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 has issued proposed regulations (REG-115452-14) that will establish a series of tests to determine if an arrangement will be treated as a disguised payment for services under IRC §707(a)(2)(A). The key test, based on the section’s legislative history, will be whether the payment is subject to significant entrepreneurial risk.
Read MoreIn the case of the Estate of John A. Pulling, Sr v. Commissioner, TC Memo 2015-134, the Tax Court was asked to decide the highest and best use of three parcels of land held by an estate. While disagreeing with the estate’s initial argument that Florida case law controlled the proper valuation of the parcels, the Court eventually accepted the estate’s values on different grounds.
Read MoreThe Tax Court found that the purported sale of certain limited partnership interests and subsequent transfer of property to those partners were disguised sales under Treasury Reg. §1.707-3 in the case of Bosque Canyon Ranch, L.P., et al v. Commissioner, TC Memo 2015-130
Read More“While it would be nice if all tax shelters advertised as legitimate tax shelters were indeed legitimate, the fact of the matter is that not all marketed tax shelters are legitimate.” That sentence outlines the basic problem for the taxpayers in the case of Our County Home Enterprises, Inc., et al v. Commissioner, 145 TC No. 1.
The case is yet another in a series of unsuccessful attempts by owners of closely held businesses to use a purported welfare benefit plan (promoted as “single employer plans” or “419(e) plans”) to use life insurance in such programs to provide cash and other benefits on an extremely tax advantaged basis to the owners of the businesses.
Read MoreWhen the IRS issued the final regulations that took effect in 2014 for determining if amounts expended are to improve tangible property under Reg. §1.263(a)‑3, one of the key issues is whether there has been a replacement of a major component or substantial structural part of an asset [Reg. §1.263(a)‑3(k)(6)]. The IRS specifically rejected provided any sort of “percentage” test to be used to make such a determination.
However, in the Large Business and International Division’s memorandum LB&I‑04‑0315‑002 we discover that it’s not only practitioners that like numeric guidance. This guidance is meant to give guidance to agents examining taxpayers who generate steam or electric power and are changing to a method of accounting for steam or electric generation property under Rev. Proc. 2013‑24.
Read MoreCiting electronic filing complications from having to submit the copy of a §83(b) election with the service provider’s return, the IRS has issued proposed regulations (REG-135524-14) that would modify Reg. §1.83-2(c) to remove the requirement that a copy of the election be submitted with the service provider’s tax return for the year in question.
Read MoreAn IRS full unilateral concession of the case is not a settlement, per the Ninth Circuit, and thus the taxpayer was prevailing party for purposes of Knudsen v. Commissioner, No. 13-720077, 2015 TNT 136-13 reversing the Tax Court’s contrary holding in an earlier ruling in the same case (TC Memo 2013-87).
Read MoreThe taxation of medical marijuana clinics came back into the Tax Court in the case of Olive v. Commissioner, 139 TC No. 2, later appealed to the Ninth Circuit who affirmed the lower court. In this case, in addition to reminding us of the Tax Court’s previous holding that IRC §280E holds to prevent the deduction of expenses other than costs of sales related to the operation of such a clinic (a position the Court put forward in the 2007 case of Californians Helping to Alleviate Med. Problems, Inc., 128 TC 173), the Court dealt with some additional items.
Read MoreThe taxpayer in the case of Padilla v. Commissioner, TC Summary Opinion 2015-38 did not fall into the traps that have caused other taxpayers to lose their cases claiming to be a real estate professional and deducting losses arising from their rentals. But he found himself trapped by a different problem.
Read MoreOne of the “rules of thumb” for tax planning is that “smell counts” in any tax situation. If the result just “looks bad” there’s a good chance that the courts will simply not allow it to stand. This is doubly true with regard to §501(c)(3) charitable organizations that, while technically operated under principles that serve the public good, in reality always seem to benefit a very distinct, not so public, private group—like a single family.
That turned out to be the problem in the case of the Educational Assistance Foundation for the Descendants of Hungarian Immigrants in the Performing Arts, Inc., v. United States, 2015 TNT 128-15.
Read MoreIn the case of Starke v. Commissioner, TC Summary Opinion 2015‑40, the IRS discovered that it’s not enough to determine a taxpayer failed to report income—it’s important to also be sure to have the year in which the failure occurred be the one that the agency is attempting to assess tax against.
Read MoreIn Notice 2015-49 the IRS announced that it proposes to amend the regulations related to required minimum distributions under IRC §401(a)(9) to provide a defined benefit plan will generally not be permitted to replace any annuity being paid with a lump sum payment or other accelerated form of distribution. The IRS plans to make these regulations effective generally as of July 9, 2015.
Read MoreIn the case of Mallo v United States, 114 AFTR 2¶2014-7022, CA10 (cert denied) the appellate court affirm the lower courts’ holding that a liability arising from a late filed income tax return does not qualify for potential discharge in a bankruptcy case.
Read MoreIn the case of Yale New Haven Hospital v. Nicholls v. Nicholls, No. 13-4725-cv, CA2, reversing in part, revising in part US DC Connecticut, No. 3:12-cv-01319-WWE, the Second Circuit Court of Appeals had to determine if benefits in four plans had been partially assigned to the decedent’s former spouse via Qualified Domestic Relations Order.
Read MoreIn the case of Levi v. Commissioner, TC Memo 2015-118 the question before the court was, effectively, whether the Levis had filed a valid return. The issue arose because the return had been signed by an attorney retained by the couple to prepare their tax return.
Read MoreNotice 2015-46 provides guidance to charitable hospitals on how to comply with the requirement in Reg. §1.501(r)‑4(b)(1)(iii)(F) that a hospital must include a provider list in its financial assistance policy (FAP). The list must include all providers, other than the hospital itself, that deliver care in the facility and specify whether the individual providers are or are not covered by the FAP.
Read MoreCongress has passed, and the President signed into law on June 29, 2015, the Trade Preferences Extension Act of 2015. While the bill primarily dealt with non-tax issues, a number of tax provisions were included in the bill, primarily as “offsets” to pay for the cost of other provisions.
Read MoreAs part of the Trade Priorities and Accountability Act of 2015 (HR 2146) a provision was added liberalizing the ability of certain federal employees to obtain penalty free distributions from governmental plans that are made after the employee reaches age 50.
Read MoreIn the case of Greenberger, et al v. Commissioner, 115 AFTR2d ¶2015-844, US DC ND Ohio, No. 1:14-cv-01041 the issue is not whether the taxpayers had incurred a deductible loss—the IRS agreed that was so. Rather the question was the nature of the loss.
Specifically the issue was whether the loss represented a theft loss (deductible as an ordinary loss under IRC §165 or was rather a capital loss that could only offset other capital gains or be slowly absorbed against $3,000 of other income each year.
Read MoreIn Chief Counsel Email 201526007 the IRS addressed the issue of whether the IRS retained the right to supplement or amend a refund claim due to the fact that a credit from that claim is remains available for use in the taxpayer’s account.
While emails generally only give us one side of the conversation (and thus often omit significant facts), it appears an IRS employee was wondering about the ability to supplement or amend a prior protective refund claim on which the IRS had acted by allowing a claim and then crediting it to the taxpayer’s account to be used for future taxes. Thus a change in the allowed claim would flow directly to the balance that was available to be applied against the taxpayer’s tax liability in a period that was still open.
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