The Tax Court recently allowed claimed losses from horse-breeding activities in one case but denied them in another. In the first case, the court held that the taxpayers could deduct all of the expenses of their horse-breeding activity, since they had a profit motive when they started and conducted the
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TOPICS / TAX
IRS practice & procedure
Charitable Contributions of Conservation Easements
Charitable contributions of conservation easements allow taxpayers to obtain a federal tax benefit while helping to conserve land for public use or enjoyment or to preserve a historic structure. Through the use of these easements, ownership of land or a historic building is kept in private hands but with restrictions
Noncompete Agreement Is a Section 197 Intangible
The First Circuit Court of Appeals, affirming the Tax Court, held that a covenant not to compete must be amortized over 15 years rather than its one-year term. Recovery Group Inc. was an S corporation that provided services to insolvent companies. To buy out the interest of one of its
TIGTA: Resolution of Math Error Disputes Often Late, Sometimes Wrong
In taxpayer disputes over its correction of math errors on returns, the IRS was wrong 17% of the time and late in resolving disputes 40% of the time, the Treasury Inspector General for Tax Administration (TIGTA) found. IRC § 6213(b)(1) allows the IRS to adjust items on tax returns without
House Passes Repeal of 3% Withholding on Government Contracts
The House of Representatives passed a bill Wednesday to repeal a law that beginning in 2013 requires tax withholding of 3% of payments to vendors and contractors providing services to federal, state and local governments and their agencies. The bill, HR 674, passed by a vote of 405-16 and now
President Signs Bill Increasing EITC Due Diligence Penalty
President Barack Obama signed into law Friday a trade agreement with South Korea (HR 3080) that increases from $100 to $500 the Sec. 6695(g) penalty for failure by preparers to exercise due diligence with respect to the earned income tax credit (EITC). Under another provision of the agreement, the IRS
PTIN System Opens for 2012 Renewals
The IRS on Thursday announced that it has opened its preparer tax identification number (PTIN) registration system to accept renewals for the 2012 filing season (IR-2011-105). Preparers are required to renew their PTINs annually and must do so before Jan. 1, 2012. Among the changes this year, CPAs will be
Inflation Adjustments Made to Many Tax Items for 2012
The IRS released on Thursday its annual revenue procedure making inflation adjustments to the income tax tables and many tax credits and other items for tax years beginning in 2012 (Rev. Proc. 2011-52). Separately on Thursday, the IRS announced the 2012 contribution limits and other figures for pension plans and
Trade Bills Pass Congress With Tax Provisions
A tax preparer penalty relating to the earned income tax credit (EITC) will increase to $500, and the IRS will receive detailed information about federal and state prison inmates, both measures in a trio of foreign trade agreements Congress passed Wednesday. The trade deals with South Korea, Colombia and Panama
Practitioners Raise Concerns About Fingerprinting Proposal at IRS Hearing
The IRS heard a consistent chorus at a hearing Friday on proposed fees (REG-116284-11) for fingerprinting of registered tax return preparers and nonsigning staff at CPA firms: The IRS’ proposal is duplicative, expensive and can be done in a better way. The fees, estimated to cost $60 to $90 per
Regs Shut Down Artificially Generated FTCs
The IRS issued final, temporary and proposed regulations providing guidance on determining the amount of taxes paid for purposes of determining the foreign tax credit. The regulations are designed to curb certain transactions that the IRS says “produce inappropriate foreign tax credit results.” The final regulations (TD 9535), issued July
IRS Relents on Two-Year Limit on Innocent Spouse Equitable Relief
After winning appeals in three federal circuit courts of its two-year limit for requesting equitable innocent spouse relief, the IRS said on July 25 it will no longer observe that deadline. In Notice 2011-70, the IRS said it will now consider taxpayer requests for equitable relief from joint and several
Estates Must File Form 706 to Make Portability Election
The IRS on Thursday issued Notice 2011-82 to alert executors of the estates of decedents dying after Dec. 31, 2010, of the need to file a Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, within the time prescribed by law (including extensions). Form 706 must be filed to
IRS Issues Guidance on Fingerprinting, Other Registered Tax Return Preparer Details
The IRS provided more details Wednesday of its still-developing requirements for all paid tax return preparers to be registered and undergo a background check, to include fingerprinting. The IRS said CPAs are exempt from fingerprinting “at this time.” It also said it will not require individuals to be fingerprinted prior
IRS Offers Employee Reclassification Agreement
Employers may reclassify independent contractors as employees and limit the resulting federal payroll taxes for their most recent tax year, plus avoid related penalties and interest for prior years, under an IRS program announced Wednesday. In Announcement 2011-64, the IRS outlined its new Voluntary Classification Settlement Program (VCSP). Unlike an
IRS Issues Accounting Software Examination Guidance, Meets with AICPA
The IRS Small Business/Self-Employed Division (SB/SE) has issued guidance for its field examiners on when to request backup files of taxpayers’ accounting software during an examination, what the limits are on reviewing those electronic files, and how examiners must safeguard those records (SBSE-04-0911-086). The IRS has also updated its online
Reportable Transaction Penalty Gets Final Regulations
The IRS issued regulations Thursday (TD 9550), governing the IRC § 6707A penalty regime for failure to report reportable transactions, to reflect changes made by the Small Business Jobs Act of 2010 (PL 111-240). However, the final regulations do not give guidance on how the amount of the penalty is
Taxpayers Hit by Irene Get Postponement
Taxpayers in certain areas affected by Hurricane Irene have until Oct. 31 to file certain returns and make payments normally due before then, the IRS announced Thursday (IR-2011-87). The areas eligible for relief include parts of North Carolina, New Jersey, New York and Puerto Rico; the IRS expects to provide
Golfer Bogies Endorsement Income
Professional golfer Retief Goosen split a decision with the IRS in the Tax Court that partly redetermined the character and source of his income from product endorsements. Goosen is a native of South Africa and a nondomiciliary United Kingdom resident. He was well-known abroad before he won the 2001 U.S.
Third Circuit Upholds $473 Million Subpart F Deficiency
The Third Circuit Court of Appeals affirmed a deficiency of nearly $473 million against pharmaceutical company Merck & Co. Inc. as successor to Schering-Plough, saying an interest rate swap Schering-Plough engaged in with two foreign subsidiaries was a disguised loan from the subsidiaries. Subpart F of the IRC (sections 951
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From The Tax Adviser
March 31, 2026
Current developments in taxation of individuals: Part 1
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