The IRS has issued a second notice (Notice 2009-14) that expands on, clarifies, and supersedes the guidance issued in Notice 2008-100 on the application of IRC § 382 to loss corporations whose instruments Treasury acquires pursuant to the Troubled Asset Relief Program (TARP) under the Emergency Economic Stabilization Act of
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COMMENTS SOUGHT ON REVISED SSTSThe AICPA released for comment an exposure draft of proposed revisions to Statements on Standards for Tax Services (SSTS). The revisions are intended to address changes in federal and state tax laws and new requirements for providing certain types of tax opinions. SSTS no. 1, Tax
Subsequent Deferrals Under Section 409A
Nonqualified deferred compensation plans must now comply with a vast set of new rules. The transition relief expired on Jan. 1, and the final regulations under IRC § 409A are now in effect. These rules include the subsequent deferral election rules, which could bring unpleasant surprises for employers and employees.
Partners’ Agreement Subject to At-Risk Rules
The Court of Federal Claims denied a taxpayer’s claim that the terms of his partner’s closing agreements with the government allowed him to use previously disallowed passive losses to offset nonpassive income. Lyman Bush was a limited partner in two partnerships, Lone Wolf McQuade and Cinema 84, which were among
Securities Trader Status Not Satisfied
The Tax Court ruled against a couple’s deduction of securities losses as ordinary rather than capital and against expenses as trade- or business-related, saying the taxpayers failed to qualify as securities traders and therefore were subject to the capital loss and itemized deduction treatment of investors. William Holsinger and Joann
Amazon Loses Round in N.Y. Nexus Fight
A New York state trial court dismissed Amazon.com’s challenge to a law that establishes sales tax nexus through in-state “associates” whose Web sites feature links to the online retailer. Amazon and another Web seller, Overstock.com, separately sued the state’s Department of Taxation and state officials last spring after New York
Automatic Penalty Assertions Begin for Delinquent Forms 5471
In December, the IRS posted to its Web site guidance encouraging taxpayers to submit delinquent Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, before Jan. 1, 2009—the date on which the Service began to automatically assert appropriate penalties under IRC § 6038 on late-filed Forms
Accountant Workpaper Privilege Upheld by First Circuit
The U.S. Court of Appeals for the First Circuit on Wednesday upheld a U.S. District Court decision that the work-product privilege applies to certain accountant workpapers (Textron Inc., No. 07-2631 (1st Cir. 1/21/09)), affirming in part, vacating in part, and remanding 507 F. Supp. 2d 138 (D.R.I. 2007). Textron is
New Regs Govern Overseas Disclosure and Use of Taxpayer Information
Editor’s note: This article appears in the February 2009 issue of The Tax Adviser, the AICPA’s monthly journal of tax planning, trends and techniques. Sec. 7216 and the regulations thereunder were promulgated to set guidelines and impose restrictions on the use and disclosure of taxpayer information by tax return
Private Companies and FIN 48
The good news is that on Oct. 15, 2008, FASB deferred the effective date of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48), for all nonpublic companies for one year. The bad news is that the year is up already. Company and outside tax and financial
No Good Deed Goes Unpunished
A volunteer president of the board of directors of a nonprofit day care center was held personally liable for the day care’s payroll taxes and therefore was not entitled to a refund of the taxes he paid on behalf of the organization. The Seventh Circuit Court of Appeals rejected the
CFC Credit Rules Eased
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)
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
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Five years ago, a grieving Angel Zhen started his own CPA firm with no clients and no revenue. Today, he has 300 clients, $600,000 in revenue and 12 weeks of annual vacation. In this JofA article, he shares how he set up his firm and how you could do the same.
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