For purposes of determining whether there had been a substantial understatement of gross income on a taxpayer’s return, the IRS Office of Chief Counsel determined that amounts on a Form 1120S, U.S. Income Tax Return for an S Corporation, filed after the three-year statute of limitation expired, were not considered
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TOPICS / TAX
Business tax
Revenue procedure provides liberal relief for late S corp. elections
On Wednesday, the IRS consolidated the provisions of a number of previous revenue procedures for requesting relief for late S elections under Sec. 1362, late qualified subchapter S trust (QSST) elections, late electing small business trust (ESBT) elections, late qualified subchapter S subsidiary (QSub) elections, and late corporate classification elections
“Private attorney general” can deduct his lawyers’ fees as trade or business expenses
In a case of first impression, a federal district court held that a taxpayer who zealously and single-mindedly pursued False Claims Act lawsuits against his former employer was engaged in the trade or business of prosecuting those lawsuits and he could deduct legal expenses related to that trade or business
IRS issues final rules on exceptions from REIT or RIC built-in-gain recognition
On Thursday, the IRS issued final regulations that provide guidance on the recognition of built-in gain in certain transfers of property from a C corporation to a regulated investment company (RIC) or real estate investment trust (REIT) (T.D. 9626). The final regulations adopt proposed regulations issued in April 2012 (REG-139991-08)
Supreme Court declines to hear Historic Boardwalk Hall; Virginia Historic Tax Credit Fund files new FPAA challenge
The U.S. Supreme Court on May 28 declined to hear an appeal of the Third Circuit’s decision denying historic structure rehabilitation credits for a state authority’s partnership with Pitney Bowes Inc. to redevelop the Atlantic City, N.J., Boardwalk Hall. Historic Boardwalk Hall LLC, with Pitney Bowes as investor member, funded
CPAs and the trust fund recovery penalty
CPAs and other accounting professionals should take note of a recent federal district court decision imposing joint and several liability against outside accountants for failure to pay a distressed client’s employment withholding taxes. In Erwin, No. 1:06CV59 (M.D.N.C. 2/5/13), a federal district court rendered judgment pursuant to Sec. 6672 against
Applying business provisions of the American Taxpayer Relief Act
While the comprehensive corporate tax reform desired by the business community remains highly elusive, businesses did receive a number of concessions via the American Taxpayer Relief Act of 2012 (ATRA), P.L. 112-240, which was signed into law Jan. 2, 2013. The act extends through 2013 an assortment of expired or
Parent corporation’s options treated as positions held by subsidiaries
In a Field Attorney Advice (FAA) memo, the IRS Office of Chief Counsel (OCC) advised that a parent corporation’s S&P 500 options held to hedge against price fluctuations of the equity portfolio held by four related subsidiaries should be treated as positions held by the subsidiaries. Consequently, the holding period
Final regs. clarify who is subject to 50% limit on meal and entertainment expenses
On Wednesday, the IRS issued final regulations clarifying which party is subject to the 50% limit on deductible meal and entertainment expenses under Sec. 274(n) (T.D. 9625). The final rules adopt proposed regulations issued in July 2012 (REG-101812-07) without substantive change. As the IRS emphasized in the preamble to the
New method for determining who gets Sec. 199 deduction under contract manufacturing arrangements
The IRS issued new guidance to examiners in its Large Business & International (LB&I) Division regarding how to determine which taxpayer is entitled to claim the Sec. 199 domestic production activities deduction in a contract manufacturing arrangement (LB&I-04-0713-006). The new directive replaces earlier guidance (LB&I-4-0112-001) issued last year, which had
Rules for deferral of income from gift card sales clarified
The IRS issued guidance clarifying that taxpayers that sell gift cards can defer recognizing income from the sale of gift cards redeemable by an unrelated third party until the year after the payment is received (Rev. Proc. 2013-29, clarifying and modifying Rev. Proc. 2011-18). With the rapid growth in the
Final rules on acceleration of COD income deferral are issued
The IRS on Tuesday issued final regulations on the rules to accelerate cancellation of debt (COD) income that taxpayers elected to defer over a five-year period when an applicable debt instrument was reacquired by the issuer or a related party in 2009 or 2010 (T.D. 9622 and T.D. 9623). An
Treasury postpones employer health care penalty, information reporting for one year
Large employers that fail to provide minimum health coverage for employees will not be subject to the shared-responsibility penalty until 2015 after Treasury announced on Tuesday that it would delay certain provisions of 2010’s health care legislation. In a Treasury blog post titled, “Continuing to Implement the ACA in a Careful,
IRS offers new method for home office deductions
Working at home has come a long way from the days when employers were most concerned that they would not get their money’s worth if they allowed employees to do so. Instant communication, improved internet access, and more stable virtual network connections have changed the equation for employers, who now
Salary was partially reasonable
Relying on standards set by the Ninth Circuit, the Tax Court found that a sole shareholder’s compensation from a wholly owned corporation for the year in question was partially deductible as reasonable compensation. The deductible compensation included catch-up payments for prior years’ services. Arthur Astor was the president and CFO
Basis reporting for debt instruments and options is phased in
In final regulations (T.D. 9616), the IRS is phasing in basis reporting requirements under Sec. 6045(g) for debt instruments and options. The IRS took the action in response to comments about the complexity of complying with these rules and to give brokers ample time to develop and implement reporting systems.
Proposed rules address minimum value of health coverage for premium tax credits
The IRS issued proposed regulations for determining whether an eligible employer-sponsored health plan provides minimum value for purposes of the Sec. 36B health insurance premium tax credit (REG-125398-12). Individuals do not receive the credit if they are eligible for affordable coverage under an eligible employer-sponsored plan that provides minimum value.
Highlights of tax research
With tax reform in the news, it is helpful to understand the origins of some popular and long-lived tax incentives, such as the favorable tax treatment of people over 65 and tax incentives that encourage people to save. As the economy takes fitful steps to recover, insight into the efficacy
Oral surgeon cannot deduct expenses for traveling between home and job
The Tax Court upheld IRS-assessed deficiencies caused by the disallowance of a number of travel expenses an oral surgeon deducted on his Schedules C, Profit or Loss From Business, for 2008 and 2009, and its imposition of a negligence penalty under Sec. 6662(a) (Bigdeli, T.C. Memo. 2013-148). Javad Bigdeli lived
Partner cannot avoid valuation penalty by conceding on other grounds
In a big win for the IRS, the Tax Court refused to grant partial summary judgment to a partner who had conceded his tax shelter case on grounds other than valuation in an attempt to avoid the 40% gross valuation misstatement penalty under Sec. 6662(a). This has been a common
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