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
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TOPICS / TAX
IRS practice & procedure
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
Offshore Account Voluntary Disclosure Deadline Extended to Oct. 15
The IRS today extended the deadline for voluntary disclosures by taxpayers with unreported income from hidden offshore accounts from this Wednesday, Sept. 23, to Oct. 15. The IRS cautioned that there would be no further extensions. The IRS said that tax practitioners had requested an extension because some are having
IRS Expands, Updates Appeals Mediation Process
The IRS on Friday expanded the number of cases that are eligible to go through mediation in Appeals and updated the mediation procedures (Revenue Procedure 2009-44). The IRS’ Appeals mediation program was authorized in 1998. The IRS Appeals function is designed to resolve tax controversies without litigation. The mediation program
Ninth, Federal Circuits: Basis Overstatement Not Income Omission
An overstatement of basis does not constitute a substantial omission of gross income that would extend the deficiency statute of limitations to six years, the Ninth Circuit Court of Appeals ruled, upholding the Tax Court. The decision in Bakersfield Energy Partners v. Commissioner puts the Ninth Circuit in line with
No Penalty Tax on Additional IRA Distributions
The Tax Court ruled that paying higher education expenses from an IRA was not a modification of a taxpayer’s annuity payments from the IRA that would have made the payments subject to the 10% additional tax on early distributions. Generally under IRC § 72(t), distributions received from an IRA before
Loan Refinancing Deemed a Taxable Distribution
The Tax Court found that the amount by which a taxpayer’s refinancing of a loan from his qualified retirement plan exceeded statutory limits was a deemed distribution subject to the 10% additional tax. Under section 72(p)(2), a loan from a qualified retirement plan to a participant is not treated as
Courts Split on Tax Shelter Exception to Practitioner Privilege
In the long-running Countryside Limited Partnership case, the Tax Court ruled against a government documents discovery request, saying the government had not met its burden of proof for showing the documents were in connection with the promotion of a tax shelter. Thus the government was unable to overcome the federally
AICPA Calls for Civil Tax Penalty Reform
The AICPA called on Congress and the IRS and Treasury Department to reform civil tax penalties, which it said have strayed from their intended purpose of promoting voluntary compliance with tax laws. A report and cover letter signed by Alan Einhorn, chair of the AICPA’s Tax Executive Committee, were submitted
IRS Modifies Automatic Accounting Method Change Procedures
The IRS on Thursday modified the procedures for obtaining automatic consent to change an accounting method. Revenue Procedure 2009-39 amplifies, modifies and clarifies various earlier pieces of guidance that had established the general procedures for taxpayers to secure advance IRS consent to an accounting method change. Last year, the IRS
IRS Provides Guidance on Election to Defer COD Income
In Revenue Procedure 2009-37, the IRS has provided guidance to taxpayers on how to make the new election to defer recognizing cancellation of debt (COD) income under IRC § 108(i). The revenue procedure also requires taxpayers who make the election annually to provide additional information on their returns, starting with
Phone Tax Suit Revived
A panel of the U.S. Court of Appeals for the District of Columbia ruled that taxpayers could challenge under the Administrative Procedure Act (APA) the IRS’ method of refunding long-distance telephone excise taxes. The 2-1 decision in Neiland Cohen v. U.S. (docket no. 08-5088) reversed and remanded a dismissal of
IRS Extends FBAR Filing Date for 2008 Filings
The IRS announced Friday in Notice 2009-62 that it is extending for certain taxpayers the due date for filing calendar year 2008 Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). Because the Treasury Department is still working out various FBAR filing issues, it has decided to
TIGTA Announces Program to Detect, Deter IRS Employee Misconduct
The Treasury Inspector General for Tax Administration (TIGTA) announced on Tuesday that it has reached an agreement with the IRS to conduct a program to detect and deter waste, fraud and abuse in IRS programs and operations. The purpose of the program is to protect against attempts to interfere with
Pre-2004 Termination Fee to “White Knight” Held Deductible
The Tax Court concluded that $65 million paid to terminate a merger contract was deductible under IRC § 162 or IRC § 165 and did not require capitalization under IRC § 263. IRC § 162 allows a deduction for the ordinary and necessary expenses paid or incurred during the tax
The IRS Whistleblower Program: What CPAs Should Know
Since Congress amended IRC § 7623 in 2006, the IRS’ new Whistleblower Office has seen significant interest from potential informants with tips about multimillion-dollar cases of tax noncompliance. In the first 12 months after it was established in February 2007, the Whistleblower Office received 116 reports of underpayments of more
Reduced Gain Opportunity Means Higher Tax Bill
The Tax Court held that a leveraged securities agreement was not a securities lending arrangement under IRC § 1058 since its economic substance indicated the taxpayers’ opportunity for gain had been reduced. Thus the arrangement was treated as two separate sales transactions; the first resulted in no gain or loss,
Broader Interpretation of Economic Substance Blunts Deductions
The Fifth Circuit Court of Appeals affirmed a district court ruling that Klamath Strategic Investment Fund’s loan transactions lacked economic substance and that no penalties applied. Furthermore, the appeals court held that the lower court erred in allowing Klamath deductions for operational expenses in connection with a sham transaction and
Line Items
IRS to Recommend New Tax Preparer Standards The IRS plans before the end of the year to recommend new standards for tax preparers, Commissioner Doug Shulman announced June 5. In testimony before the House Ways and Means Oversight Subcommittee and in a news release, Shulman said he would propose to
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