In an unreported decision, the U.S. Court of Federal Claims held that plaintiffs in 10 consolidated tax refund cases were entitled to an additional state unemployment insurance (SUI) credit against their FUTA tax liabilities for years 1991–1996. Although the case selected as the lead was that of Cencast Services LP,
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TOPICS / TAX
Business tax
Managing S Corporation At-Risk Loss Limitations
Today’s economic climate may be dealing your clients a loss. It’s bad enough, especially for small business owners, to have to wonder when they might return to profitability. Beyond that, tax recognition of their losses is limited. One of those limitations is that a taxpayer’s loss deductions are limited to
Vendor Allowances for Defective Merchandise Reduce Inventory Cost
In a recent chief counsel advice, the IRS held that certain allowances resellers receive from vendors for defective merchandise should be treated as reducing the cost of inventory under Treas. Reg. § 1.471-3(b). The IRS is closely scrutinizing the various types of vendor allowances to determine if they constitute gross
Obama Outlines Proposed Tax Credits, Other Changes
President Barack Obama, in a State of the Union address Wednesday that focused heavily on job creation, proposed several business and individual tax credits. Obama called for a new tax credit for small businesses that hire workers or raise wages as well as the elimination of all capital gains tax
IRS Plans to Require Disclosure of Uncertain Tax Positions
The IRS announced Tuesday that it is considering making changes to how business taxpayers report uncertain tax positions (Announcement 2010-9). Specifically, the IRS said it is developing a schedule that certain businesses would be required to use to disclose uncertain tax positions on their returns annually. The IRS plans to
IRS Updates Method Thresholds for Vehicle Fringe Benefits
The IRS has updated for 2010 (Revenue Procedure 2010-10) the maximum allowable fair market value (FMV) of an employer-provided vehicle for which the cents-per-mile and fleet-average rules may be used in determining the value of an employee’s personal use of the vehicle. For passenger automobiles, the new maximum FMV is
Tax Season Kicks Off
Following a flurry of tax legislation that enacted changes for tax years beginning in 2009, this tax season requires heightened attention to make sure your clients don’t miss any of the new and extended deductions and credits to which they’re entitled. Most of the changes for 2009 were directed at
Family Partnership Rules Applied in TIFD III-E Remand
In a case reversed and remanded by the Second Circuit, the U.S. District Court in Connecticut again held that a General Electric subsidiary could treat Dutch banks’ interests as partnership equity rather than debt. In so doing, the district court in the long-running TIFD III-E case again sided with the
Series LLCs: Pros and Cons of a Growing Trend
Eight states allow the formation of series LLCs (Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas and Utah). A series LLC consists of a “master” LLC with one or more series of members, managers, interests or assets. Although contained within the master LLC, each series can have separate rights, powers and
Applying for a Private Letter Ruling
When a transaction requires greater certainty or when relief is sought for a difficult tax situation, applying to the IRS for a private letter ruling (PLR) can provide interpretation and application of law and regulation with respect to that taxpayer the Service will follow, within certain conditions and limitations. Here’s
Roth IRA an Ineligible S Corp Shareholder
The Tax Court decided 11–4 that an S election was automatically terminated because the corporation’s sole shareholder was a Roth IRA. The case was said to be a test case for a number of similar ones before the court. Taproot Administrative Services Inc., a Nevada corporation, was fully owned by
Regulations Proposed on Basis Reporting by Brokers
The IRS issued proposed regulations (REG-101896-09) on Wednesday relating to how securities brokers report sales to the IRS and how stock basis is determined. The regulations project also proposes to set a Feb. 15 deadline for brokers to supply certain information statements. The proposed rules reflect changes made in 2008
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IRS ISSUES REGS ON SIX-YEAR LIMITATIONS ON BASIS OVERSTATEMENT The IRS issued proposed and temporary regulations (TD 9466, REG-108045-08) Sept. 24 to clarify that an overstatement of basis can create a substantial omission of gross income under IRC §§ 6229(c)(2) and 6501(e) for purposes of the six-year extended period for
A Limited-Time Opportunity for Small Business Stock
The American Recovery and Reinvestment Act of 2009 (ARRA) increased the exclusion amount for qualified small business stock (QSBS) from 50% to 75% (IRC § 1202). In addition, QSBS is currently subject to a lower inclusion rate for gains subject to the alternative minimum tax (AMT) under section 57(a)(7). However,
Requests for Tax Shelter Opinion Letters Denied
The Tax Court denied a partnership’s motions to compel the IRS to provide tax opinion letters related to all known “Son of BOSS” transactions, along with a list of law or accounting firms that have issued them. The court determined that the information requested by 3K Investments LLC (tax matters
IRS Releases Guidance on Expanded NOL Carryback Rules
The IRS on Friday provided guidance on the new expanded five-year net operating loss (NOL) carryback rules, which were recently amended by the Worker, Homeownership, and Business Assistance Act, PL 111-92. The guidance is contained in Revenue Procedure 2009-52, and it explains how a taxpayer elects to carry back an
President Signs Unemployment Bill With Tax Items
On Friday, President Obama signed into law a bill that includes changes to the first-time homebuyer credit, increased NOL carrybacks for small businesses, and mandatory e-filing for most tax return preparers. The bill cleared Congress on Thursday. The Senate had unanimously agreed to the bill, the Worker, Homeownership, and Business Assistance
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FIRST CIRCUIT DENIES TEXTRON WORK PRODUCT PRIVILEGE In a 3-2 decision, the First Circuit Court of Appeals overturned its earlier three-judge ruling and a district court to hold that the work product doctrine did not protect from IRS summons the tax accrual workpapers of aviation and industrial conglomerate Textron Inc.
Application of Six-Year Statute of Limitations Denied Again
The Tax Court, whose denial of a six-year statute of limitations in Bakersfield Energy Partners had been recently upheld by the Ninth Circuit, held in two more cases that an overstatement of basis did not allow the extended assessment period for a substantial omission of gross income under IRC §
Salaries a BIG Offset
C corporations that elect S status are often subject to the built-in gains (BIG) tax under IRC § 1374. One of the aspects of the BIG tax that can be a trap for the unwary is the treatment of accounts receivable for cash-basis corporations. The fair market value of accounts
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