The Tax Court held that a leveraged securities agreement was not a securities lending arrangement under IRC § 1058 since its economic substance indicated the taxpayers’ opportunity for gain had been reduced. Thus the arrangement was treated as two separate sales transactions; the first resulted in no gain or loss,
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TOPICS / TAX
Business tax
Broader Interpretation of Economic Substance Blunts Deductions
The Fifth Circuit Court of Appeals affirmed a district court ruling that Klamath Strategic Investment Fund’s loan transactions lacked economic substance and that no penalties applied. Furthermore, the appeals court held that the lower court erred in allowing Klamath deductions for operational expenses in connection with a sham transaction and
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IRS to Recommend New Tax Preparer Standards The IRS plans before the end of the year to recommend new standards for tax preparers, Commissioner Doug Shulman announced June 5. In testimony before the House Ways and Means Oversight Subcommittee and in a news release, Shulman said he would propose to
AICPA: Existing Law Sufficient to Regulate Preparers
The IRS already has authority to regulate currently unlicensed tax return preparers without additional legislation, the chair of an AICPA tax committee told the Service in a public forum Thursday in Washington. Michael P. Dolan, chair of the AICPA’s IRS Practice and Procedures Committee, made the remarks during a panel
IRS Issues Guidelines for Low-Speed Electric Car Manufacturers
On July 10, the IRS issued Notice 2009-58, which provides procedures for car manufacturers to certify that their vehicles qualify for the new plug-in electric vehicle credit under IRC § 30. Taxpayers who buy a qualified electric vehicle between Feb. 17, 2009, and Jan. 1, 2012, can take a credit
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AUTO DEPRECIATION LIMITS UPDATED The IRS issued Revenue Procedure 2009-24 that provides 2009 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under IRC §§ 280F and 168. For passenger automobiles (other than trucks or vans) placed in service during calendar 2009, the 2009 depreciation limit
Self-Employment or Other Income?
Taxpayers frequently have income reported on Form 1099-MISC. It may represent earnings from a trade or business that should be reported on Form 1040, Schedule C. If not, it generally is reported as other income on Form 1040. Of course, net income from a trade or business is subject to
IRS Proposes New Cell-Phone Fringe Benefit Substantiation Rules
Employer-provided cell phones have gone from an exclusive perk to common equipment in the 20 years since Congress made them subject to strict substantiation requirements for business use. Monday, the IRS proposed simplifying those rules. Generally, employees must include in income the fair market value of fringe benefits provided by
Ninth Circuit Rules on Tax Court Jurisdiction in Partnership Cases
The Ninth Circuit has held in a group of consolidated cases that the Tax Court has jurisdiction to decide in partner-level proceedings whether a partnership’s transactions were tax-motivated (Keller, No. 06-75466 (9th Cir. 6/3/09)). The case concerns the outstanding tax liabilities of 16 partners who invested in cattle partnerships that
A Broker Is What a Broker Does
The Tax Court held that a woman’s work as an independent contractor for a real estate agency enabled her and her husband to deduct losses because they were incurred from a real property trade or business rather than a passive activity. According to the court, the taxpayers’ real estate activities
State Taxation of Telecommuters
Walk into any office today—not just late on a Friday afternoon—and you might wonder where all the workers are. Most likely, they’re telecommuting, from home or anyplace they can plug in or catch a wireless signal and log on—and for a lot of good reasons. Employers don’t have to provide
Ponzi Guidance Welcomed
The Ponzi loss safe harbor recently set forth in Revenue Procedure 2009-20 and Revenue Ruling 2009-9 brought welcome clarity to permissible treatment of such losses as well as the possibility of expedited theft loss deductions, practitioners said. “It’s about as taxpayer-friendly as one could have hoped for,” said Rick Klahsen,
No Second Class of Stock
The Fifth Circuit Court of Appeals rejected an S corporation owner’s argument that the corporation’s payments to her father, one of the company’s founders, had created a second class of stock that had terminated the S election. The daughter had unsuccessfully sought by that reasoning to exclude from her gross
IRS Proposes Basis-Tracing Regulations
The IRS has issued proposed regulations that propose a comprehensive approach for stock basis recovery. The regulations, if adopted as final, would apply across a broad spectrum of transactions. They will create a single model for stock basis recovery if a shareholder receives a dividend under IRC § 301. These
IRS Notice Provides Work Opportunity Credit Definitions
The IRS has released a notice that defines the terms “unemployed veteran” and “disconnected youth,” for purposes of the IRC § 51 work opportunity credit (Notice 2009-28). The notice also gives transition relief to employers who hire employees from those targeted groups after Dec. 31, 2008, and before July 17,
Tax Amnesty Programs and Voluntary Compliance Initiatives: A Way to Mitigate Declining State Revenues
Since 2000, more than half of the states have offered tax amnesty programs one or more times (see Federation of Tax Administrators, “State Tax Amnesty Programs” (July 2007)). The programs allow taxpayers to “come clean” and report and pay delinquent tax liabilities. They are popular with taxpayers because they provide
Revenue Ruling Gives Guidance on S Elections for Partnerships Converting to Corporations
The IRS issued Revenue Ruling 2009-15, which addresses the question of whether, when a partnership becomes a corporation for federal tax purposes, it is eligible to elect to be taxed as an S corporation in its first tax year. The ruling, issued Thursday, clarifies that a partnership that converts to
Administration’s International Tax Proposals Plan to Raise $210B Over 10 Years
President Obama released his plan to raise $198.3 billion from 2011–2019 by overhauling international taxes, which will affect multinational corporations. When combined with further international tax reforms that will be described in the administration’s full budget proposal, the proposed international tax reform package would raise $210 billion over the next
Third Party’s Activities Create Nexus
The U.S. Supreme Court declined to review a finding of substantial nexus by New Mexico for gross receipts tax on mail-order and online sales in that state by a subsidiary of Texas-based computer maker Dell Inc. The New Mexico Court of Appeals last summer affirmed an assessment of gross receipts
Noncompete Agreement Payment Wasn’t Sale of Personal Goodwill
The First Circuit upheld a district court’s holding that money allocated to a noncompete agreement was not for “personal goodwill” when a business’ sale agreement didn’t specifically identify it as such. When a business is sold, it is not uncommon for a portion of its sale price to be attributable
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