Search Results

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 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 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.

November 2009 |  Article

FIRST CIRCUIT DENIES TEXTRON WORK PRODUCT PRIVILEGE In a 32 decision, the First Circuit Court of Appeals overturned its earlier threejudge ruling and a district court to hold that the work product doctrine did not protect from IRS summons the tax accrual workpapers of aviation and industrial conglomerate Textron Inc.

November 2009 |  BY ALISTAIR M. NEVIUS |  Article

The Pension Protection Act of 2006 introduced a new notification requirement for small taxexempt organizations that are not required to file an annual information return under IRC § 6033(a)(1). In July, the IRS released final regulations spelling out what small taxexempt organizations must do to meet this requirement.

October 2009 |  BY Gerard H. Schreiber Jr., CPA |  Article

IRS rules effective Jan. 1, 2009, delineate more strictly tax return preparers’ duties to safeguard taxpayer information from unauthorized disclosure or use. IRC § 7216 imposes criminal penalties on the unauthorized use of taxpayer information. The requirements are closely tailored to the type of information, the party using it, and whether that party is inside or outside the United States.

October 2009 |  BY TINA QUINN, CPA, PH.D., JOHN F. ROBERTSON, ESQ., CPA |  Article

The Court of Federal Claims recently ruled that an interest in a Texas limited liability company (LLC) was not a limited partnership interest held as a limited partner for purposes of the passive loss rules and therefore losses from the interest should not be treated as presumptively passive.

October 2009 |  Article

In a rare setback for the IRS in its litigation against leasein, leaseout (LILO) tax shelters, the Court of Federal Claims held that an arrangement Consolidated Edison Co. of New York (Con Ed) had with an electric utility in the Netherlands should be respected for federal tax purposes because it had valid business purposes beyond its tax benefits.