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 appears to be continuing to show its displeasure with attempts to use IRA funds to purchase businesses, most recently in PLR 201547010. The IRS denied the taxpayer relief for failing to complete a rollover of IRA funds within 60 days.
Read MoreIn the case of Mathews v. Commissioner, TC Memo 2015-225 the taxpayer protested that the IRS had abused its discretion by counting the taxpayer’s veterans’ disability payment as income in determining his ability to pay when deciding on the amount the taxpayer could pay under an installment agreement for unpaid taxes.
The taxpayer owed taxes from eight separate years running from 2000 to 2011. The IRS issued a notice of tax lien and the taxpayer for a collection due process hearing.
Read MoreIn Field Attorney Advice 20154601F the IRS critiqued a taxpayer’s application of the partial disposition rules contained in the proposed tangible property regulations at Proposed Reg. §1.168(i)-8 which are very similar to those contained in the currently applicable final regulations.
In the case in question the taxpayer was attempting to use those regulations to claim a loss on partial dispositions of buildings the taxpayer owned using the late partial disposition election available for a change in method to the revised tangible property regulations.
Read MoreIn Notice 2015-82 the IRS has increased the invoice cost limits for taxpayers without an applicable financial statement to $2,500 for the de minimis safe harbor under the tangible property regulations that took effect for tax years beginning in 2014.
Under Reg. §1.263(a)-1(f) a taxpayer may annually elect to apply the de minimis provisions that, effectively, “bless” a taxpayer’s capitalization policy up to certain limits on a per invoice level.
Read MoreThe IRS, along with certain payroll services, will be testing a 16 character W-2 Verification Code for the 2015 filing season the IRS announced on their website at https://www.irs.gov/Individuals/IRS-Tests-W-2-Verification-Code.
An important fact to note is that the IRS initially will not be doing anything with this code except to “test-and-learn” to see if it is useful in determining the integrity of W-2 information. Thus, to put it a bit differently, using or not using the code is not going to do anything for the moment to improve the chances that a taxpayer will not be subject to ID theft.
Read MoreA recent Arkansas U.S. District Court case involved the court resolving a number of not often raised in court questions regarding the interaction of the passive activity rules, the real estate professional classification, S corporations and stock provided to an employee that was subject to restrictions triggering treatment under IRC §83(b). The case in question is the case of Stanley v. United States, 116 AFTR2d ¶2015-5419, Case No. 5:14-CV-05236, U.S.D.C. Western District of Arkansas.
The issues arose regarding Mr. and Mrs. Stanley's claimed deductions for losses on Schedule E that arose from real estate related activities. Mr. Stanley took the position that he qualified as a real estate professional and that all of the various items reported on Schedule E were properly classified as a single activity under the passive activity rules.
Read MoreIn Chief Counsel Advice 201547006 the IRS discusses the condition under which an employer can exclude an amount from an employee’s income for payments made through the employee’s spouse’s group health plan.
Read MoreIn a pair of cases (Trout v. Commissioner, TC Summary Opinion 2015-66 and Podraza v. Commissioner, TC Summary Opinion 2015-67) the Tax Court applied the standard of “placed in service” to determine if the taxpayers in each case properly claimed a credit for purchase of an electric vehicle.
Read MoreThe issue of whether a taxpayer was justified in writing off the balance of a purchased intangible was the matter at issue in the case of Steinberg, et al v. Commissioner, TC Memo 2015-222.
The taxpayers in this case had acquired a towing contract as part of the acquisition of the assets of a business in 2005. The contract, which provided the taxpayers the sole and exclusive right to operate “Official Police Garages” in a portion of Los Angeles. The contract had an expiration date on June 27, 2009 and the city of Los Angeles had the exclusive option to extend the term for an additional five years.
Read MoreThe IRS has provided information on how a victim of tax related identity theft may obtain a copy of the return filed by the other party at https://www.irs.gov/Individuals/Instructions-for-Requesting-Copy-of-Fraudulent-Returns.
Read MoreIn Revenue Procedure 2015-56 the IRS provided a safe-harbor method that may be used by certain taxpayers operating a retail establishment or restaurant for remodel-refresh costs.
One key restriction is that this safe harbor may only be used by taxpayers that have applicable financial statements (AFP) as referred to in the tangible property regulations that took effect in 2014. Such statements are defined at Reg. §1.263(a)-1(f)(4)—and many small businesses will not have a statement.
Read MoreIn the case of Green v. United States, 116 AFTR 2d ¶ 2015-5394, US District Court, Western District of Oklahoma, Case No. CIV-13-1237-D the court was asked to decide the application of the charitable contribution provisions applicable to trusts and estates under IRC §642 and a donation of appreciated property.
Read MoreThe IRS in Notice 2015-77 extended until the 2017 tax year the safe harbor method originally provided for in Notice 2013-7 of reporting payments made on a home mortgage that had received relief from a state housing agency from the Hardest Hit Fund (HFA Hardest Hit Fund). The notice also extended relief from penalties related to information returns for mortgage services and state housing agencies due to payments made under the program.
Read MoreIn Chief Counsel Email 201545025 the issue involved whether the use of an approved private delivery service was acceptable for delivery to the IRS of notices of non-judicial sales.
IRC §7425 deals with the IRS’s rights when the service obtains a lien on property. Generally such a lien is not impacted by any judicial proceeding to which the IRS is not a party. A limited exception occurs in certain cases described in IRC §7425(b) if the IRS is properly notified of the proceeding.
Read MoreIn Chief Counsel Advice 201545017 the IRS looked at whether an amended return was timely filed where an attempt was made to file it electronically prior to the expiration of the statute, the return was rejected and then a paper return was filed without contacting the e-Help desk to make a waiver request to file on paper.
Read MoreIn TAM 201544025 the IRS decided that a foundation's weekly sales bazaar income is not substantially related to its tax exempt purpose, nor does it qualify for the rental exception for rental of real property under IRC §512(b).
Read MoreIn Chief Counsel Advice 201544024 the Chief Counsel’s office ruled that it was not permissible for one representative on a Form 2848 to sign the Form 2848 on behalf of another representative.
In the case discussed, there were three representatives appointed on the Form 2848 to represent the taxpayer. However, one of the representatives had not personally signed the form, but rather another representative signed the form “on behalf” of the third representative when the document was completed.
Read MoreThe IRS National Office determined that the proper life for amortization of an acquired domain name is 15 years in Chief Counsel Advice 201543014. That was true whether the domain name was a generic domain name (one that doesn’t refer to a specific company or product name, say “dogfood.com”) or a non-generic domain name (one that is associated with a specific company, product or service name, such as “microsoft.com”).
Read MoreThe IRS issued a Fact Sheet (FS-2015-24) that discusses tax preparers and their obligations with regard to protecting their clients from data theft as well as generally securing taxpayer information.
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