Trustees performing services on a trust’s behalf qualify the trust for the exception for real estate professionals to the passive activity loss disallowance. The Tax Court held that a trust’s rental losses could be currently deducted since the trust qualified as a real estate professional. According to the court, the
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TOPICS / TAX
Business tax
Regulations provide guidance for small-employer premium tax credit
The IRS issued final regulations on the Sec. 45R credit for small employers that offer health insurance coverage for employees (T.D. 9672). The regulations provide guidance on how to determine full-time-equivalent employees (FTEs) and average annual wages, how to calculate the credit, and what is a “qualifying arrangement” for purposes
The consequences of willful failure to pay payroll taxes
Employers are required to withhold payroll taxes from employees’ wages for the government’s account. This article examines what can happen when a responsible person fails to pay over these amounts.
Cooperative advertising agreements and Sec. 199
In a recent legal memorandum (AM 2014-001), the IRS affirmed the potential for retailers to claim the Sec. 199 domestic production deduction when they produce and distribute advertising fliers under a cooperative advertising agreement with a printer. Under a cooperative advertising agreement, a vendor will provide an incentive for a
Tax Court snuffs out cigarette importer’s deductions
The Tax Court holds that under the qualified settlement fund rules in Sec. 468B, a cigarette importer could not deduct tobacco settlement obligations until they were paid. The Tax Court held that an accrual-basis cigarette importer was not entitled to deductions for accrued but unpaid obligations to the Tobacco Master
Supreme Court holds severance payments are subject to FICA
The case resolves a circuit split over the definition of “wages” and excludable severance payments. In a decision involving over $1 million in Federal Insurance Contributions Act (FICA) taxes paid, the Supreme Court held in an 8–0 decision that severance payments to terminated employees are taxable wages for FICA tax
Home builder properly reported income under completed-contract method
Developers of upscale home communities could include common improvements and infrastructure in contract subject matter for the completed-contract method of recognizing income from the sale of homes. The Tax Court held that in deferring recognition of its home-sales income while the homes’ developments or phases were incomplete, a residential builder
Proposed rules would amend definition of acquiring corporation in corporate reorganizations
On Tuesday, the IRS issued proposed regulations under Sec. 381 that in certain acquisitions would change which corporation succeeds to the tax attributes, including the earnings and profits (E&P), of the transferor or distributor corporation (REG-131239-13). In earlier, related proposed regulations under Sec. 312, the IRS clarified that, in certain
QSub election does not create an item of income
The Third Circuit affirmed the Tax Court’s opinion that an S corporation’s election to treat its wholly owned subsidiary as a qualified subchapter S subsidiary (QSub) did not create an item of income or tax-exempt income under Sec. 1366(a)(1)(A). It also determined that an increase in stock bases and declared
“Killer B” anti-abuse regulations are on the way
Recognizing that taxpayers are exploiting the rules in ways it had not intended, the IRS on Friday announced that it will amend the existing regulations on cross-border reverse triangular reorganizations, popularly known as “Killer B” transactions (Notice 2014-32). Killer B transactions are designed to allow corporations to repatriate foreign subsidiary
Tax filing resources—Tax year 2013
This is the one-stop shop for all the updates you need to know for this year’s tax filing season. Find resources from the Journal of Accountancy, plus tax return checklists and tax savings tips from the AICPA, categorized by tax topic. INDIVIDUAL TAX Taxpayers can claim charitable contributions for typhoon
Critical lessons from the Peco Foods case
The Tax Court’s Peco Foods ruling imparts several critical tax lessons for all taxpayers in an acquisition mode, regardless of whether they plan to pursue a cost-segregation study.
Partnership basis rules proposed
The IRS issued proposed regulations providing guidance on the application of Sec. 704(c)(1)(C) added by the American Jobs Creation Act of 2004 (AJCA), P.L. 108-357, and the amendments to the mandatory basis adjustment rules of Sec. 743 in the AJCA. The proposed regulations would also conform the regulations to account
Trust materially participated in real estate business
In a case of first impression, the Tax Court held that a trust materially participated in its rental real estate business and therefore could deduct the losses it incurred in conducting those activities in 2005 and 2006 as losses from nonpassive activities (Frank Aragona Trust, 142 T.C. No. 9 (2014)).
Final rules issued on employment tax responsibilities of designated payer agents
Final regulations issued on Friday contain rules on the liability for employment taxes when an employer designates an agent under a “service agreement” to pay its employees and to satisfy its employment tax obligations instead of following normal IRS procedures to designate an agent (T.D. 9662). The new rules affect
The Supreme Court rules severance payments are subject to FICA
In a decision involving over $1 million in FICA taxes paid, the Supreme Court on Tuesday held in an 8–0 decision that severance payments to terminated employees are taxable wages for FICA tax purposes (Quality Stores, Inc., No. 12-1408 (U.S. 3/25/14)). Justice Anthony Kennedy’s opinion overturned a decision of the
New procedure permits automatic recognition of consolidated return filing status
The IRS announced that it will permit an affiliated group of corporations that did not file the required Form 1122, Authorization and Consent of Subsidiary Corporation to Be Included in a Consolidated Income Tax Return, for all of its subsidiaries, to be treated as if its subsidiaries had filed Form
Simplified employer health care coverage reporting announced
On Wednesday, the IRS released final regulations to implement simplified reporting requirements under the Patient Protection and Affordable Care Act, P.L. 111-148, which requires employers to report health care coverage information under Secs. 6055 and 6056 starting in 2015 (T.D. 9660 and T.D. 9661). Also Wednesday, the Department of Health
Domestic production activities deduction disallowed
The Tax Court disallowed a corporate taxpayer’s domestic production activities deduction because, it determined, the taxpayer did not possess the burdens and benefits of ownership of the property produced. The court developed a nine-factor test of the burdens and benefits of ownership that it applied to the facts and circumstances
Religious exemptions from the health care individual mandate
The January 2014 Tax Practice Corner, “Calculating the Health Care Individual Mandate Penalty,” (page 54) outlined how the penalty under Sec. 5000A, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, is calculated. The column also listed individuals to whom the mandate does not apply,
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