From time to time, corporate officers and shareholders agree to indemnify their corporations for certain expenses and losses. The taxpayer would prefer to claim an ordinary loss deduction instead of a capital loss or, worse, a nondeductible payment. The Sixth Circuit Court of Appeals recently denied such a claim. Isaac
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TOPICS / TAX
IRS practice & procedure
Bills Target Contractor Scofflaws; Fed Workers Delinquent
U.S. Rep. Ed Towns, D-N.Y., in April introduced the Contractor Tax Enforcement Act, HR 1870, to bar federal tax debtors from contracting with the government. Another bill, introduced by Brad Ellsworth, D-Ind., would require contractors to certify they don’t owe a federal tax debt. The proposed legislation followed by a
No Penalty for BLIPS
In the widely reported case Klamath Strategic Investment Fund (see “Tax Matters,” JofA, March 07, page 72), the district court disallowed claimed losses on a finding that the transactions were shams and lacked economic substance. An important but less widely known aspect of the case was the court’s refusal to
Determining Basis for Gambling Losses
With the proliferation of legal types of gambling (lotteries, casinos, horse and dog racing, jai alai, bingo, etc.), many more taxpayers are in the (enviable) position of having to report winnings on their tax returns. While many taxpayers may generally know that they can deduct their losses
Stakes Increase as High-Profile Bills Move Through
The new House and Senate Democratic majorities started the year with aggressive agendas, passing several pieces of legislation in the first 100 hours. However, as the burden of being in the majority takes its toll, they are finding it increasingly difficult to reconcile the differing House and Senate versions of
In the Line of Duty
The Second Circuit Court of Appeals ruled against a military veteran’s income-exclusion claim, affirming the Tax Court’s distinction of taxable disability benefits versus exempt benefits paid for a service-connected injury. William D. Reimels was exposed to Agent Orange during service in Vietnam in the 1970s. He then worked in the
IRS, B&D Tool Up for Trial
By reversing a district court’s grant of summary judgment that originally favored the taxpayer (see “Tax Matters,” JofA, March 05, page 88), the Fourth Circuit Court of Appeals opened the door for further interpretation of the “sham transaction” rule as it relates to contingent liability transactions. The case, involving Black
Horse Sense Applied to Startup
In its first ruling of 2007, the Tax Court concluded that a woman could deduct expenses of for-profit horse boarding and training that later grew into a business. Had the IRS prevailed, taxpayers who engaged in a for-profit activity with the hope it would grow into a full-fledged trade or
IRS Directors “Own” Shelters
With the new Industry Issue Focus initiative of its Large and Mid-Size Business Division, the IRS is poised to concentrate more resources on its top enforcement priorities, which are weighted toward business and industry. The new strategy gives IRS directors compliance “ownership” of each of 14 Tier 1 issues, plus
Whistleblowers Wanted
The government has decided that whistleblowers are its friends, and it is increasingly making efforts to nourish and protect them. This is evidenced by a provision of the Tax Relief and Health Care Act of 2006 that increased potential rewards to people who provide information on individuals
Back to School
Back to School A rising number of professionals are returning to college for a master’s or other graduate degree to enhance their earning power. An advanced degree can bring, on average, a $16,000 bump in annual salary. Source: www.worldwidelearn.com . GOLDEN BUSINESS IDEA
Small Business Shuns Outside Financing
Small Business Shuns Outside Financing E ighty-one percent of small business owners said they have never received outside equity or debt financing, according to a survey by SurePayroll. More than half (55%) of respondents said they had no need and no future plans for external funding. For those businesses that
Hot Jobs
Hot Jobs L ooking for a new career path? Narrow your search to the fastest-growing accounting jobs. According to the Robert Half International 2007 Salary Guide, the following are the top five high-growth positions for the year: Source: Robert Half Finance & Accounting, www.roberthalf.com . NEWS
Report Sheds Light on IPO Market
Report Sheds Light on IPO Market U .S. markets are holding their own against foreign competition for initial public offerings (IPOs), says a report by Ernst & Young. Key among E&Y’s findings is the fact that most companies list on exchanges close to home. Even at the height of the
IRS Scores Victory Over Alleged Tax Shelter
The Second Circuit Court of Appeals overturned the TIFD III-E Inc./Castle Harbour decision (see “Tax Matters,” JofA , June 05, page 93), a win for the IRS in its battle against tax shelters. The court ruled that the mere existence of a business purpose of a partnership does not preclude
How Low Can They Go
How Low Can They Go? S ecurities fraud class action lawsuits fell to a record low in 2006, says a report by Stanford Law School’s Securities Class Action Clearinghouse. The number of cases filed was the lowest since the adoption of the Public Securities Litigation Reform Act of 1995. Securities
Showing the Way
Showing the Way A small firm can’t operate efficiently if workers are constantly asking similar questions, circumventing problems or forwarding inquiries to the higher-ups. Make sure your employees have enough knowledge to make decisions and solve problems on their own: Source: Score, www.score.org . TOP 10
The Best-Laid Plans
The Best-Laid Plans A ccording to a study of accounting, legal, marketing and other professionals, accountants rated as “Cool Cucumbers” (compared with “Nervous Nellies”) on the emotional scale when it comes to being prepared for a serious disability. Just 27% of accountants (the lowest percentage among all the professions) questioned
Beating the Clock on Refunds
Most taxpayers know when to file their annual tax return. But they may be less sure of how much time they have to claim a refund. Three decisions last year may help clarify the rules. In the first, Wachovia Bank was trustee for the George C. Nunamann Trust, which was
Corporate Shields
Corporate Shields T hirty-three percent of in-house corporate lawyers surveyed said their companies have been investigated by the SEC or the Occupational Safety and Health Administration since 2003. Source: Fulbright & Jaworski LLP. BUSINESS TIPS
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