The Tax Court upheld a disallowance of more than $22,000 of a couple’s charitable contribution deduction solely for the lack of a contemporaneous statement from their church, the donee, that the couple received no goods or services in return. The taxpayers, David and Veronda Durden, made the contributions by check,
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TOPICS / TAX
IRS practice & procedure
Tax compliance for acquisitions: Prepare before purchasing
Fears of a “double-dip” recession in 2012 may have subsided, but the overall economic forecast remains uncertain. Therefore, companies are looking beyond organic, internal growth to external growth sources to bolster company performance. A recent study by The Boston Consulting Group (BCG) touted the power of acquisitions for growth during
Regulations finalize rules on entertainment use of business aircraft
On Tuesday, the IRS issued final regulations relating to the disallowance under Sec. 274 of deductions for the use of business aircraft for entertainment (T.D. 9597). The final regulations adopt, with some modifications, proposed regulations issued in 2007 (REG-147171-05), which in turn followed principles first expressed in Notice 2005-45. In
Treasury releases model intergovernmental agreement for FATCA
The Treasury Department on Thursday released a model intergovernmental agreement designed to implement the information-reporting and withholding-tax provisions in the Foreign Account Tax Compliance Act (FATCA), which was enacted by Congress in 2010 to require foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by
Taxpayers who did not establish insolvency must recognize COD income
Taxpayers who settled a credit card debt for $4,412 less than they owed in 2008 had to include that amount in income because they did not prove they were insolvent under Sec. 108(a)(1)(B) at the time of the debt discharge (Shepherd, T.C. Memo. 2012-212). Sec. 108(a)(1)(B) excludes cancellation of debt
Tax Court upholds regulation requiring dependents be citizens in year tax benefits are claimed
On Thursday, the Tax Court upheld Regs. Sec. 1.152(a)(1), which requires that children be U.S. citizens at some time during the calendar year for which the children are claimed as dependents, as a valid interpretation of Sec. 152(b)(3)(A) (Carlebach, 139 T.C. No. 1 (2012)). The taxpayers and their six children
American Institute of CPAs recommends changes to tangible property guidance
On July 16, 2012, the AICPA submitted a comment letter to the IRS recommending various changes and simplifications to the voluminous and complex regulations regarding the treatment of expenditures incurred in selling, acquiring, producing, or improving tangible assets (T.D. 9564 and REG-168745-03) and the revenue procedures governing the accounting method
New rules aim to shut down certain outbound asset reorganizations
In Notice 2012-39, the IRS issued rules to govern certain outbound asset reorganizations involving the transfer of intangibles under Sec. 367(d) occurring on or after July 13, 2012, and that will apply instead of existing regulations (Temp. Regs. Secs. 1.367(d)-1T(c), (d), (e), and (g)). The IRS intends to issue regulations
Tax Court petition challenging a notice of deficiency suspends statute of limitation
The Eleventh Circuit overturned a Tax Court decision and held that a petition filed by taxpayers who had transferee liability for their corporation’s tax liability was a “proceeding in respect of the deficiency” under Sec. 6503(a)(1) that suspended the limitation period for assessment (Shockley, No. 11-13494 (11th Cir. 7/11/12), rev’g
Debtors’ taxes are not discharged in bankruptcy where tax return was filed late
A federal appeals court held that bankrupt debtors who filed their income tax return 17 months after their income taxes were assessed were not entitled to have those taxes discharged in the bankruptcy proceeding (In re Wogoman, No. CO-11-084 (B.A.P. 10th Cir. 7/3/12)). In doing so, the court considered what
Medical center’s FICA refund claim dismissed as untimely
The First Circuit Court of Appeals dismissed a suit for refund of FICA taxes Maine Medical Center mistakenly paid for its medical residents in the 2001 tax year, upholding a lower court determination that Maine Medical’s discovery requests were not warranted and that the information it sought from the IRS
IRS looks into international activities
Many tax-exempt entities participate in the global economy by engaging in charitable or other exempt activities overseas and/or making foreign financial investments. These activities have drawn attention from the IRS and other federal agencies as they examine the flow of tax-exempt funds around the world. FOREIGN BANK ACCOUNTS The first
Tax Court disallows cost segregation of apartment building components
In a case exploring the extent of allowable cost segregation in depreciable rental real estate, the Tax Court held that all but a small handful of items identified by the building’s owner had to be depreciated over the life of the building. AmeriSouth, a limited partnership, bought an apartment complex
Unmarried co-owners must allocate mortgage interest limits
The Tax Court held that, in calculating qualified residence interest, unmarried taxpayers must apply the debt limits for home acquisition and home equity loans to their total joint indebtedness on qualified residences rather than to each of their shares of the indebtedness. Sec. 163(h)(3)(A) permits taxpayers to deduct interest paid
Waitress’s lottery win shared with family ruled taxable gift
In Dickerson, the IRS prevailed when the Tax Court ruled that a waitress’s transfer of her winning lottery ticket to an S corporation with herself and family members as shareholders was a taxable gift. In 1999, a regular customer at a Waffle House restaurant in Alabama where Tonda Lynn Dickerson
Supreme Court affirms Home Concrete on overstated basis
The U.S. Supreme Court in a 5–4 decision affirmed the Fourth Circuit’s holding in Home Concrete & Supply, LLC, that a taxpayer’s overstatement of basis in property sold was not an omission from gross income for purposes of the extended six-year statute of limitation under Sec. 6501(e)(1)(A). The Supreme Court’s
IRS releases new FAQs for Offshore Voluntary Disclosure Program, announces other rules
The IRS said Tuesday that it has collected more than $5 billion in its offshore voluntary disclosure programs (IR-2012-64), the third of which was announced in January this year. At the same time, it also released 55 questions and answers updated for the 2012 program. On Jan. 9, the IRS
Eleventh Circuit says PTIN user fees are valid
The Eleventh Circuit held that the fee the IRS charges to issue preparer tax identification numbers (PTINs) to tax return preparers, who are required to use the PTINs on returns they prepare, is valid because the PTIN confers a special benefit on the preparers: the privilege to prepare tax returns
Offer in compromise rules made more flexible in expansion of Fresh Start program
The IRS on Tuesday announced that it is making the terms under which it will accept offers in compromise more flexible (IR-2012-53). The changes are part of the IRS’s expansion of its Fresh Start program and are designed to help financially distressed taxpayers clear up tax problems more quickly. The
Final regs. issued on health insurance premium tax credits
The IRS issued final regulations governing the Sec. 36B health insurance premium tax credit enacted by 2010’s health care legislation (T.D. 9590). They are scheduled to be published in the Federal Register on May 23. The final regulations provide guidance to individuals who enroll in qualified health plans through Affordable
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