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November 2009 |  Article

FASB issued Accounting Standards Update (ASU) 200906 to provide additional implementation guidance on accounting for uncertainty in income taxes and to eliminate the disclosures required by FASB Accounting Standards Codification (ASC) Paragraphs 740105015(a) through (b) for nonpublic entities, including passthrough and notforprofit entities. The new guidance involves requirements under what was previously known as FASB Interpretation no.

November 2009 |  BY MICHAEL M. SMITH, ESQ., CPA, DONALD L. ARIAIL, CPA, DBA, MICHAEL EVANS, ESQ. |  Article

In the current real estate climate of decreased property values and excess inventories, many rental property owners are facing reduced cash flows due to vacancies. At the same time, the fair market value of their property may be close to or even less than the amount owed on the mortgage (“upside down”).

November 2009 |  BY DAVID W. RANDOLPH, PH.D. |  Article

Despite the recent downturn in the American housing market, one of the highestvalue assets owned by most taxpayers remains their home. While many taxpayers have seen the value of their home decline, those in locales where home values have remained relatively strong—such as parts of some Southern and Midwestern states—could still realize a gain upon the sale of their home.

November 2009 |  BY JAMES M. HOPKINS, CPA |  Article

One requirement for claiming a qualifying child (QC) for purposes of the dependency exemption deduction is that the child must be related to the taxpayer, that is, the taxpayer’s child (including stepchild or foster child), sibling, halfsibling, stepsibling or descendant of any of them (IRC § 152(c)(2)). However, dependents alternatively may be claimed as qualifying relatives (QRs), who can be unrelated if they live with the taxpayer for the entire year (section 152(d)(2)(H)) and meet other qualifying tests.

November 2009 |  BY EDWARD J. SCHNEE, CPA, PH.D. |  Article

A district court held that a partnership’s reported capital loss stemming from nonperforming loans lacked economic substance and denied the claimed tax benefits. D. Andrew Beal owned a bank that was in the business of acquiring nonproducing loans (NPLs) at extreme discounts. With an associate and China Cinda Asset Management Co., a Chinese “bad bank,” Beal formed Southgate Master Fund LLC (Southgate) to invest in Chinese NPLs.

November 2009 |  BY CHARLES J. REICHERT, CPA |  Article

The Tax Court, whose denial of a sixyear statute of limitations in Bakersfield Energy Partners had been recently upheld by the Ninth Circuit, held in two more cases that an overstatement of basis did not allow the extended assessment period for a substantial omission of gross income under IRC § 6501(e).

November 2009 |  BY MELANIE J. EARLES, CPA, DBA |  Article

The Fifth Circuit held that IRC § 6229(a) sets no deadline by which the IRS must issue an FPAA (final partnership administrative adjustment). Its interpretation of the relationship between the limitations period in sections 6501(a) and 6229(a) mirrors that of the Tax Court, the D.C. Circuit and the Federal Circuit (see RhonePoulenc Surfactants & Specialties LP v.

November 2009 |  BY W. JOEY STYRON, CPA, PH.D. |  Article

In a recent private letter ruling, the IRS clarified how employer reimbursement of employee expenses for tools, equipment, training or certification required as a condition of employment may qualify as an accountable plan under IRC § 62. Reimbursements under an accountable plan are excluded from gross income of employees and are exempt from withholding and payroll taxes.

November 2009 |  BY VINAY S. NAVANI, CPA |  Article

C corporations that elect S status are often subject to the builtin gains (BIG) tax under IRC § 1374. One of the aspects of the BIG tax that can be a trap for the unwary is the treatment of accounts receivable for cashbasis corporations. The fair market value of accounts receivable is usually the face value of the receivables.

November 2009 |  BY James M. Hopkins, CPA |  Article

The Fostering Connections to Success and Increasing Adoptions Act of 2008, PL110351, made several changes to the qualifying child (QC) definitions effective for tax years beginning after Dec. 31, 2008. Section 501(a) of the act amended the age requirement (IRC § 152(c)(3)) to also require the QC to be younger than the individual claiming a QC exemption for the child.