The Third Circuit Court of Appeals has reaffirmed as still valid the “common-law mailbox rule”—that a properly mailed document is presumed to reach the IRS within normal delivery time—despite holdings by other circuits that the rule was supplanted by the 1954 Tax Code provision that allows a postmark date to
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TOPICS / TAX
IRS practice & procedure
The Scholarship Trap for Foreign Students
Many U.S. colleges and universities recruit foreign students, especially for graduate programs and athletics. Such students often receive full scholarships that include room and board, making them subject to U.S. income taxes. These students may be unfamiliar with the U.S. tax system, but they need to understand
Equal Treatment for All Taxpayers
The Tax Court reversed its prior decision in a “retail tax shelter” case, granting further relief from assessments to approximately 400 taxpayers. It did so because the IRS secretly—and fraudulently—entered into more favorable settlements with some test case litigants before the test cases were decided. The action marked a reversal
Line Items
COURTS ON BOARD WITH CSX CASE At least one other court has ruled that supplemental unemployment compensation benefits (SUCBS or SUBs) paid by employers to laid-off employees are subject to FICA taxes, after the Federal Circuit so ruled in the long-running case CSX Corp. v. U.S., 101 AFTR2d 2008-1120 (see
Debt Forgiveness Taxed
Two exceptions to the general provision of IRC § 61(a)(12) recognizing income from the discharge of indebtedness were tested recently in separate cases, but the taxpayers were not successful in either. Argued before the U.S. Bankruptcy Court for the Eastern District of Tennessee, Higgins v. Commissioner involved discharge of indebtedness
Levels of Certainty
Two rulings in separate cases by the Court of Federal Claims helped clarify how penalties involving partnerships are imposed and defended against at the partnership and partner levels. Because partnerships are flow-through entities, contested partnership items were formerly litigated at the partner level. This approach, however, led to repetitive legal
Kinder, Gentler IRS Turns to Liens, Levies
In the early 1990s, IRS enforcement activities were fairly aggressive. In several well-publicized cases, individual taxpayers lost their homes and livelihoods to the IRS because of unpaid taxes. As a result, public sentiment turned against the agency, and congressional hearings were held to address the problem. Congress
Share Loans Under IRS Microscope
TAX PRACTICE In a recently released Coordinated Issue Paper (LMSB-04-1207-077), the IRS underscored how its examinations will home in on a once-favored strategy for monetizing stock gains while deferring capital gains taxes. In doing so, the Service reiterated its legal basis for why a variable prepaid forward
Cook Won’t Excuse Estate From Table
Despite contrary holdings by other circuits, the Fifth Circuit recently held fast to its earlier decision in Cook v. Commissioner to once again overrule an estate’s discounting of an annuity interest and restrict it to the valuation tables prescribed by IRC § 7520. The decedent in the recent decision, James
IRS Will Not Acquiesce in Kohler
In Action on Decision 2008-001, the Service said it would not acquiesce in the Tax Court’s allowance of a taxpayer’s contested valuation of the stock of a closely held corporation following a post-death, tax-free reorganization. The court’s 2006 decision represented a $100 million victory for family owners of privately held
Equitable Recoupment a Timeless Remedy
An amendment to IRC § 6214(b) included in the Pension Protection Act of 2006 empowers the Tax Court to apply equitable recoupment to offset overpayments of hospital insurance taxes (the Medicare portion of FICA) against income tax deficiencies, according to the court’s ruling in Menard Inc. v. Commissioner . Although
High Court: No Evasion Without Deficiency
The U.S. Supreme Court vacated a conviction for criminal tax evasion, holding that the taxpayer could argue that distributions he received were a nontaxable return of capital. If they were so characterized, then the taxpayer had no tax deficiency, which is a required element of tax evasion, the court pointed
The Liechtenstein Connection
The IRS warned that some 100 Americans were likely to be caught up in its investigation in cooperation with other countries of tax evasion in Liechtenstein. Any U.S. taxpayer hiding income and gains in the tiny principality in the European Alps would do well to “make a prompt and complete
All in the Family?
The Tax Court recently held that a note does not constitute a qualified family-owned business interest (QFOBI) for purposes of IRC § 2057, which allows an estate to deduct up to $675,000 from its value for estate tax purposes. To qualify for the deduction, the value of the QFOBI at
When “Happily Ever After” Ends – Get It in Writing
After the perfect wedding, the happy couple looks forward to sharing a lifetime of happiness. Life, however, does not always go as planned. Divorce happens. In addition to the emotional aspects, there are tax consequences to deal with as well. If the parties intend to have one spouse receive alimony,
IRS Targets High-Income Taxpayers, S Corps
One out of 11 individuals with an income of $1 million or more faced an audit in fiscal year 2007, when the number of audits for these high-income taxpayers increased 84%, from 17,015 in 2006 to 31,382. Overall, audits of individual returns rose by 7%,
Like a Good Neighbor
The Ninth Circuit has affirmed a district court and held that termination payments received by a retiring insurance agent were not capital gain but were taxable as ordinary income. The court thus joins the Seventh Circuit in so ruling on similar facts. See Warren L. Baker Jr. v. Commissioner, 92
GAO: Offshore Remittances Underwithheld
Despite the IRS’s eight-year-old qualified intermediary (QI) program, billions of dollars in U.S.-source income continue to flow overseas without proper tax withholding, the Government Accountability Office said. QIs are foreign financial institutions that contract with the IRS to provide withholding of U.S. tax and administer treaty provisions. However, they figure
Charity Begins With Ownership
The Tax Court ruled that a criminal defense attorney who donated case materials in a prominent case to the University of Texas did not have sufficient ownership rights to the materials to claim a charitable deduction under IRC § 170. Even if the taxpayer did exhibit proper ownership, section 170(e)(1)(A)
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From The Tax Adviser
March 31, 2026
Current developments in taxation of individuals: Part 1
March 31, 2026
Current Developments in Taxation of Individuals: Part 1
March 6, 2026
