The Ohio Supreme Court has been asked to rule on Ohio’s commercial activity tax (CAT) as applied to certain food sales, after the tax was found by a state appeals court to violate the state constitution in that regard. A gross receipts business tax, the CAT was enacted in 2005
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TOPICS / TAX
Business tax
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CONGRESS TRUMPS SUPREME COURTIn Announcement 2008-103, the IRS provided procedures and guidelines for claiming refunds of excise tax paid by domestic coal producers and exporters on exported coal. The guidance was in response to an extension by Congress of the tax years for which refunds may be claimed, to those
VEBA’s Excess Set-Aside is UBI
The Court of Federal Claims ruled that a tax-exempt voluntary employees’ beneficiary association (VEBA) recognized income subject to the unrelated business income tax (UBIT) because it exceeded the amount the VEBA could set aside to pay benefits. The UBIT was enacted to prevent tax-exempt organizations from competing with taxable entities
Proof of Material Participation Must Be Credible
A taxpayer must prove material participation in an activity to deduct losses from that activity against nonpassive income. The Ninth Circuit reaffirmed that credible evidence must be presented to prove that one of the material participation tests of IRC § 469 has been met. In 2007, the U.S. District Court
IRS Auditor’s Pups Unprofitable
The Tax Court disallowed an IRS auditor’s deductions for breeding greyhounds as a hobby loss. Ralph Thomas Whitecavage bred and raised the dogs for racing. He received a percentage of their race winnings but did not realize a profit. The IRS determined deficiencies totaling $18,601 for tax years 2001 through
Economic Substance Redux
The Court of Federal Claims ruled against another Son of BOSS shelter, upholding penalties despite the taxpayers’ reliance on the advice of tax attorneys The Welles family owned Therma-Tru Corp., a leading manufacturer of insulated doors. Between 1999 and 2000 the family negotiated the sale of the corporation to a
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SERVICE LAUNCHES LILO, SILO SETTLEMENT INITIATIVEThe IRS followed up its recent court victories against LILOs (lease in, lease out) and SILOs (sale in, lease out) with an offer to settle the estimated hundreds of the listed-transaction tax shelters still on companies’ books. The offer, sent initially on Aug. 6 to
Applying At-Risk Rules Risky
On remand from the Sixth Circuit, the Tax Court has held that a deficit restoration obligation (DRO) added to the operating agreement of a limited liability company didn’t allow its member to create recourse debt. Despite the DRO, the at-risk rules under IRC § 465 barred a current deduction because
Service Launches LILO, SILO Settlement Initiative
The IRS followed up its recent court victories against LILOs (lease in, lease out) and SILOs (sale in, lease out) with an offer to settle the estimated hundreds of the listed-transaction tax shelters still on companies’ books. The offer, sent initially on Aug. 6 to 45 large corporations known to
Shell Wins $19M Refund
A district court in Texas allowed Shell Petroleum to carry back capital losses and receive a nearly $19 million refund. The losses were generated by a restructuring transaction involving an exchange of highbasis property for new subsidiary stock followed by loss-generating dispositions of the stock. In 1992, Shell Oil was
Startup Expensing Election Now Deemed
Taxpayers may elect under IRC § 195 to deduct in the first year of operation up to $5,000 of startup expenses (reduced by the excess of total startup costs over $50,000) of an active trade or business and generally must amortize the remainder over 15 years. In July, the IRS
Court Hangs Up On Phone Tax Refund
The Court of Federal Claims held that the statute of limitations applies to taxpayers who paid the telephone excise tax through carriers and were not required to file returns related to it. Until May 2006, the IRS contended that telephone toll charges that varied only with elapsed time but not
GAO: Businesses Owe $58B in Payroll Taxes
Although payroll tax debts are one of the IRS’s top collection priorities, the Service hasn’t made optimal use of its enforcement tools against the 1.6 million businesses owing $58 billion for employees’ income, Social Security and Medicare taxes, the Government Accountability Office said. Earlier GAO audits found that payroll taxes
Online Retailers Battle N.Y. Nexus
Online retailers Amazon.com and Overstock. com sued the New York State Department of Taxation and state officials over the state’s new definition of Web sellers required to collect sales and use tax. New York changed the definition of vendors subject to the tax to include those who pay a commission
Pass-Through Entity Automatic Extension Shortened
Along with final regulations adopting automatic six-month filing extensions for certain returns, the IRS proposed reducing the extension to five months for partnerships and other pass-through entities. The shorter period is intended to better enable owners to receive Schedules K-1 and other information returns in time to prepare their individual
LILO Comes Up One Leg Short
The Fourth Circuit Court of Appeals held that a LILO (lease in, lease out) transaction by banking company BB&T Corp. was not a genuine leasehold interest but only a circular transfer of funds. In so ruling, the Fourth Circuit upheld a district court’s denial of deductions arising from the deal.
Unitary Business Principle Clarified
A recent addition to the Lexis database of Supreme Court decisions could spare the electronic legal research service’s former owner from a $4 million tax bill. In MeadWestvaco v. Illinois , the nation’s top court said an Illinois appellate court improperly applied the operational function test of the unitary business
Levels of Certainty
Two rulings in separate cases by the Court of Federal Claims helped clarify how penalties involving partnerships are imposed and defended against at the partnership and partner levels. Because partnerships are flow-through entities, contested partnership items were formerly litigated at the partner level. This approach, however, led to repetitive legal
Check-the-Box Regulations Are Valid
The U.S. Supreme Court declined to review a case in which a business owner argued that “check-the-box” entity classification rules represent an invalid exercise of the IRS’s authority to issue interpretive regulations under IRC § 7805(a). In so doing, the court let stand a ruling by the Sixth Circuit
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From The Tax Adviser
March 31, 2026
Current developments in taxation of individuals: Part 1
March 31, 2026
Current Developments in Taxation of Individuals: Part 1
March 6, 2026
