Although it has a well-deserved reputation for complexity and uncertainty for taxpayers, the research tax credit of IRC § 41 nonetheless remains a valuable source of support to businesses that conduct qualified research and development. In fiscal year 2009 alone, the credit represented an estimated $5.6 billion federal subsidy for
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Tax
Toward a (More) Paperless Tax Practice
Nearly all CPA firms prepare tax returns electronically. However, many still also use some old-fashioned methods, such as sending out tax organizers manually. Here are tips to more fully realize what it means to go paperless. First, understand and share the goal: A more efficient, digital tax process can help
Line Items
SECURITIES BASIS REPORTING PROP. REGS ISSUED The IRS issued proposed regulations (REG-101896-09) in December relating to how securities brokers report sales to the IRS and how stock basis is determined. The regulations also proposed a Feb. 15 annual deadline for brokers to supply certain information statements. The proposed rules reflect
Charitable Deduction Due to a Partial Disclaimer
The Eighth Circuit upheld the Tax Court’s decision to allow a charitable deduction involving a disclaimer by an heir of a portion of her interest in an estate. The Tax Court had held the disclaimer was not qualified under IRC § 2518 with respect to property that passed to a
Acquisition Intermediary’s Role Ignored
The Fifth Circuit Court of Appeals upheld a decision of the U.S. District Court for the Southern District of Texas that recharacterized a corporation’s acquisition of assets as an acquisition of stock with a subsequent liquidation of the acquired corporation. The appellate court agreed with the IRS and the district
IRS to Register and Test Signing Preparers
The IRS on Jan. 4 said it will require registration of paid, signing tax return preparers as well as competency testing and continuing education for preparers other than practitioners (CPAs, attorneys and enrolled agents and others authorized to practice before the IRS). The plan also calls for extending the requirements
NOL Carrybacks and the Statute of Limitation
With the introduction of the five-year net operating loss (NOL) carryback in IRC § 172(h) many taxpayers are now examining their tax situations to determine how to best take advantage of the new rules. However, as taxpayers evaluate their situations, they should also consider the impact that carryingback an NOL
Voluntary Tax Payment Not Exempt From Early Withdrawal Penalty
Although paying a tax levy can exclude early IRA withdrawals from an otherwise applicable 10% penalty, a notice of intent to levy does not have the same effect, the Tax Court held. If a taxpayer is under 59½ years old, IRC § 72(t) generally imposes an additional penalty tax of
Method of Calculating Buy-In Payment Approved
The Tax Court approved a software company’s method of valuing a buy-in payment for the transfer of intangible assets to a subsidiary, calling the IRS’ redetermination of the buy-in payment amount “arbitrary, capricious and unreasonable.” The case concerned tax years 1999 through 2001 of VERITAS Software Corp. (VERITAS U.S.), which
Allowed Uses of Taxpayer Info Widened
The IRS in late December issued temporary and proposed regulations under IRC § 7216 clarifying and expanding the ways in which tax return preparers may disclose or use certain tax return information without taxpayer consent (TD 9478 and REG-131028-09). The IRS also issued two revenue rulings approving several scenarios involving
The ESOP Exit Strategy
The scenario is all too common. A majority partner wants to retire, but the remaining partners can’t afford to buy him or her out, or they want out themselves. Key employees eye the door as rumors swirl that the company may be sold to a larger competitor that is sure
Missing Links?
In “Tax Matters: When a Tax Return Is Not a ‘Return’” (Dec. 09, page 73), I believe that you were addressing the specific issue of what is a validly filed return for purposes of Bankruptcy Code § 523(a). While I appreciate your pointing out the Links case, I think that
IRS Issues Regulations on 2009 Reduced Estimated Tax Options
The IRS on Friday released temporary and proposed regulations relating to reduced estimated income tax payments for qualified individuals with small business income in 2009 (TD 9480 and REG-117501-09). The regulations provide guidance on who is a qualified individual and what is a small business for these purposes. The American
Taxpayers Have Until Feb. 28 to Make Haiti Donations and Deduct Them on 2009 Returns
Taxpayers have until midnight on Sunday, Feb. 28, to make cash contributions to charities providing earthquake relief in Haiti and deduct them on their 2009 tax returns, under the provision of the Haiti Assistance Income Tax Incentive Act, PL 111-126. Contributions made after that date and before the end of
Tax Court Rules on Valuation of Life Insurance Policy in Bargain Sale
In a case of first impression, the Tax Court has held that where taxpayers purchased a life insurance policy on their lives from their profit-sharing plan, they could not reduce the taxable value of the policy by the amount of the policy’s surrender charge (Matthies, 134 T.C. no. 6). The
IRS Initiatives Could Change Compliance Landscape in 2010
During the latter part of 2009, the IRS announced a number of new compliance initiatives that, when fully implemented, have the potential to dramatically alter how the IRS deals with certain groups of taxpayers. The programs are important not only in how they will directly affect the targeted taxpayer groups
Tax Court Allows LLC Member’s Losses; Rules Against IRS on Limited Partner Issue
The Tax Court held on Tuesday that an LLC member who materially participated in the management of an LLC is not treated as a limited partner and is therefore not subject to the passive loss limitations under IRC § 469 (Newell, TC Memo 2010-23). The taxpayer owned one-third of a
IRS Issues 2010 Updates for Automobile Depreciation Deduction Limits
The IRS provided the 2010 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under IRC § 280F (Revenue Procedure 2010-18). For passenger automobiles (other than trucks or vans) placed in service during calendar 2010, the depreciation limit under IRC § 280F(d)(7) is $3,060 for the
Tax Consequences of Rollovers from Employer Plans to Roth IRAs
Starting in 2010, taxpayers can make rollovers from non-Roth retirement accounts to Roth individual retirement accounts (IRAs) without regard to the former $100,000 modified adjusted gross income (AGI) limit and (in 2010 only) can benefit from a special two-year averaging provision (the taxable portion of the rollover is taxed in
IRS Issues 2009 Form 990; Explains Significant Changes
The IRS has issued final 2009 versions of Forms 990 and 990-EZ, as well as their instructions. The IRS has also provided a detailed explanation of significant changes to the forms. Form 990, Return of Organization Exempt From Income Tax, was extensively revised for 2008. The new Form 990 is
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