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.
Subtle differences in facts can be very important when attempting to apply the opinion in a prior court decision to a client’s current situation. This is rather clearly illustrated by looking at the result in the case of Speer v. Commissioner, 144 TC No. 4 and contrasting his result with the result in a case he was relying upon, Givens v. Commissioner, 90 TC 1145.
Read Morehe taxpayer in the case of Tarighi v. Commissioner, TC Summary Opinion 2015-28 the taxpayer ran afoul of, among other things, the problem of the start-up expense provisions of IRC §195.
Read MoreA person who is unable to manage their financial affairs due to a disability has the statute of limitations for claiming refunds suspended generally under §6511(h). However, in Chief Counsel Advice 201515019 the IRS National Office concluded that the suspension is limited in one very important way—it does not suspend the special extended period for filing a net operating loss claim under IRC §6511(d)(2).
Read MoreTaxpayers who have tried to reconstruct log showing they met the qualified real estate professional requirements have generally fared poorly in Tax Court. But in the case of Leyh and O’Neill v. Commissioner, TC Summary Opinion 2015-27 the Tax Court accepted the reconstructed records—but there are key facts that make this case different from the earlier taxpayer failures.
Read MoreThe continuing saga of the erroneous Forms 1099-A received official IRS guidance in the form of Notice 2015-30. While the IRS had previously announced they would grant various forms of relief, this notice provides specifics on relief in a standard (and binding on the IRS) form.
Read MoreThe taxpayer discussed in Chief Counsel Memorandum 201515018 got a bit confused about this whole accrual vs. cash basis issue when reporting for tax purposes. The partnership kept its books on the accrual basis but reported on the cash basis for tax purposes.
Read MoreThe taxpayer in the case of Cutler v. Commissioner, TC Memo 2015-73 argued that because his only connection with various states that were imposing an income tax on him was that he owned an interest in a partnership that operated in those states, he should be able to deduct that taxes paid to those states in computing adjusted gross income, rather than being limited to deducting the taxes as an itemized deduction.
Read MoreThe IRS has issued revisions to the Employee Plans Compliance Resolution System (“ECPRS”) in Revenue Procedure 2015-28, modifying Revenue Procedure 2013-12.
ECPRS is a program that allows for correction of plan failures. As the IRS outlines in the introduction to the program found in Rev. Proc. 2013-12, it is meant to allow retirement plans that are intended to comply with §§401(a), 403(a), 403(b), 408(k) or 408(p) but which have failed to meet the requirements of those provision to correct the errors that will allow the plans to continue to offer tax-favored benefits.
Read MoreThe IRS issued guidance to agents dealing with state chartered credit unions recognizing IRS losses on issues related to the treatment of certain items of income in TEGE Memo TEGE-04-0314-0005, later (very minorly) updated to TEGE-04-0315-0007.
Read MoreIn the case of Wish v. Commissioner, TC Summary Opinion 2015-25 the taxpayer was paying funds to his former spouse as part of their divorce decree. Not surprisingly the key question was how much of the payments made constituted deductible alimony under IRC §215 which, in turn, depends on whether the payments would be treated as alimony income by the recipient under IRC §71.
Read MoreThe IRS lost in its attempt to claim a taxpayer’s attempt at providing a Crummey power to trust beneficiaries failed to grant a present interest in the case of Mikel v. Commissioner, TC Memo 2015-64. The IRS’s claim was that there were effectively restrictions imposed on the beneficiary’s withdrawal rights that meant they had no real present interest.
Read MoreThe taxpayers in the case of Brumbaugh and Holifield v. Commissioner, TC Memo 2015-65 argued that an extremely small interest of a partnership held by an LLC (0.02%) should not cause the partnership to be subject to the TEFRA audit procedures, but rather qualify for the small partnership exception to those rules found in IRC §6231(a)(1)(B)(i).
Read MoreThe third time was not a charm for the taxpayer in the case of SWF Real Estate, LLC, et al. v. Commissioner, TC Memo 2015-63. As was true in the case of Virginia Historic Tax Credit Fund 2001 v. Commissioner, 693 F.3d 146, CA4 reversing TC Memo 2009-295 and Route 231, LLC v. Commissioner, TC Memo 2014-30 the issue involved whether individuals who paid money to become “partners” that received tax credits from the state of Virginia had really simply bought credits in a disguised sale under IRC §707(a)(2). And, as was eventually found in the prior cases, the Court determined the answer was yes.
Read MoreIn the case of Moore v. United States, US DC WD Washington, Docket No. 2:13-cv-02063, 2015 TNT 64-13 a taxpayer was found to be subject to civil penalties for failure to file FBAR reports on his foreign bank accounts, though the Court did not yet decide whether the IRS had abused its discretion in failing to reduce or waive the penalty, finding the IRS had not produced evidence of the reasoning it had for denying relief.
Read MoreThe 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.
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