Section 7216 of the Internal Revenue Code imposes criminal penalties on tax return preparers who knowingly or recklessly make unauthorized disclosures or uses of information furnished to them in connection with the preparation of an income tax return. Newly finalized regulations should prompt all return preparers to evaluate their processes
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TOPICS / TAX
IRS practice & procedure
Economic Substance Prevails Against Another Son of BOSS
The IRS scored a major success in its war against Son of BOSS-type tax shelters in Jade Trading LLC . The Court of Federal Claims used the application of the economic substance doctrine in Coltec Industries to disallow losses involving partnerships and euro call options. In 1999, after clearing approximately
New and Increased Filing Penalties for Businesses
Among the revenue offsetting provisions of HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, were increases in penalties on partnerships and S corporations for failure to timely file returns. The monthly penalty for failure to file required partnership returns on time (absent any extension) was increased from $50
Environmental Cleanup, Price-Fixing Settlement Not Claims of Right
Two recent appellate cases further circumscribed the ability of taxpayers to claim a section 1341 deduction for income subject to a “claim of right.” Section 1341 allows a deduction when a taxpayer had an apparent right to an amount over $3,000 included in gross income in a prior year but
Voluntary Disclosure to the IRS: A Viable Option
EXECUTIVE SUMMARY Under its policy of voluntary disclosure, the IRS can forbear from referring for criminal prosecution taxpayers who come forward to admit previously unreported tax liabilities. CPAs may be in a position to learn of clients’ intentions to make such disclosures. Where disclosures could otherwise
A Hard Night at the Casino
In a summary opinion, the Tax Court ruled that a woman who operated a trucking business by day and played casino slot machines by night was a professional gambler, allowing her to deduct $1.4 million in gambling losses as a business expense rather than as a miscellaneous itemized deduction. A
Whistleblowers Take Their Cue
In the first year it was established, along with enhanced rewards for tips on large tax underpayments, the IRS Whistleblower Office received about 80 claims, the IRS said in a news release. About half the claims came in the last two-and-a-half months of 2007. They include a claim of $2
Till Death or § 6015(E)(4) Do Us Part
The Tax Court recently decided an issue of first impression concerning innocent spouse relief, describing it as “a small but noticeable gap in the tax law”: Does the right of a nonelecting spouse to intervene in an innocent spouse case continue after the nonelecting spouse’s death? The court answered in
Son of BOSS Adjustment Timely for IRS
A federal court has concluded that a suspected “Son of BOSS” transaction that caused an overstatement of basis in the calculation of gain from a sale of real estate is a gross income omission that allows the IRS six years to assess a deficiency. The ruling, in Salman Ranch Ltd.
IRS Reminds EOs of Political Restrictions
Churches and other exempt organizations (EOs) must abide by laws prohibiting them from direct or indirect involvement in political candidates’ campaigns, the IRS reminded in a news release. Revenue Ruling 2007-41, issued last summer, provides scenarios of how the ban may be observed. Generally, tax-exempt organizations are forbidden to promote
Passive or Nonpassive Activity—IRS Wins Either Way
The Tax Court recently ruled on the same day in favor of the IRS in two unrelated cases involving the passive loss rules for rental activities (see also “ Real Tax Savings in Real Estate,” page 68). In one case, the court determined that a taxpayer’s rental activity was passive,
Do-It-Yourself Will Succeeds in Spite of Itself
The Ninth Circuit Court of Appeals recently upheld a district court’s decision that a self-prepared will’s bequest qualified for the marital deduction, even though its literal wording created a disqualifying terminable interest. The courts found the decedent’s handwritten notes of planned revisions to the will and an article he saved
Deciphering the Code
A recent case that ostensibly dealt with a bank’s deductions for interest and other expenses associated with tax-exempt income could affect how advisers approach interpretation of the Code and revenue rulings generally. PSB Holdings is the parent of an affiliated group that includes Peoples State Bank, which is based in
Reporting Your Other Income
The IRS updated its “Tax Gap” series with a new fact sheet, Reporting Miscellaneous Income, which includes guidelines for reporting self-employment income, barter exchanges of goods and services, gambling winnings, prizes and awards. The series, located at www.irs.gov/newsroom/article/0,,id=158619,00.html, also includes fact sheets on reporting auction income and capital gains, tax
Correcting § 409A(a) Failures
The IRS has issued transition relief and guidance for correcting operational failures under nonqualified deferred compensation plans. Following the methods outlined in the guidance will avoid income inclusion under § 409A(a). The second section of the guidance explains how to obtain relief for unintentional operational failures corrected in the same
The Intersection of FIN 48 and Tax Opinions
FASB’s Interpretation no. 48, Accounting for Uncertainty in Income Taxes, has changed how enterprises recognize and measure tax benefits associated with tax positions and disclose in their financial statements uncertainties related to income tax positions. Most enterprises have found they must take a variety of steps to
FICA for Medical Residents Splits Circuits
Medical residents in a teaching hospital might be eligible for a student exemption from FICA taxes, a circuit court ruled recently, adding to a split among circuits on the issue. The Eleventh Circuit vacated and remanded the decision of a Florida district court in United States v. Mount Sinai Medical
Ohio Court Turns the Tables on Annuities
What is the estate tax value of future state lottery payments? One might think it would be the present value the state used in calculating a lump sum payout. The IRS, however, relying upon the actuarial tables prescribed by IRC § 7520, came up with a higher number in an
Abusive Insurance Plans Get Red Flag
The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in whole or in part, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice
IRS Simplifies Late Filing Relief
In Rev. Proc. 2007-62 (released Oct. 9, 2007), the IRS has provided a new simplified method for taxpayers to request relief for late S corporation elections. A small business corporation may make an election to be an S corporation at any time during the preceding tax year or at any
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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
