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
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TOPICS / TAX
IRS practice & procedure
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
Accounting firm payments to owners flunk independent investor test
The Seventh Circuit held that an accounting and consulting firm organized as a C corporation could not deduct payments to related entities because they were dividends, not compensation for services rendered by the company’s owners (Mulcahy, Pauritsch, Salvador & Co., No. 11-2105 (7th Cir. 5/17/12), aff’g T.C. Memo. 2011-74). The
Farm debtors must pay capital gain tax in full, the Supreme Court holds
The U.S. Supreme Court ruled on Monday that farmers who sold farm assets during a bankruptcy reorganization under Chapter 12 of the Bankruptcy Code were liable for the full amount of the capital gains tax that resulted from the sale (Hall, Sup. Ct. Dkt. No. 10-875 (U.S. 5/14/12), aff’g 617
Illinois “click-through nexus” law held unconstitutional
On Monday, the Circuit Court for Cook County in Illinois issued an eagerly awaited order explaining its bench decision on April 25, which declared Illinois’s “click-through nexus” law unconstitutional (Performance Marketing Ass’n v. Hamer, No. 2011 CH 26333 (Ill. Cir. Ct. Cook Cty. 5/7/12)). The order found that the law
TIGTA and Congress focus on identity theft and tax fraud
On the same day the House Ways and Means Oversight and Social Security Subcommittees held a hearing on tax fraud involving identity theft, the Treasury Inspector General for Tax Administration (TIGTA) released a report saying the IRS does not handle identity theft issues well (TIGTA Rep’t No. 2012-40-050). Tuesday’s congressional
Terms in OIC agreement take meaning from Code, court holds
The Second Circuit Court of Appeals held on Wednesday that the terms “refund” and “overpayment” in an offer-in-compromise (OIC) agreement are specialized tax terms that take their meaning from the Internal Revenue Code and are not given their “plain English” meanings, despite the colloquial tone of the agreement (Sarmiento, No.
AICPA: Correspondence audits challenge taxpayers
The IRS’s use of correspondence audits to resolve issues with tax returns has mushroomed over the past decade—but taxpayer satisfaction with the program is fairly low. According to the Treasury Inspector General for Tax Administration (TIGTA), only 48% of those surveyed by the IRS said they were either somewhat or
IRS proposes expanding tax return information it will disclose to HHS under health care acts
On Friday, the IRS issued proposed regulations relating to how it will release certain tax return information to the Department of Health and Human Services (HHS), as required by 2010’s health care legislation (REG-119632-11). The proposed regulations describe certain items the IRS will disclose in addition to those required by
Federal Circuit dismisses refund suit based on all-zero returns
A married couple who filed tax returns listing all income and tax due as “zero” were denied refunds in a decision by the U.S. Court of Appeals for the Federal Circuit (Waltner, No. 10-CV-225 (Fed. Cir. 4/19/12)). The court dismissed the couple’s tax refund suit for lack of jurisdiction, holding
IRS creates priority phone service for correspondence audits
The IRS on April 2 launched a new toll-free phone service for tax professionals to use when responding to correspondence examination telephone calls or letters. The IRS calls the new service the Practitioner Priority Service (PPS). Practitioners can call a toll-free number (866-860-4259) and select the correspondence examination option (option
Colorado’s “Amazon” law requiring out-of-state retailers to report sales held to be unconstitutional
The U.S. District Court for the District of Colorado has held that the Colorado law requiring out-of state retailers to report information about customers’ purchases to each customer and to the Colorado Department of Revenue (DOR) violated the Commerce Clause of the United States Constitution (Direct Marketing Ass’n v. Huber,
Medical Center’s FICA refund claim dismissed as untimely
The First Circuit Court of Appeals dismissed a suit for refund of Federal Insurance Contributions Act (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
IRS launches third offshore voluntary disclosure program
With more than $4.4 billion collected in its 2009 and 2011 voluntary disclosure initiatives, the IRS in January announced its third program designed to encourage taxpayers with undisclosed offshore accounts to disclose them and fulfill related tax obligations (IR-2012-5). The new program, unlike the previous initiatives, has no deadline to
Innocent spouse is entitled to refund
The Tax Court recently found that a taxpayer who petitioned for relief under Sec. 6015(f) was not precluded from receiving a refund of money levied from a joint bank account. The court ruled that relevant Massachusetts law gave the innocent spouse a 50% ownership interest in the account. Thus, under
Homebuyer credit denied where former home still in use
A house that a married couple continued to use while trying to sell it was their principal residence during that period; therefore, they did not meet the timing requirement to qualify for an $8,000 first-time homebuyer credit when they purchased a new house, the Tax Court held. Francis and Maureen
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