On Tuesday, the Treasury Inspector General for Tax Administration (TIGTA) released a report concluding that the IRS’s awards program, which awards cash and compensatory time off to a large number of IRS employees, did not consider employee misconduct, including tax compliance issues, in making these awards. Although the IRS complied with federal
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Taxpayers must reveal tax shelter opinion letters despite attorney-client privilege
By attempting to establish good-faith and state-of-mind defenses, taxpayers put their legal knowledge and understanding into contention, and therefore they waived attorney-client privilege, the Tax Court held on Wednesday (Ad Investment 2000 Fund LLC, 142 T.C. No. 13 (2014)). As a result, the court will order the taxpayers to produce
Foreign housing expense limitations issued for 2014
According to the IRS, Hong Kong, Moscow, and Geneva are the three most expensive foreign cities to live in, for purposes of the Sec. 911 foreign housing exclusion. On Monday, the IRS provided its annual list of inflation-adjusted limitations on foreign housing expenses for 2014 (Notice 2014-29). Sec. 911(a) allows
Horse breeder materially participated
The Tax Court held that a taxpayer materially participated in his horse-breeding activity for 2002 through 2004 and therefore was not barred from deducting his losses as passive activity losses under Sec. 469 (Tolin, T.C. Memo. 2014-65). Although the case involved horse-breeding activities, the IRS did not seek to disallow
Guidance issued on application of Windsor to retirement plans
Administrators of qualified retirement plans must recognize the same-sex spouses of legally married participants as of June 26, 2013, under guidance issued by the IRS but will not be required to amend their plans to retroactively recognize participants’ legal same-sex marriages before that date (Notice 2014-19). The Supreme Court, in
Tax filing resources—Tax year 2013
This is the one-stop shop for all the updates you need to know for this year’s tax filing season. Find resources from the Journal of Accountancy, plus tax return checklists and tax savings tips from the AICPA, categorized by tax topic. INDIVIDUAL TAX Taxpayers can claim charitable contributions for typhoon
Taxpayers can claim charitable contributions for typhoon relief on 2013 returns
On Friday, the IRS announced the procedures for taxpayers to follow to take advantage of the recently enacted Philippines Charitable Giving Assistance Act, P.L. 113-92, which allows taxpayers to take deductions for cash contributions to qualified charities for the relief of victims of Typhoon Haiyan on their returns for the
Plan administrators can assume certain rollovers are valid
In Rev. Rul. 2014-9, the IRS ruled that a plan administrator for a plan that is qualified under Sec. 401(a) may reasonably conclude in the situations described in the ruling that a potential rollover contribution is valid under Regs. Sec. 1.401(a)(31)-1, Q&A-14(b)(2), which governs the treatment of a plan that
Avoiding the squeeze: Trusts, estates, and the new ATRA tax regime
The American Taxpayer Relief Act of 2012 raised the top income tax rate to 39.6%, and a new 3.8% tax on net investment income also applies beginning in 2013. Both taxes apply to trusts and estates with income in excess of $11,950 in 2013, in contrast to much higher thresholds for individuals. This new tax regime necessitates drafting wills and trusts to give executors and trustees maximum discretion so they can reduce these taxes.
Critical lessons from the Peco Foods case
The Tax Court’s Peco Foods ruling imparts several critical tax lessons for all taxpayers in an acquisition mode, regardless of whether they plan to pursue a cost-segregation study.
How to calculate employer health care responsibilities
In compliance with new health care employer responsibility regulations, two halves indeed equal a whole for employers when they determine their number of full-time employees. To determine whether a business is subject to the employer mandate penalty under the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, the business
AICPA recommends changes to net investment income tax rules
The AICPA submitted a comment letter to the IRS recommending a number of changes to the Sec. 1411 regulations on the application of the net investment income tax to charitable remainder trusts (CRTs), when final regulations are issued. First, the AICPA noted that the final regulations issued last year (T.D.
Automatic consent for changing accounting methods under the “repair regs.”
The IRS recently issued Rev. Proc. 2014-16 describing the procedures to obtain automatic consent for changing to accounting methods required or permitted under the “repair” final regulations (T.D. 9636) and temporary regulations (T.D. 9564). The final regulations are effective for tax years beginning on or after Jan. 1, 2014, but
Decanting trusts
Sometimes after clients create an irrevocable trust, circumstances change and the trust needs to be amended to reflect those changes. Sometimes these changes are related to family events, such as the marriage, divorce, or even death of the beneficiary; sometimes the client wants a new fiduciary or to have the
IRS issues final rules on sales-based royalties and vendor allowances
The IRS issued final regulations on sales-based royalties and vendor allowance rules under Sec. 263A and Sec. 471. The rules, which adopt the proposed regulations (REG-149335-08) issued in 2011 with some changes in response to comments, apply to tax years ending on or after Jan. 13, 2014. The sales-based royalty
Partnership basis rules proposed
The IRS issued proposed regulations providing guidance on the application of Sec. 704(c)(1)(C) added by the American Jobs Creation Act of 2004 (AJCA), P.L. 108-357, and the amendments to the mandatory basis adjustment rules of Sec. 743 in the AJCA. The proposed regulations would also conform the regulations to account
Tax Court addresses “placed in service” date
The Tax Court recently held that an operational aircraft delivered and titled to a taxpayer late in December 2003 was not “placed in service” in 2003. Accordingly, the court rejected the taxpayer’s claim of a bonus depreciation allowance for 2003. The court’s decision hinged on whether the aircraft was available
IRS changes position on foster care payments despite court win
The U.S. District Court for the Southern District of Ohio held that payments received by a legal guardian to care for her handicapped adult son could not be excluded from income as qualified foster care payments under Sec. 131. According to the court, a foster care relationship did not exist
Trust materially participated in real estate business
In a case of first impression, the Tax Court held that a trust materially participated in its rental real estate business and therefore could deduct the losses it incurred in conducting those activities in 2005 and 2006 as losses from nonpassive activities (Frank Aragona Trust, 142 T.C. No. 9 (2014)).
Final rules issued on employment tax responsibilities of designated payer agents
Final regulations issued on Friday contain rules on the liability for employment taxes when an employer designates an agent under a “service agreement” to pay its employees and to satisfy its employment tax obligations instead of following normal IRS procedures to designate an agent (T.D. 9662). The new rules affect
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