In response to the liquidity crisis, which has made it difficult for taxpayers to fund their operations, the IRS quickly responded on Oct. 3 with Notice 2008-91, temporarily expanding the short-term financing exception to IRC § 956. This measure will permit corporations to access cash from their controlled foreign corporations (CFCs)
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TOPICS / TAX
IRS practice & procedure
Congress Extends, Amends Research Credit
The recently enacted Emergency Economic Stabilization Act of 2008 includes the long-awaited extension of the IRC § 41 research credit. The credit had expired at the end of 2007, but the act extends it to apply to amounts incurred after Dec. 31, 2007, and before Jan. 1, 2010. Under section
Stock Loan Treated as Sale
The value of a couple’s stock securing a loan could not be deducted as a theft loss, even though the stock was sold without the borrowers’ knowledge, the U.S. District Court for the Northern District of California ruled. Other claims, including whether, as the government argued, the loan was really
TIGTA: Unenrolled Preparers Often Wrong
Unenrolled, unlicensed preparers had only a 35% accuracy rate in preparing income tax returns, in a test conducted by the Treasury Inspector General for Tax Administration. More than one-third of the erroneous returns contained misstatements or omissions that TIGTA considered willful or reckless. TIGTA auditors posed as taxpayers earlier this
Twin Outcomes From Cap Gemini Deal
In two more of at least four similar cases, former Ernst & Young consulting partners were denied refunds of tax they paid on stock received from a merger with Cap Gemini that lost most of its value while in restricted accounts. In 2000, Cap Gemini agreed to purchase E&Y’s consulting
IRS Auditor’s Pups Unprofitable
The Tax Court disallowed an IRS auditor’s deductions for breeding greyhounds as a hobby loss. Ralph Thomas Whitecavage bred and raised the dogs for racing. He received a percentage of their race winnings but did not realize a profit. The IRS determined deficiencies totaling $18,601 for tax years 2001 through
New Treatment for Second-Home Proceeds
The 2008 Housing and Economic Recovery Act, enacted in late July, changes the rules for the partial exclusion of gain from the sale of a residence. For sales after Dec. 31, 2008, the IRC § 121 exclusion of gain will not apply to any gain allocated to a period of
“Significant Purpose” of Tax Avoidance Trumps Document Privlege
The U.S. District Court for the Northern District of Illinois required Valero Energy Corp. to produce documents sought by the IRS, saying they were not protected by the tax practitioner privilege of IRC § 7525 because they concerned a tax shelter. In so holding, the court adopted a more expansive
Withholding From Foreign Payments: IRM Section Offers Insight
CPAs with clients whose responsibilities include withholding and remitting taxes on payments to foreign individuals and entities can help those clients understand guidelines and institute sound practices. Often, these “withholding agents” are financial institutions, but they can include any individual, business or other entity paying U.S.- source income to a
Economic Substance Redux
The Court of Federal Claims ruled against another Son of BOSS shelter, upholding penalties despite the taxpayers’ reliance on the advice of tax attorneys The Welles family owned Therma-Tru Corp., a leading manufacturer of insulated doors. Between 1999 and 2000 the family negotiated the sale of the corporation to a
Widow of Ex-San Francisco Mayor Held to Be an Innocent Spouse
The widow of Joe Alioto, who served as the mayor of San Francisco from 1968 to 1976, was granted relief under section 6015(f) from paying nearly $2 million in taxes for tax years 1995 and 1996. The Tax Court had dismissed the case in September 1996 due to lack of
Line Items
SERVICE LAUNCHES LILO, SILO SETTLEMENT INITIATIVEThe IRS followed up its recent court victories against LILOs (lease in, lease out) and SILOs (sale in, lease out) with an offer to settle the estimated hundreds of the listed-transaction tax shelters still on companies’ books. The offer, sent initially on Aug. 6 to
Guidance Issued on Dividing CRTs, Assiting Divorcing Couples and Squabbling Annuitants
The IRS has issued Revenue Ruling 2008-41 confirming that charitable remainder trusts (CRTs) can be divided into separate but equal trusts for each recipient without adverse tax consequences. If properly divided, the separate trusts will continue to qualify as CRTs, and no private foundation termination excise taxes will apply under
Documenting a Casualty Loss
The ordeals of hurricanes Katrina, Rita and Wilma in 2005 and Gustav and Ike this year taught us in the Gulf Coast a lot about serving clients who have experienced casualty losses. Here are some ideas to keep in mind if you ever have to help your clients rebuild their
Phone Company on the Hook for Incentives
The Eleventh Circuit Court of Appeals upheld a Georgia district court decision holding that federal and state incentive payments to a local telephone company were gross income. The appellate court accepted the lower court’s analysis that the payments were not excludable as nonshareholder capital contributions. IRC § 118(a) excludes from
Safe From the IRS but Not Necessarily From the State
My comments relate to Stephen Huggard’s article titled “Voluntary Disclosure to the IRS: A Viable Option” (March 08, page 40). This article was very well written and right on point. Huggard makes an excellent final comment in the article stating that, “As long as the taxpayer is careful, he or
IRS Commissioner: Tax Collections Must Be Fair Amid Tough Economic Times
The IRS and tax preparers can reach out to taxpayers hurt by the current economic downturn to help them meet their tax obligations, IRS Commissioner Douglas Shulman told the AICPA National Tax Conference on Oct. 27. (Watch the speech here.) While the Service is mindful that many taxpayers are
IRS Appeals Jelke to Supreme Court
The government asked the U.S. Supreme Court to review the Eleventh Circuit’s decision in Estate of Frazier Jelke III v. Commissioner (100 AFTR2d 2007-6694, “Tax Matters: Dunn Does It Again,” JofA, March 08, page 70). The Eleventh Circuit previously declined to rehear en banc its decision overruling the Tax Court
Service Launches LILO, SILO Settlement Initiative
The IRS followed up its recent court victories against LILOs (lease in, lease out) and SILOs (sale in, lease out) with an offer to settle the estimated hundreds of the listed-transaction tax shelters still on companies’ books. The offer, sent initially on Aug. 6 to 45 large corporations known to
Shell Wins $19M Refund
A district court in Texas allowed Shell Petroleum to carry back capital losses and receive a nearly $19 million refund. The losses were generated by a restructuring transaction involving an exchange of highbasis property for new subsidiary stock followed by loss-generating dispositions of the stock. In 1992, Shell Oil was
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SPONSORED REPORT
Preparing clients for new provisions next tax season
As the 2025 filing season approaches, H.R. 1 introduces significant tax reforms that CPAs must be prepared to navigate. These legislative changes represent some of the most comprehensive tax updates in recent years, affecting both individual and corporate taxpayers. This report provides in-depth analysis and guidance on H.R. 1.
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