Nonrecourse Determination for Debt under §752 Does Not Control Treatment for Nature for Determining Cancellation of Debt Rules for §61(a)(12)

June 20, 2015 by Ed Zollars, CPA

In tax law (and, in fact, law in general) confusion may reign because words are often given a specific definition in a particular context—such as when dealing with a particular statute or regulation. That limited scope may exist even though an identical term is used in a very similar context—such as the same term having different (though somewhat related) meanings for two different provisions of the Internal Revenue Code.

In Chief Counsel Advice 201525010 the IRS looks at the issue of “nonrecourse debt” under the tax law and the fact that the term is used in two very different contexts.

Officer of Parent of Member-Manager Corporation Included in Consolidated Return Must Sign Form 2848 for Partnership

June 03, 2015 by Ed Zollars, CPA

The question of who is able to sign a Form 2848, Power of Attorney and Declaration of Representative is sometimes not a simple one to answer. Chief Counsel Advice 201522005 looks at a fact pattern involving a LLC taxed as a partnership and a member manager that is an indirect subsidiary included in the consolidated return of a parent corporation—and you may find the IRS’s conclusion surprising.

Holder of Small Interest in Oil and Gas Working Interest Found Subject to Self-Employment Tax Despite Being "Merely" an Investor

April 28, 2015 by Ed Zollars, CPA

A taxpayer’s liability for self-employment tax related to income from working interests in oil and gas wells was the issue in the case of Methvin v. Commissioner, T.C. Memo 2015-81.

This is not a case of David being out there drilling for oil—rather, he had simply been acquiring working interests in several oil and gas ventures as investments. His interests were never more a small amount in each venture. David’s interactions were basically to invest funds and then receive his checks for his share of revenues less expenses. He did not perform any services with regard to the wells.

Cash Basis Taxpayer's Accidental Switch to Reporting Revenue When Billed Rather than Collected Did Not Create Bad Debt Deduction

April 17, 2015 by Ed Zollars, CPA

The 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.

Partner Not Able to Deduct Taxes Imposed by States in Which He Performed no Services as a Business Deduction

April 17, 2015 by Ed Zollars, CPA

The 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.