The IRS has ruled that indebtedness incurred by a taxpayer to acquire, construct or substantially improve a qualified residence can constitute “home equity indebtedness” to the extent it exceeds $1 million, up to an excess of $100,000 (Revenue Ruling 2010-25). In the fact situation discussed in the ruling, an unmarried
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Tax
IRS Issues Final Regulations on Stock Basis Reporting Requirements
The IRS issued final regulations on Wednesday regarding a new requirement for reporting of basis and other information by stockbrokers and mutual fund companies for most stock purchased in 2011 and all stock purchased in 2012 and later years (TD 9504). The final regulations implement a provision from the Energy
IRS Delays Mandatory W-2 Reporting of Health Care Coverage Costs
On Tuesday, the IRS issued a notice providing interim relief to employers regarding reporting the costs of group health plan coverage to employees (Notice 2010-69). Under the notice, notification to employees on Form W-2 will not be required for 2011. The IRS also posted a draft 2011 Form W-2 on
AICPA VP Testifies on Changes Needed to IRS Return Preparer Regulation Plan
Edward Karl, AICPA vice president–Taxation, testified at an IRS hearing on Friday about proposed amendments to Circular 230 that would put into place many parts of the IRS’ plan to register and regulate tax return preparers (REG-138637-07). The proposed regulations would clarify the definition of tax practice, establish a new
PTIN Registration Site Offline This Weekend
The IRS announced that its new online preparer tax identification number (PTIN) registration site will undergo system maintenance this weekend and be unavailable for use. The Service estimates that the site will be taken down at approximately 8 a.m. EDT Saturday, Oct. 9, and will remain unavailable until approximately 8
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IRS PROPOSES PTIN FEES The IRS proposed (REG-139343-08, issued July 23, 2010) to begin charging all authorized tax preparers a $50 user fee to obtain or renew annually a preparer tax identification number (PTIN). The fee would be on top of a fee charged by a third-party vendor that will
Jurisdiction Not Limited to Award Amount, Tax Court Says
The Tax Court ruled that an IRS letter denying a tax whistleblower’s claims was a “determination” giving the Tax Court jurisdiction to review the matter under IRC § 7623(b)(4). Thus, the court declared that its jurisdiction is not limited to the amount of an award but includes any determination by
Online Selling and Third-Party Network Reporting
The payment settlement reporting requirements of new IRC § 6050W, which go into effect next year, apply broadly to transactions conducted by debit or credit card, as well as third-party network transactions. While CPAs’ clients can easily understand how accepting payment cards at point of sale might affect them, those
IRS Issues Final Regulations on Tax Shelter Excise Taxes
The IRS and Treasury Department issued final regulations under IRC § 4965 for excise taxes on tax-exempt entities that enter into prohibited tax shelter transactions and on their managers who approve such transactions or have reason to know that they are prohibited tax shelter transactions. Certain tax-exempt entities such as
Some Audit Documents Protected
The District of Columbia Court of Appeals held that the work product privilege protected two documents created by taxpayer Dow Chemical Inc. from discovery by the IRS and might protect another document created by Dow’s independent auditor, Deloitte LLP. The D.C. Circuit thus affirmed a holding by the District Court
Company’s Deduction for Shareholder-Executive’s Pay Reduced
The Tax Court reduced a corporation’s deduction for compensation to its CEO, but by much less than the IRS sought. Factors favoring the taxpayer were consistent compensation policies and that the owner was the driving force behind successful operations. Weighing against the taxpayer for one tax year was a negative
Income Tax Accounting for Trusts and Estates
Estates and nongrantor trusts must file income tax returns just as individuals do, but with some important differences. For one, their income is taxed at either the entity or beneficiary level depending on whether it is allocated to principal or allocated to distributable income, and whether it is distributed to
Taxpayers Who Built New Home Denied Exclusion
The Tax Court held that a married couple could not exclude gain under IRC § 121 from the sale of a house that they had never lived in, built after they had demolished their former residence on the same site. The court held that Congress intended that the exclusion should
Final Regs Deny Interest and Penalty Suspension
The IRS issued final regulations under IRC § 6404(g)(2)(E) regarding an exception to interest and penalty suspension if the amounts are related to listed transactions and undisclosed reportable transactions. Section 6404(g) generally provides for the suspension of interest and penalties if the IRS does not contact the taxpayer regarding the
Advance Pricing Agreements for SMEs
In today’s global economy, small and medium-size enterprises (SMEs) compete not only to make sales but to employ labor, consume raw materials, and obtain low-cost capital. SMEs now comprise some 97% of all U.S. exporters and produce almost one-third of all goods and services exported. But whenever companies cross borders
Per Diem Travel Rates Updated
The IRS issued updated federal per diem rates and procedures Thursday (Revenue Procedure 2010-39) for substantiating deductible expenses or employer-paid allowances for lodging, meals and incidental expenses incurred in business-related travel away from home. The revenue procedure supersedes Revenue Procedure 2009-47, issued Sept. 30, 2009, and is generally effective for
AICPA Urges Lawmakers to Ban Tax Patents
The AICPA joined a group of national consumer and taxpayer organizations to urge Congress to ban tax strategy patents before adjourning for the year. In a letter to lawmakers, the groups said that tax strategy patents effectively create a monopoly for patent holders on certain parts of the U.S. tax
Adoption Tax Credit Guidance Released
The IRS issued interim guidance Wednesday on the child adoption credit and income exclusion for employer reimbursements of adoption expenses, as expanded by the Patient Protection and Affordable Care Act (PL 111-148). For tax years beginning in 2010 and 2011, the act made the credit for qualified adoption expenses (QAEs)
IRS Activates New PTIN System
The IRS deployed a new preparer tax identification number (PTIN) registration system Tuesday as a component of its initiative to register and regulate paid tax return preparers. All paid tax return preparers (including CPAs, attorneys and enrolled agents) must apply for and obtain a PTIN—even if they already have one—before
President Signs Small Business Jobs and Tax Relief Bill
On Monday, President Barack Obama signed into law the Small Business Jobs Act of 2010 (HR 5297). The bill, which Congress passed last week, expands loan programs through the U.S. Small Business Administration (SBA), strengthens small business preference programs for federal government projects, provides incentives for exporters, offers a variety
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