The IRS has issued new final regulations on cross-border reverse triangular reorganizations, popularly known as “Killer B” transactions (TD 9526). The regulations finalize with some modifications proposed regulations that were issued in 2008 (REG-136020-07). Killer B transactions are designed to allow corporations to repatriate foreign subsidiary earnings tax-free, in violation
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Tax
Tax Court Gives Some Petitioners Extra Time to File Motions to Vacate
During the transition to its new eAccess electronic document management system, the Tax Court failed to serve a small number of petitioners with paper or electronic notices of the documents concluding their cases (such as final decisions or orders of dismissal). The Tax Court has notified petitioners in those cases,
Oversight Board Identifies IRS Problems
The IRS Oversight Board released its annual report to Congress on Thursday, describing the IRS’ performance during fiscal 2010 and its progress in meeting the goals in its strategic plan. The board describes the challenges the IRS has faced in recent years in administering new tax laws enacted to provide
Government Contractor Withholding Delayed to 2013
The IRS issued final regulations (TD 9524) further postponing implementation of mandatory 3% withholding on payments from government entities to contractors and providing interim guidance. The final regulations also adopt a $10,000 withholding threshold for any single payment and provide a transition rule under which interest and penalties will not
Tax Court Rejects Taxpayer’s Argument That Denial of Accounting Method Change Was Arbitrary
The Tax Court held that the IRS’ rejection of a taxpayer’s accounting method change request was not the result of an “automatic rejection policy” and that the IRS acted within its proper discretion in denying the request (Lattice Semiconductor Corp. v. Commissioner, TC Memo 2011-100). The taxpayer produced electronic components
IRS Responds to AICPA Accounting Software Examination Letter
In a March 29 letter from Patricia Thompson, chair of the AICPA’s Tax Executive Committee, to Chris Wagner, commissioner of the IRS’ Small Business/Self-Employed Division, the AICPA communicated its concerns regarding the Service’s program to request the accounting software files of certain small business taxpayers under examination; the letter cites
IRS Expands Rules on Deductible Home-Equity Debt
In Revenue Ruling 2010-25, the IRS ruled that a taxpayer can deduct as qualified residence interest up to $1.1 million of the debt securing the purchase of a taxpayer’s principal residence. While personal interest is nondeductible, qualified residence interest, which includes both interest on acquisition indebtedness and home-equity indebtedness, is
In-Plan Roth Conversions: Planning and Administrative Considerations
Before enactment of the Small Business Jobs Act of 2010 (SBJA), amounts held in section 401(k), 403(b) and 457(b) plans could be converted to a Roth-type retirement plan only by taking a distribution and rolling it into a Roth IRA. This put plan sponsors in a difficult position, because in-service
FinCEN Amends BSA Regs on FBAR Filings
The Financial Crimes Enforcement Network (FinCEN) issued a final rule (tinyurl.com/4tevafd) that amends the regulations under the Bank Secrecy Act (BSA) regarding Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), to clarify when an account is foreign and therefore reportable as a foreign financial account and
Wagering Losses Not Deductible, Gambling Business Expenses Deductible
The Tax Court held that a taxpayer engaged in the trade or business of gambling could not deduct wagering losses in excess of his wagering gains but could deduct ordinary, nonwagering business expenses incurred while pursuing his gambling business. Section 165(d) limits losses from wagering transactions to the amount of
“Too Good to Be True” Arrangement Lacks Business Purpose
The Tax Court disregarded for tax purposes a multilevel-entity structure for a taxpayer’s psychiatry practice, holding the taxpayer liable for unpaid self-employment taxes on the practice’s net income. Tony Robucci had conducted his practice in Colorado as a sole proprietorship until 2001, when, at his request to minimize his
Carrot and Stick Reprised for Foreign Accounts
The IRS on Feb. 8 opened a second reduced-penalty voluntary compliance initiative for taxpayers’ undisclosed offshore assets. The program is designed to bring money held in foreign accounts back into the U.S. tax system and to help taxpayers with income from offshore accounts to comply with federal tax law. Under
Circuit Split Deepens on Six-Year Period for Basis Overstatements
The Federal Circuit Court of Appeals joined the Seventh Circuit in holding that an overstatement of basis can be construed as an omission from gross income for purposes of the extended six-year limitation period for assessment of tax, while the Fourth and Fifth circuits reached the opposite conclusion, ruling in
Scholarships and Support
Tax preparers may have problems determining the dependency status of a student who lives with, but is not the child of, a taxpayer, especially when the student has proceeds from a scholarship or tax-deferred education account or loan. While this is not a common situation, such a scenario may require
IRS Allows Deduction for Payments for Preferred Stock Used to Settle Bank’s Lawsuits
In a private letter ruling released on Friday, the IRS’ Office of Chief Counsel allowed a private bank catering to high-wealth individuals to deduct as ordinary and necessary trade or business expenses the payments it made to settle lawsuits arising from criminally fraudulent activities by one of the bank’s fund
AICPA Recommends Ways IRS Could Reduce Schedule M-3 Burdens
In a letter to Heather Maloy, commissioner of the IRS’ Large Business and International Division, Patricia Thompson, chair of the AICPA’s Tax Executive Committee, encouraged the IRS to collaborate with external stakeholders in revising Schedule M-3, Net Income (Loss) Reconciliation, and suggested some revisions to reduce taxpayers’ compliance burdens. The
IRS Issues Proposed Regulations on Controlled Group Deferred Losses
On Wednesday, the IRS issued proposed regulations on the time for taking into account deferred losses on the sale or exchange of property between members of a controlled group (REG-118761-09). Generally, for any loss on the sale or exchange of property between certain related persons, no deduction is allowed, except
IRS Extends, Modifies Program Allowing Truncated Social Security Numbers on Information Returns
The IRS announced that it is extending and modifying a pilot program designed to deter identity theft (Notice 2011-38). Under the program, which was introduced in 2009, filers of certain paper information returns are allowed to truncate the payee’s Social Security number on the payee statement. The notice extends the
AICPA’s Call for AMT Repeal, Simplification Strikes Chord With Lawmakers
Annette Nellen, chair of the AICPA Individual Income Taxation Technical Resource Panel, pleased some members of Congress when she repeated the AICPA’s support for repeal of the alternative minimum tax (AMT) in testimony before the House Ways and Means Committee on April 13. “That’s music to my ears,” veteran congressman
President Signs Repeal of Expanded 1099 Requirements
On Thursday, President Barack Obama signed into law the Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (HR 4; 1099 Act), which repeals both the expanded Form 1099 information reporting requirements mandated by last year’s health care legislation and also the 1099 reporting requirements imposed
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