In the arsenal of estate planning, private foundations have traditionally ranked among the big guns. With their relative formality and extensive tax rules, they have been considered the province of the truly wealthy – people with $1 million or more to dispose of charitably. The belief that lesser largesse could
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TOPICS / PERSONAL FINANCIAL PLANNING
Tax planning
A 401(k) Tax Break That’s Often No Break
Withdrawing company stock from a 401(k) to take advantage of a tax break called net unrealized appreciation (NUA) sounds like a no-lose proposition, and most advisers tell their eligible clients to go for it. But there’s just one big problem: When you run the numbers, this maneuver
Partnership Incorporation Provides Planning Opportunities
It is common for business owners to conclude that they must change the legal form of the entity through which a business has been conducted. When incorporating a business that has been a partnership, CPAs should pay close attention to the form of the conversion because the method used can
Return Preparer Penalties Guidance Issued
The IRS said it will revise regulations before the end of 2008 to incorporate provisions of the Small Business and Work Opportunity Tax Act of 2007 concerning preparer penalties under section 6694 and related sections. In the meantime, interim guidance issued in the final hours of 2007 offered some clarification
Son of BOSS Adjustment Timely for IRS
A federal court has concluded that a suspected “Son of BOSS” transaction that caused an overstatement of basis in the calculation of gain from a sale of real estate is a gross income omission that allows the IRS six years to assess a deficiency. The ruling, in Salman Ranch Ltd.
Independent Contractor or Employee?
A recent congressional inquiry into whether Blackwater USA properly classified its security guards in Iraq and Afghanistan as independent contractors rather than employees highlights the often complicated application of provisions for determining this status. In its defense, Blackwater invoked the safe-harbor provisions of section 530 of the
Real Tax Savings in Real Estate
EXECUTIVE SUMMARY While the passive loss limitation rules generally prevent the current deduction of rental real estate net losses, many taxpayers with real estate rental income may meet the standard for a real estate professional conducting a real property trade or business. Such status requires the taxpayer
Privilege Claims Under Fire
Despite some legal setbacks, the IRS has signaled it will continue to press for a strict reading of the work product privilege that protects taxpayer documents from discovery. With Action on Decision 2007-004, the IRS said it will not acquiesce in the Sixth Circuit’s holding in U.S. v. Roxworthy that
House Passes Tax Strategy Patent Ban, FHA Overhaul Legislation
On Sept. 7, the House of Representatives passed major patent reform legislation, which would ban the issuance of patents on tax strategies. The AICPA is a strong advocate of Congress’ work in this area. The comprehensive patent reform bill (HR 1908) also contains provisions unrelated to patents on
Hiring Incentives Target Veterans, Rural Counties
The work opportunity tax credit (WOTC) has been in existence for years; however, the Small Business and Work Opportunity Tax Act of 2007, P.L. 110-28 (SBWOTA), expanded the definition of some of the target groups, creating tax incentives that will affect more clients than originally expected. SBWOTA
Settlement Doesn’t Legitimize Sham
The U.S. District Court of New Hampshire ruled that a taxpayer couldn’t claim losses stemming from partnerships’ transactions that lacked economic substance, even though a settlement with the IRS had allowed some of their claims. Richard Nault invested in several agricultural limited partnerships between 1984 and 1986 that reported significant
AICPA Urges Congress to Reconsider Preparer Standards
When Congress passed the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007, it contained one major tax policy change not reflected in the title. The law, which was enacted May 25, included a provision that raises the standards applicable to tax return
Disregarded Entities Held in High Regard
In the decade since the “check-the-box” (CTB) regulations took effect, tax and business planners have taken advantage of their flexibility to structure a wide variety of transactions. Perhaps the most beneficial tax and business planning tool encouraged by CTB regulations is the single-member limited liability company (SMLLC).
Tax Patents Considered
EXECUTIVE SUMMARY The U.S. Patent and Trademark Office since 1998 has granted patents to business methods. In recent years, these patents have come to include strategies to minimize tax, a development many observers find troubling. Tax strategy patents complicate tax advising, return preparation and compliance, since
Practice Makes Perfect
Tax practitioners have enough concerns without having to fear the specter of a professional liability claim resulting from a preventable mistake or oversight. Many of these slip-ups can be prevented by simply jotting a contemporaneous note recording the rationale for an election or flagging a filing deadline
The Dreaded Kiddie Tax
EXECUTIVE SUMMARY Since 1987, taxpayers wanting to shift income to children subject to lower tax rates had to consider the kiddie tax when the children were under 14 years old. TIPRA, which became law in May 2006, made a significant change in the kiddie tax retroactive
AICPA Criticizes Tax Patents
Congress should restrict patents on tax strategies or protect taxpayers and preparers from infringement actions arising from them, the AICPA told members of congressional committees. In letters to the House and Senate tax-writing and judiciary committees and a white paper, the AICPA said one government agency—the U.S. Patent and Trademark
The Choice-of-Entity Maze
EXECUTIVE SUMMARY When advising clients on the choice of business entity, CPAs should consider the advantages and disadvantages of each type. If more than one entity is involved, CPAs should also determine whether clients can deal with the complexity of the resulting structure. The many issues
To Roth or Not to Roth?
EXECUTIVE SUMMARY Companies took a wait-and-see attitude toward the Roth 401(k) in the plan’s first year, but researchers say 2007 is nearly certain to see rapid growth in participation by companies and enrollment by employees. CPAs can help workers decide between a traditional and a Roth
Home Free
EXECUTIVE SUMMARY Many home sellers have seen rapid appreciation of their home’s value in recent years, leaving them vulnerable to capital gains beyond the principal-residence exclusion under IRC section 121of $250,000 for an individual or $500,000 for joint filers. If sellers buy another home, however, they may be able to
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How a CPA beat burnout after strokes, depression
Randy Crabtree, CPA, suffered two strokes in four days and struggled with his mental health for years before he learned to recognize, address, and prevent chronic stress. Learn from his insights on how CPAs can avoid professional burnout.
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