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Offshore Voluntary Disclosure Program Expanded, Revised

Timed to coincide with the July 1 effective date of the Foreign Account Tax Compliance Act (FATCA), the IRS changed its Offshore Voluntary Disclosure Program (OVDP) to make it easier for taxpayers to comply with their obligations to report offshore assets and accounts (News Release IR-2014-73). The changes from the 2012 OVDP include lower penalties for nonwillful violations and availability of streamlined procedures to U.S. taxpayers. For more, see “Tax Practice Corner: Expanded OVDP a Chance to Reduce Penalties,” page 94.

Tax Court’s Whitehouse Do-Over OK’d by Fifth Circuit

In a long-running easement valuation dispute over a New Orleans historic building, the Fifth Circuit partly affirmed and partly vacated the Tax Court’s decision on remand from the plaintiffs’ first appeal (Whitehouse Hotel Limited Partnership, No. 13-60131 (5th Cir. 6/11/14); see previous Tax Matters coverage Nov. 2010, page 67, and April 2009, page 67). The appellate court affirmed the Tax Court’s slight increase of the value of the façade easement from its earlier valuation of $1.79 million to $1.86 million, yielding a valuation overstatement by 401%. Because that still exceeded the 400% threshold for a valuation-misstatement penalty and the Tax Court had again found the taxpayers had not made a good-faith investigation of the easement’s value allowing an exception, it again upheld the penalty. The Fifth Circuit, however, held that the taxpayers’ efforts to obtain and double-check their appraisals and their reliance on a professional to prepare their tax return were sufficient to support a finding that they made a good-faith investigation, and it overruled the penalty.

IRS Adopts “Taxpayer Bill of Rights”

The IRS in June released a Taxpayer Bill of Rights (IRS News Release IR-2014-72; see also the Taxpayer Advocate Service website at tinyurl.com/nqlrdnd). Restating existing statutory and administrative protections, it declares that taxpayers have the rights to:

  • Be informed;
  • Receive quality service;
  • Pay no more than the correct amount of tax;
  • Challenge the IRS’s position and to be heard;
  • Appeal an IRS decision in an independent forum;
  • Finality (e.g., to know the maximum time for challenging an IRS position, for being audited, or when an audit is finished);
  • Privacy;
  • Confidentiality of information provided to the IRS;
  • Retain representation; and
  • A fair and just tax system.

 

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