read MoreA last minute change in the tax law came as we raced towards the 2015 filing deadline. As the IRS announced in New Release IR-2015-65 Congress passed and the President signed into law the Slain Officer Family Support Act of 2015.
Read MoreThe IRS has lost again on the question of material participation for a taxpayer helping the family business deal with the financial crisis of 2008. In the case of Lamas v. Commissioner, TC Memo 2015-59, the issue was whether the taxpayer had materially participated in businesses in 2008 where the taxpayer’s share of losses generated multi-million refunds from a net operating loss carryback.
Read MoreA CPA’s inability to prove that he had timely mailed an appeal to the IRS regarding the issue of whether this taxpayer was truly liable for a trust fund recovery penalty proved a major problem for the taxpayer in the case of Smith v. Commissioner, TC Memo 2015-60.
In late October of 2010 the IRS sent Letter 1153, Trust Funds Recovery Penalty Letter, to Mr. Smith proposing to assess the penalty against him for unpaid employment taxes of a partnership in which he had been a partner. Mr. Smith faxed the letter to his CPA who was with a firm with 5 partners and over 40 staff members.
Read MoreThe taxpayer referred to in Chief Counsel Email 201513003 argued that the payment he was making under a Deferred Prosecution Agreement (DPA) represented a deductible payment under IRC §162(a). The taxpayer argued that the Department of Justice planned to use the funds to pay restitution to those the DOJ alleged had been defrauded by the taxpayer and thus should represent a business expense.
The IRS, in this email, disagreed with that view, arguing that IRC §162(f) prohibited the deduction.
Read MoreThe paper income tax return makes a comeback—at least for certain airline employees affected by a change found in P.L. 113-243. In Announcement 2015-13 the IRS provided guidance on reporting rollovers authorized by this act that requires individuals claiming the benefits of this law change for a 2014 payment to file their tax return in paper form.
Read MoreThe corporation in the case of Medical Weight Control Specialist v Commissioner, TC Memo 2015-52 found it could not have its day in Court because its corporate privileges had been suspended by the state of California during the 90 day period available for it to file a challenge of an IRS in Tax Court. This was held to be the case even though the corporation had issued to it by the state a certificate of reviver and certificate of relief from contract voidability later that, in the corporation’s view retroactively reinstated its right to bring the suit initially.
Read MoreIn News Release IR-2015-54 the IRS has outlined steps taxpayers who receive an identity verification letter (Letter 5071C) should use to help resolve the question about the validity of a return that has been filed, as well as the basic nature of the process.
Read Moren 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. Now the California Board of Equalization has issued a separate warning in News Release 27-15-G to taxpayers that a similar scam is taking place for California state taxes.
Read MoreIn the case of BMC Software Inc. v. Commissioner, 141 TC No. 5, reversed CA5, Case No. 13-60684, 115 AFTR 2d ¶2015-528, the Fifth Circuit Court of Appeals and the U.S. Tax Court had to consider whether there was an intent requirement imposed by the language of what would reasonably be seen as an anti-abuse provision. The Tax Court ruled that since no “bad intent” requirement was found in the statute, the statute had to be applied mechanically even if both the IRS and the taxpayer agreed that there was no “bad faith” on the part of the taxpayer. The Fifth Circuit disagreed with that conclusion.
Read MoreIn a case dealing with much the same issue as the Maines v. Commissioner (144 TC No. 8) case decided the preceding week, the Tax Court in Elbaz v. Commissioner, TC Memo 2015-49 found that a taxpayer was taxable under the tax benefit rule for a refundable state tax credit (the New York QEZE Credit for Property Taxes) even though the refund was of property taxes that had been paid by passthrough entities and not the taxpayers. The Court did not find it relevant that the taxpayer claimed the IRS had taken an inconsistent position in a prior Chief Counsel Advice.
Read MoreThe IRS Large Business & International Division issued a memorandum outlining activities the division contends generally do not meet the definition of “manufactured, produced or grown” under §199 for computing the deduction for domestic production activities. LB&I Memorandum LB&I-04-0315-001 provides a specific list of “non-qualifying” activities.
Read MoreIn Notice 2015-28 the IRS extended the temporary nondiscrimination relief provision described below for plan years beginning before 2017. The extension was granted because the IRS does not believe it will have final regulations in place to address this issue before the original expiration date that applied to plans years beginning on or after January 1, 2016. The original notice is not other changed except for this extension of the time period for which it will apply.
Read MoreThe ABLE Act, passed in December of 2015, added §529A to the Internal Revenue Code allowing for states to establish ABLE Accounts. These tax advantaged accounts will be available to pay disability related expenses of qualified individuals. If used in that manner the earnings of the account will never be subject to tax.
However the accounts must be enabled by the states who either establish such a program or contract with another state to establish such a program. This will generally require enabling legislation to create the program, allow for the management of other state’s programs and/or allow a state to contract with another state to manage that state’s program.
Read MoreIn the case of Maines v. Commissioner, 144 TC No. 8, the Tax Court had to consider the federal tax treatment of various tax credits provided by the state of New York.
Read MoreA taxpayer who was used as what might be termed a “partner of convenience” by a promoter in structuring tax shelters where a partnership entity was needed was found by the Tax Court to have self employment income on a payment of $2,000,000 in the case of Chai v. Commissioner, TC Memo 2015-42.
Read MoreThe fact that the taxpayer didn’t retain the right to substitute entirely different property, but rather was limited to changing the boundaries of the conservation easement by no more than 5% did not get the taxpayer in the case of Balsam Mountain Investments, LLC, et al v. Commissioner, TC Memo-2015-43 a positive result.
Read MoreThe IRS issued a new Audit Technique Guide entitled Real Property Foreclosure and Cancellation of Debt Audit Technique Guide that is meant to provide guidance to agents who encounter issues involving foreclosures and/or cancellation of debt. However, as is true of many other such guides, the guide also provides a reasonably useful primer on the tax treatment in this area and contains some hints about the National Office of the IRS’s thinking on certain issues that may not be clear.
Read MoreIn the case of Panetta v. Commissioner, TC Summary Opinion 2015-16, the Tax Court did not have sympathy for a taxpayer claiming innocent spouse relief when:
The Eighth Circuit rejected a taxpayer’s attempt to structure an equipment like kind exchange (LKE) program to effectively allow a related taxpayer the use of the sales proceeds in the case of North Central Rental & Leasing, LLC v. United States, CA8, 115 AFTR 2d ¶ 2015-494.
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