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
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Tax
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
IRS Releases Final Schedule UTP, Incorporates Changes
In two announcements on Friday, the IRS unveiled a number of significant changes to its plan to require certain business taxpayers to report uncertain tax positions on their tax returns (Announcements 2010-75 and 2010-76). The changes come in response to numerous comments received on the proposal and on the draft
Small Business Stimulus Passes Congress
The House on Thursday passed the Small Business Jobs Act of 2010 (HR 5297) by a vote of 237–187, and sent it to the President, who is expected to sign the bill into law. The bill, which passed the Senate last week, expands loan programs through the Small Business Administration
Senate Passes Small Business Tax Relief
The Senate on Thursday passed the Creating Small Business Jobs Act of 2010 (part of the Small Business Jobs and Credit Act, HR 5297) by a vote of 61–38, and sent it back to the House of Representatives. The bill as passed by the Senate differs from the version the
IRS Says It Won’t Give Advance Guidance on Transactions Under Codified Economic Substance Doctrine
The IRS issued its first guidance on the newly codified economic substance doctrine on Monday (Notice 2010-62). In general, the IRS says it will enforce the two-prong test mandated in the Code and will not issue guidance on whether specific transactions pass muster. The economic substance doctrine was originally created
IRS Releases Proposed Regs on Series LLCs
On Monday, the IRS released proposed regulations on the tax treatment of series limited liability companies (LLCs) and cell companies, proposing to treat the individual series or cells as separate entities for tax purposes (REG-119921-09). Eight states and Puerto Rico have enacted series LLC statutes that allow an LLC to
IASB Proposes Amendment to Aspect of Deferred Tax Accounting
The International Accounting Standards Board (IASB) on Friday published for public comment an exposure draft, Deferred Tax: Recovery of Underlying Assets, that would amend one aspect of IAS 12, Income Taxes. The IASB said it is setting an exposure period of 60 days—shorter than its normal 120 days—because the amendments
IRS Issues Proposed Regs Requiring Disclosure of Uncertain Tax Positions
The IRS issued proposed regulations (REG-119046-10) that would require certain business taxpayers to report uncertain tax positions on their tax returns. The regulations are the latest step in an initiative the IRS launched in January with the release of Announcement 2010-9. In April, the IRS released a draft Schedule UTP,
Draft Form for Small Business Health Insurance Credit Released
The IRS on Tuesday issued a draft form for businesses to use in figuring and claiming the new small business health insurance credit, starting this year. Draft Form 8941, Credit for Small Employer Health Insurance Premiums, leads taxpayers through the steps of determining the number of full-time equivalent employees, average
Treasury Announces Low-Cost Financial Account Program for Taxpayers
In a move that may cut down on the use of refund anticipation loans (RALs), the Treasury Department announced on Thursday the launch of a pilot program to provide taxpayers with access to low-cost financial accounts. This is the second action in the past month the Treasury Department has taken
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