The Tax Court disallowed a corporate taxpayer’s domestic production activities deduction because, it determined, the taxpayer did not possess the burdens and benefits of ownership of the property produced. The court developed a nine-factor test of the burdens and benefits of ownership that it applied to the facts and circumstances
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Tax
Take steps to meet the EITC due-diligence requirements
The IRS is scrutinizing returns that claim the earned income tax credit (EITC) and paying attention to return preparers who it suspects are filing inaccurate EITC claims. New due-diligence rules require practitioners to document more information and report it to the IRS with every return filed.
Safe harbor offered for allocating rehab credits
In the wake of an appellate decision denying allocations of Sec. 47 credits to investor partners in a historic rehabilitation project, the IRS issued guidance including a safe harbor for such allocations. The guidance, Rev. Proc. 2014-12, had been anticipated after the IRS won reversal of a Tax Court opinion
Religious exemptions from the health care individual mandate
The January 2014 Tax Practice Corner, “Calculating the Health Care Individual Mandate Penalty,” (page 54) outlined how the penalty under Sec. 5000A, enacted by the Patient Protection and Affordable Care Act of 2010 (PPACA), P.L. 111-148, is calculated. The column also listed individuals to whom the mandate does not apply,
Individual mandate hardship exemption expanded
In December, the U.S. Department of Health and Human Services expanded hardships eligible for exemption from the Sec. 5000A shared-responsibility payment to include individuals whose policies were canceled by their previous insurers and who find that other coverage options are more expensive than their canceled policies. The shared-responsibility payment, popularly
Final regs. allow Sec. 336(e) elections for S corps.
The IRS issued final regulations last May that apply when a Sec. 336(e) election is made to treat the sale, exchange, or distribution of at least 80% of the voting power and value of a target corporation’s stock as a nontaxable sale of all its underlying assets, which the regulations
Supreme Court resolves circuit split on gross-valuation-misstatement penalty
The U.S. Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero (Woods, No. 12-562 (U.S. 12/3/13), rev’g 471
IRS: Terminating partnerships may not accelerate amortized startup expenditures
The IRS issued proposed regulations aimed at preventing partnerships from using technical terminations to accelerate their deductions of startup and organizational expenses (REG-126285-12). When finalized, the regulations will apply to technical terminations of partnerships that occur on or after Dec. 9, 2013. Under Sec. 708(b)(1), a partnership terminates if (1)
Guidance on repair regs. updates accounting method change procedures
The IRS issued the second part of the guidance on accounting method changes under the so-called repair regulations, which govern the treatment of expenditures incurred in acquiring, producing, or improving tangible assets (Rev. Proc. 2014-17, modifying and superseding Rev. Proc. 2012-20). The first part of the updated procedures on accounting
IRS issues final instructions for net investment income tax form
The IRS finally released its eagerly awaited final instructions for Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, on Thursday. The instructions, which are 20 pages (for a one-page form), were released in draft form in the beginning of January. Practitioners and taxpayers have waited almost a month after
2014 car, truck depreciation limits issued
On Tuesday, the IRS issued the 2014 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2014-21). Prior-year versions of this annual guidance had included figures for first-year bonus depreciation, but because bonus depreciation is not in effect for 2014, the
Final substantial-risk-of-forfeiture rules are released
The IRS on Tuesday finalized regulations that clarify when a substantial risk of forfeiture exists on the transfer of stock to an employee that is treated as compensation under Sec. 83 (T.D. 9659). If a substantial risk of forfeiture exists, the employee does not have to recognize the income at
Report reveals breadth of criminal tax activities
From shady tax preparation businesses to identity theft gangs to corrupt IRS agents, the IRS Criminal Investigation division’s annual report reviewing its accomplishments in 2013 reveals the wide range of criminal tax activities it investigated in the past year. And, the report points out, despite a continued significant decline in
Final FATCA rules are issued
On Thursday, the IRS released a large package of regulations needed to implement the Foreign Account Tax Compliance Act (FATCA). FATCA, enacted as part of the Hiring Incentives to Restore Employment Act of 2010, P.L. 111-147, requires U.S. withholding agents to withhold tax on certain payments to foreign financial institutions
“Dirty Dozen” tax scam list now includes telephone scams
Identity theft and telephone scams top this year’s list of the “Dirty Dozen” fraudulent tax schemes released by the IRS on Wednesday. The annual list contains various common scams that taxpayers may be subjected to at any time, but the IRS says many of them reach a peak during tax
D.C. Circuit affirms decision striking down tax return preparer regs.
The IRS’s attempt to regulate unenrolled tax return preparers was dealt another blow on Tuesday as the D.C. Circuit Court of Appeals held that the agency exceeded its statutory authority when it issued regulations imposing various requirements on tax return preparers (Loving, No. 13-5061 (D.C. Cir. 2/11/14), aff’g No. 1:12-cv-00385
New IDR procedures postponed until March 3
The IRS announced in an email to practitioners that it is pushing back the effective date for its new information document request (IDR) procedures to March 3 (e-News for Tax Professionals 2014-6 (Feb. 7, 2014)). The new procedures had been scheduled to start Jan. 2. The new IDR procedures were
IRS announces additional one-year delay in health coverage penalty for midsize employers
The IRS announced on Monday that it is delaying the so-called shared-responsibility requirement under Sec. 4980H for employers who have 50 to 99 full-time equivalent employees in 2014 (T.D. 9655). These employers will now have until 2016 to offer health care coverage to their employees or be subject to the
New proposed rules determine UBTI of certain exempt employee benefit organizations
The IRS on Wednesday issued proposed regulations to implement Sec. 512(a)(3)(E), which limits the amount of exempt function income that can be set aside when calculating the unrelated business taxable income (UBTI) of Sec. 501(c)(9) voluntary employee beneficiary associations (VEBA) and Sec. 501(c)(17) supplemental unemployment benefit trusts (SUBs) (REG-143874-10). This
Seven ways for small businesses to rein in health care costs
Editor’s note: On Feb. 10, the IRS delayed the penalty for employers with 50 to 99 full-time equivalent employees. Click here for details. New health care regulations in the United States have small business leaders bracing for increased costs and eager to save where they can. Although it was delayed
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