Editor’s note: Also read “Deferral and Spreading of Roth Conversion Income Not Always Best,” in the July 2010 issue of the Journal of Accountancy. Click here to download “Regular IRA to Roth IRA Conversion: Evaluating the Income Recognition Options,” an illustrative spreadsheet that allows planners to choose between two possible
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TOPICS / TAX
Individual income taxation
Charitable Planning: CRTs, CLTs and the Increasing Payment CLAT
One of the main reasons people give to charity is for their ego or image—they want to be seen in the community as philanthropic. Another main reason some donate is for the tax breaks. Others give to charity for truly altruistic reasons. Yet others leave money to charity because they
IRS Revises Section 179 Expensing Amounts to Reflect HIRE Act Changes
On June 1, the IRS issued revised inflation-adjusted numbers to reflect the extension of the increased section 179 expensing amount for 2010 (Revenue Procedure 2010-24). On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, PL 111-147 (the HIRE Act), extended for 2010 the increased amounts that
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ADOPTION CREDIT AND EXCLUSION EXPANDED The Patient Protection and Affordable Care Act (PL 111-148) temporarily increased the adoption expense credit and fringe benefit exclusion limit for adoption-assistance programs and made the credit refundable. The changes are effective for tax years beginning after Dec. 31, 2009. The act increased the statutory
Spouse Had “Reason to Know” of Disallowed Deductions
The Sixth Circuit joined the Second, Fifth, Seventh, Eighth, Ninth and Eleventh circuits in adopting the “knowledge of the transaction” test of Price v. Commissioner (887 F.2d 959 (9th Cir., 1989)) in innocent spouse cases, upholding a Tax Court finding of ineligibility for relief. IRC § 6015(b)(1)(C) requires taxpayers seeking
Widow Not Barred From Innocent Spouse Claim
The Tax Court determined that a widow was not prohibited from raising the issue of relief from joint and several liability for three tax years that had been previously litigated. The court concluded that the exception to res judicata applied, but it did not address whether the taxpayer qualified to
Sixth Circuit Finds False Imprisonment Settlement Payments Taxable
The Sixth Circuit affirmed a Tax Court decision that settlement proceeds received for false imprisonment were not excludable under IRC § 104(a)(2) as amounts received due to physical injury. Brenda Stadnyk was falsely imprisoned as the result of an auto dealership’s criminal complaint against her. She had stopped payment on
Don’t Neglect to Elect
A wide range of federal tax elections gives individual taxpayers options for how they report certain income or expense items. Some of the more common elections for individuals concern retirement plans, medical expenses and interest expense. Each election has specific rules as to who can make the election, when and
House Passes Tax Extenders Bill
On Friday, the House of Representatives passed the American Jobs and Closing Tax Loopholes Act (HR 4213) by a vote of 215–204. The bill now goes to the Senate, which will not take it up for consideration until after it returns from its Memorial Day recess on June 7. The
Final Interim Regulations Issued on Adult Dependent Health Coverage
On Monday, the IRS, along with the Department of Labor and Department of Health and Human Services, issued interim final regulations for group health plans and health insurers relating to dependent coverage for children under the age of 26 (TD 9482). The regulations complement guidance issued by the IRS on
IRS Releases Average Premiums for Determining Small Business Health Care Credit
The IRS on Monday issued average small group market premiums for use in determining the new small business health care credit under IRC § 45R (Rev. Rul. 2010-13). The Patient Protection and Affordable Care Act, P.L. 111-148, provides tax credits for small businesses, beginning in years after 2009, designed to
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UNCERTAIN TAX POSITIONS SCHEDULE TO DEBUT FOR 2010; COMMENT PERIOD STILL OPEN The IRS extended until June 1 the comment period for its proposal to require large businesses to disclose uncertain tax positions and announced that it intends to make the requirement effective for tax years beginning in 2010. The
Sex-Change Surgery Deductible Medical Expense
In a case of first impression, the Tax Court ruled that the costs of hormone therapy and sex reassignment surgery for an individual diagnosed with gender identity disorder (GID) qualified as deductible medical expenses. However, the court also said the cost of breast augmentation surgery was cosmetic surgery and not
IRS Provides Guidance on Health Coverage for Adult Dependents, Addresses Discrepancies in Law
The IRS issued guidance Tuesday on the tax treatment of health coverage for children who have not yet turned 27 (Notice 2010-38). The health care reform legislation enacted in March extended the general exclusion from gross income for reimbursements for medical care under an employer-provided accident or health plan (under
IRS Grants Military Spouses Six-Month Extension to Pay 2009 Tax
On April 15, the IRS issued Notice 2010-30, which gives certain civilian spouses of service members on active duty an extension of time through Oct. 15, 2010, to pay their 2009 federal income taxes. However, civilian spouses were not granted an automatic extension of time to file a return. The
Using a Qualified Plan Account to Fund a Roth IRA Conversion
Roth IRAs have become popular retirement savings options since their introduction in 1998. However, high-income individuals have not been able to take advantage of the Roth IRA opportunity. Recent tax law changes expand the Roth IRA to all taxpayers who have or could have traditional IRA accounts. Background Before 2010,
Final Regs Govern Deductibility of State Legislators’ Deemed Living Expenses
The IRS and Treasury released final regulations Thursday on the availability of a special deduction for deemed living expenses of state legislators (TD 9481). The final regulations adopt, with amendments, proposed regulations that were issued in 2008 (REG-119518-07). Under IRC § 162(h), a state legislator who lives more than 50
Tax Filing Season Resources—Tax Year 2009
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 JofA and The Tax Adviser, plus tax return checklists and tax savings tips from the AICPA, categorized by tax topic. INDIVIDUAL TAX IRS Reports Average Refund Size Is
Health Care Reform Reshapes Tax Code
In March, Congress passed two pieces of legislation designed to reform the U.S. health care system. The Patient Protection and Affordable Care Act (PL 111-148) was enacted on March 23, and was quickly followed by the Health Care and Education Reconciliation Act of 2010 (PL 111-152), which amended several portions
Claiming and Documenting the First-Time Homebuyer Credit
Practitioners should be aware of increased documentation procedures for the first-time homebuyer credit and the new administrative powers available to the IRS if a client’s return is selected for review. In addition, required attachments necessitate filing a paper return for 2009 (see news release IR 2009-108). This credit under IRC
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