The Tax Court held that credit card “interchange” fees received by subsidiaries of credit card issuer Capital One resembled interest that increased or created original issue discount (OID) related to the company’s pool of credit card receivables. As OID, a daily amount was properly included in income over the life
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TOPICS / TAX
IRS practice & procedure
LILO Stands Up to Court Scrutiny
In a rare setback for the IRS in its litigation against lease-in, lease-out (LILO) tax shelters, the Court of Federal Claims held that an arrangement by Consolidated Edison Co. of New York (Con Ed) with an electric utility in the Netherlands should be respected for federal tax purposes because it
IRS Extends Moratorium on Tax Shelter Enforcement
IRS Commissioner Doug Shulman announced in a letter to Sen. Chuck Grassley, R-Iowa, that the IRS is extending until March 1, 2010, a moratorium on collection enforcement of the IRC § 6707A penalty for failure to disclose tax shelters and other reportable transactions. Shulman first announced the moratorium July 6
When a Tax Return Is Not a “Return”
A taxpayer who does not comply with IRC § 6020(a) when filing late tax returns could lose the benefit of a bankruptcy discharge of taxes due on those returns. CPAs must be wary of this 2005 amendment to the Bankruptcy Code (USC Title 11) if a client has a history
Requests for Tax Shelter Opinion Letters Denied
The Tax Court denied a partnership’s motions to compel the IRS to provide tax opinion letters related to all known “Son of BOSS” transactions, along with a list of law or accounting firms that have issued them. The court determined that the information requested by 3K Investments LLC (tax matters
Final Regulations Update Rules on Paying Tax in Installments
The IRS issued final regulations Tuesday governing the payment of tax liabilities in installments (TD 9473). The regulations reflect changes to the law made by various acts going as far back as 1996. IRC § 6159 allows taxpayers who cannot pay their tax liabilities in full an option to enter
Tax Court Amends Rules to Allow Electronic Filing
The Tax Court has amended its procedural rules, effective Jan. 1, 2010, to allow electronic filing of documents submitted to the court (Tax Court Rule 26). The court set up a pilot electronic filing program in 2005. In 2008, the court added an electronic document access system to its Web
UBS Targets Come Into Focus
The IRS has released the selection criteria for identifying holders ofaccounts with Swiss bank UBS under a U.S. settlement agreement with the Swiss government negotiated in August. Under the agreement, UBS will turn over information concerning approximately 4,450 accounts for investigation. IRS Commissioner Doug Shulman also recently announced that about
Court Negates Tax Planning Transaction
A district court held that a partnership’s reported capital loss stemming from nonperforming loans lacked economic substance and denied the claimed tax benefits. D. Andrew Beal owned a bank that was in the business of acquiring nonproducing loans (NPLs) at extreme discounts. With an associate and China Cinda Asset Management
Final Regs Issued on E-Postcards
The Pension Protection Act of 2006 introduced a new notification requirement for small tax-exempt organizations that are not required to file an annual information return under IRC § 6033(a)(1). In July, the IRS released final regulations spelling out what small tax-exempt organizations must do to meet this requirement. Practitioners should
Line Items
FIRST CIRCUIT DENIES TEXTRON WORK PRODUCT PRIVILEGE In a 3-2 decision, the First Circuit Court of Appeals overturned its earlier three-judge ruling and a district court to hold that the work product doctrine did not protect from IRS summons the tax accrual workpapers of aviation and industrial conglomerate Textron Inc.
Qualifying Child Definition Amended
The Fostering Connections to Success and Increasing Adoptions Act of 2008, PL110-351, made several changes to the qualifying child (QC) definitions effective for tax years beginning after Dec. 31, 2008. Section 501(a) of the act amended the age requirement (IRC § 152(c)(3)) to also require the QC to be younger
Salaries a BIG Offset
C corporations that elect S status are often subject to the built-in gains (BIG) tax under IRC § 1374. One of the aspects of the BIG tax that can be a trap for the unwary is the treatment of accounts receivable for cash-basis corporations. The fair market value of accounts
IRS Not Limited to Three Years for FPAA
The Fifth Circuit held that IRC § 6229(a) sets no deadline by which the IRS must issue an FPAA (final partnership administrative adjustment). Its interpretation of the relationship between the limitations period in sections 6501(a) and 6229(a) mirrors that of the Tax Court, the D.C. Circuit and the Federal Circuit
Unrelated Child as a Qualifying Relative
One requirement for claiming a qualifying child (QC) for purposes of the dependency exemption deduction is that the child must be related to the taxpayer, that is, the taxpayer’s child (including stepchild or foster child), sibling, half-sibling, step-sibling or descendant of any of them (IRC § 152(c)(2)). However, dependents alternatively
Final Regulations Issued on S Corporation COD Income Exclusion and Tax Attributes
The IRS and Treasury Department issued final regulations (TD 9469) this week governing how an S corporation reduces its tax attributes under IRC § 108(b) when the S corporation has discharge of indebtedness (COD) income that is excluded from gross income under section 108(a). The regulations address situations in which
Government Loses LILO Case
In a rare setback for the IRS in its litigation against lease-in, lease-out (LILO) tax shelters, the Court of Federal Claims held that an arrangement Consolidated Edison Co. of New York (Con Ed) had with an electric utility in the Netherlands should be respected for federal tax purposes because it
Coalition Urges Congress to Ban Tax Strategy Patents
A coalition of various organizations, including the AICPA, has written to members of Congress to ask for a ban on the patenting of tax strategies. The letter says tax strategy patents “pose a significant threat to taxpayers and their advisers,” and urges Congress to prohibit them. In the past few
Losses From Interests in LLCs and LLPs Not Presumptively Passive
The Court of Federal Claims recently ruled that an interest in a Texas limited liability company (LLC) was not a limited partnership interest held as a limited partner for purposes of the passive loss rules and therefore losses from the interest should not be treated as presumptively passive. The Tax
Disclosure Consent Under § 7216
IRS rules effective Jan. 1, 2009, delineate more strictly tax return preparers’ duties to safeguard taxpayer information from unauthorized disclosure or use. IRC § 7216 imposes criminal penalties on the unauthorized use of taxpayer information. The requirements are closely tailored to the type of information, the party using it, and
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