Line items


The IRS doubled the maximum unpaid assessment balance qualifying for its streamlined installment agreement program for certain taxpayers and extended the time for payment (SBSE 05-0112-013). The new maximum balance is $50,000, and the time for full payment is extended from 60 months to 72 months.


In February 2011, the IRS increased the ceiling from $10,000 to $25,000 (see “Tax Matters: Lien Filing Threshold Raised, Other Collection Relief Announced,” May 2011, page 64).


Only individuals and out-of-business sole proprietors will qualify for a streamlined installment agreement when the unpaid balance of assessment is $25,001 to $50,000. Individuals, businesses that file Form 1120, U.S. Corporation Income Tax Return, and other types of businesses that are out of business can qualify for a streamlined installment agreement for income taxes if their unpaid balance of assessment is $25,000 or less.


All agreements for unpaid balances of more than $25,000 must be established as direct debit installment agreements.




The IRS issued final regulations relating to the exclusion from gross income for damages received on account of physical injuries or sickness (T.D. 9573). The regulations remove the requirement that damages received from a legal suit, action or settlement be based on “tort or tort type rights” to be excludable. The final regulations adopt without substantive change those proposed in 2009 (REG-127270-06).


Sec. 104 limits exclusion from income for damages to those received for “personal physical injuries or physical sickness.” The original regulations that the IRS issued under Sec. 104 required that, to be excludable, the damages had to be based on “tort or tort type rights” (Regs. Sec. 1.104-1(c)), which was intended to distinguish between damages for personal injuries and other types of damages, such as those for breach of contract.


The IRS explained in the preamble to the latest final regulations that there is no need to limit the type of action because Sec. 104(a)(2) limits the exclusion to damages for personal physical injury or physical sickness. The regulations also permit the exclusion of damages for emotional distress to the extent the emotional distress is attributable to a physical injury or physical sickness and permit the exclusion of damages that do not exceed the amount paid for medical care for emotional distress (Regs. Sec. 1.104-1(c)(1)).




The Tax Court erred last year in allowing a minister to exclude from income a portion of his housing allowance allocable to a second home, the Eleventh Circuit held.


A divided Tax Court had ruled 7–6 (see “Tax Matters: Second Home Eligible for Parsonage Exclusion,” April 2011, page 53) that the minister (and Grammy award-winning trumpeter), Philip Driscoll, could exclude the full housing allowance he received to cover both his principal residence and a lake house. The majority relied on the Dictionary Act (1 U.S.C.§ 1) to interpret the exclusion from income under Sec. 107(2) of amounts paid a minister “to rent or provide a home” as referring to any home, not just one.


In rejecting that reading, the Eleventh Circuit (Driscoll, No. 11-12454 (11th Cir. 2/8/12)) said the dictionary meanings of “a” and “home” had a singular connotation. The court noted that “the consistent use of the singular in this legislative history— ‘a dwelling house,’ ‘a home,’ and ‘the home’—demonstrate that Congress intended for the parsonage allowance exclusion to apply to only one home.” The court asserted that the general rule that an exclusion should be narrowly interpreted did not support the expansive reading of the provision for which the taxpayers argued.


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