Because the Ponzi scheme perpetrated by Bernard Madoff involved potentially thousands of taxpayers, the IRS has issued guidance on the tax aspects of losses from a Ponzi scheme and created a safe harbor under which investors can claim theft loss deductions. IRC § 165(a) allows taxpayers to deduct losses sustained
Advertisement
TOPICS / TAX
Individual income taxation
International Tax Provisions Introduced and to Be Considered This Year
President Obama’s budget proposal for the 2010 fiscal year includes “certain international tax reform and enforcement measures,” but the only detail on this is the following one-line item from the associated revenue table: “implement international enforcement, reform deferral, and other tax reform policies.” This is estimated to raise $210 billion
IRS Lowers Interest Rates on Over- and Underpayments
The IRS announced that interest rates on tax overpayments and underpayments will drop by one percentage point for the quarter starting April 1 (Rev. Rul. 2009-7). IRC § 6621 establishes the interest rates on tax overpayments and underpayments. The rates are based on the federal short-term rate (most recently published
Appeals Court Finds $20 Million Bonus Reasonable
The Seventh Circuit Court of Appeals reversed a Tax Court decision that held that most of an executive’s $20 million compensation was unreasonable and therefore a nondeductible dividend (Menard, Inc., No. 08-2125 (7th Cir. 3/10/09), rev’g T.C. Memo. 2005-3). John Menard is founder and CEO of Menard Inc. In 1998,
Green Energy Incentives Among Recovery Act’s Tax Provisions
From fitting a home with energy-efficient windows to harnessing the power of waves and tides, activities that conserve energy or produce it from clean and renewable sources enjoy new or expanded tax credits in the American Recovery and Reinvestment Act of 2009 (ARRA). The next generation of electric vehicles gets
Taxpayers Receiving Bigger Refunds This Season
With five and a half weeks to go in tax season, the IRS reports that more taxpayers have filed returns this year than last and that those taxpayers are receiving larger refunds. As of Feb. 27, individual taxpayers had filed 56 million returns with the IRS, a slight increase over
Concerns About CPA Letters to Third Parties
A CPA receives a request from a client to provide a letter to the client’s mortgage broker, lender, adoption agency, or other third party. The request seems simple enough and harmless. All the client asks is that the CPA verify that this is her client, that she has been preparing
Sixth Circuit Upholds Use of Life Tables for Lottery Lump Sum
The Sixth Circuit Court of Appeals ruled in Carol J. Negron v. U.S., docket no. 07-4460, that the IRS annuity tables of IRC § 7520 provide a realistic and reasonable estate valuation of a state lottery prize paid as a lump sum. In so doing, it reversed a district court’s
Creating Joint Ownership: Avoiding the Tax Traps and Other Pitfalls
Last month’s column showed how adding a child or other nonspouse family member to the title of property as a joint tenant can create unintended consequences of deemed gifting for gift tax purposes. In that illustration, Jack added his daughter, Liz, as joint owner of rental property, immediately triggering a
Two Out of Three Not Good Enough
The Tax Court ruled that a taxpayer was not entitled to claim a theft loss where he failed to show he had no reasonable chance of recovering his stolen money during the tax year in question. From 1999 to 2001 Dominick Vincentini, a resident of Michigan, was involved with Anderson
Private Annuity Defers Gain
A taxpayer was permitted to defer capital gain when he transferred appreciated capital assets in exchange for a private annuity. The Tax Court held the arrangement met the requirements of Revenue Ruling 69-74, 1969-1 C.B. 43, and thus the capital gain could be deferred until the taxpayer began receiving payments
Worker Classification Still Troublesome
The Tax Court ruled that a worker was an employee rather than an independent contractor partly because he was paid a daily rate during the four years he worked for an energy company and he supervised other employees. The worker classification issue has been a headache for taxpayers and the
Erroneous LIFO Methodology
A mistake made in a taxpayer’s last-in, first-out (LIFO) computation may repeat in later-year returns if staff preparing the computation take a “same as last year” approach. When the mistake ultimately is detected, there is a question of whether the mistake represents a method of accounting or an error. Huffman
IRS Releases New Withholding Tables
The IRS on Monday released withholding tables that reflect a new tax credit, dubbed the making work pay credit, created by the stimulus package. The making work pay credit was created by the American Recovery and Reinvestment Act, PL 111-5, which President Obama signed on Feb. 17. The credit equals
Requesting 9100 Relief
A taxpayer who fails to make a tax election by the due date for the election may not be out of luck. Certain extension and administrative relief options exist if the taxpayer can obtain “9100 relief” under Treas. Reg. §§ 301.9100-1 through -3. The drawback is that unless he or
Tax Aspects of Contributing a House to a Fire Department
Local fire departments often deliberately burn existing structures as a training exercise. New firefighters can practice their skills and techniques, knowing in advance that the structure is uninhabited. Often individuals will donate an old property, possibly even a former residence, to the local fire department. Obviously, where possible, taxpayers would
Individual Tax Breaks in the Stimulus Package
With its new and expanded tax benefits for individuals, the American Recovery and Reinvestment Act of 2009 seeks to get more money into the pockets of American consumers. College students and their families, homebuyers, and buyers of new cars are among the potential beneficiaries, but so too are low-income Americans,
What to Do If a Client Is Missing a W-2
Employers had until Feb. 2 to issue Forms W-2 to their employees, showing wages and earnings for 2008. If a client hasn’t received a W-2 by now, here are the steps the IRS says to take: 1. Contact the employer. The client should contact his or her employer to find
Tax Court Can Look Outside Administrative Record in Determining Innocent Spouse Relief
The Eleventh Circuit has held that the Tax Court could consider evidence outside the administrative record when deciding on a taxpayer’s claim for innocent spouse relief (Neal, No. 06-14357 (11th Cir. 2/10/09)). The taxpayer had petitioned the IRS for equitable relief under IRC section 6015(f) because, unbeknownst to her, her
Taxes in Troubled Times
The IRS has acknowledged there’s plenty of pain to go around in the current economic downturn. Financially strapped taxpayers can take advantage of several relief initiatives and provisions that could lessen their tax bite. Those with investments posting a loss may be able to “harvest” it or at least reposition
Features
ALSO FEATURED
How to protect nonprofits from hidden fraud risks
CPAs can help not-for-profits spot the red flags of common schemes, so they can take steps to tighten controls and reduce exposure.
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
