UNCERTAIN TAX POSITIONS DRAFT SCHEDULE RELEASED The IRS released a draft of new Schedule UTP, Uncertain Tax Position Statement, (tinyurl.com/27jmhm7) and instructions (tinyurl.com/25uorpf) as part of its initiative to require certain business taxpayers to report uncertain tax positions on their returns (Announcement 2010-30). (For previous JofA coverage of the initiative,
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Tax
Royalty Payments Held Deductible
The U.S. Court of Appeals for the Second Circuit held that a company’s royalty payments for the right to use certain trademarks could be currently deducted, reversing a Tax Court decision. Since the royalty payments were calculated using a percentage of sales, the Second Circuit held, the royalty cost was
Turning Business Losses Into Tax Refunds
Businesses with a need for a cash infusion may be able to obtain one quickly as a result of a tax refund from recently expanded net operating loss (NOL) carryback allowances. These provisions address the fact that, although a net loss may appear in only one tax year, it represents
Charitable Planning: CRTs, CLTs and the Increasing Payment CLAT
One of the main reasons people give to charity is for their ego or image—they want to be seen in the community as philanthropic. Another main reason some donate is for the tax breaks. Others give to charity for truly altruistic reasons. Yet others leave money to charity because they
Closing Up Shop: How to Successfully Shut Down a Private Foundation
The precipitous drop in wealth in the United States during the 2008–2009 financial meltdown accelerated a trend of many private foundations’ considering closing their doors. Foundations gave 8.4% less in grants in 2009 from the year before, as the value of their assets fell by 17.2%. Between 2007 and 2008,
Valuing Art for Tax Purposes
Even people who don’t collect art probably own a painting or sculpture or two. At some point, one of two things is likely to happen: One, the artwork will be given away, perhaps as a noncash charitable contribution for which the owner will claim an itemized deduction, or as a
Mapping the Scope of Personal Service Corporations
The Tax Court held that a land surveying company was a personal service corporation subject to a 35% flat income tax rate because it was engaged in engineering, despite the fact that it performed no work requiring an engineering license under state law. Section 448 requires most C corporations to
Deferral and Spreading of Roth Conversion Income Not Always Best
This year has been touted as the Year of the Roth IRA Conversion (“2010: The Year of the Roth Conversion?” JofA, Jan. 2010, page 28). Advice abounds on when to carry out a conversion and how to pay for it. Often, though, a thorough analysis of the alternatives requires planners
High Court Denies Business-Method Patent
The U.S. Supreme Court ruled Monday that a method of hedging against fluctuations in the price of energy or other commodities was an unpatentable abstract idea. The court, however, rejected the idea that a business method could never be patentable. The case, Bilski v. Kappos (08-964), has been widely followed
President Signs Bill Providing Temporary Funding Relief for Pension Plans
President Barack Obama signed HR 3962, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, on Friday. The bill includes the so-called “doc fix,” increasing Medicare reimbursement to physicians by 2.2% through the end of November, in place of a scheduled 21% cut. The
Health Care Regulations Issued
The IRS and Treasury Department issued proposed regulations (TD 9491, REG-120399-10) Tuesday implementing rules for health care insurance coverage and group health plans under the Patient Protection and Affordable Care Act (PL 111-148) and the Health Care and Education Reconciliation Act (PL 111-152). The text of the proposed regulations is
Go Easy on E-File Mandate, Committee Suggests
The IRS should phase in over the next three years a requirement that tax return preparers filing more than 10 returns do so electronically—a mandate that otherwise will take effect next year, an advisory panel said Friday. The recommendation was among nine by the Electronic Tax Administration Advisory Committee in
Regulations Issued on Grandfathered Health Plans
The IRS, the Department of Labor, and the Department of Health and Human Services issued interim final regulations on June 14 regarding grandfathered health plans under the health reform legislation enacted in March (TD 9489). The Patient Protection and Affordable Care Act (PL 111-148) incorporated the provisions of part A
IRS Issues Regulations on New Indoor Tanning Tax
On Friday, the IRS issued final, temporary and proposed regulations to provide guidance on the new 10% indoor tanning services excise tax (TD 9486; REG-112841-10). The Patient Protection and Affordable Care Act (PL 111-148) created a new 10% excise tax on amounts paid for indoor tanning services after June 30,
IRS Issues Partnership Anti-Abuse Rule Regulations
The IRS and the Treasury Department issued final regulations on June 8 to provide that the IRC § 704(c) anti-abuse rule takes into account the tax liabilities of both partners and certain owners of partners (TD 9485). The regulations also provide that partnerships cannot use an allocation method to achieve
AICPA Submits Comments on IRS Uncertain Tax Position Proposal
On June 1, the AICPA submitted comments to the IRS on the Service’s proposal to require certain business taxpayers to disclose their uncertain tax positions on their tax returns. The comments raise concerns the AICPA has with the proposal and make several recommendations to the IRS. In its comments, the
IRS Revises Section 179 Expensing Amounts to Reflect HIRE Act Changes
On June 1, the IRS issued revised inflation-adjusted numbers to reflect the extension of the increased section 179 expensing amount for 2010 (Revenue Procedure 2010-24). On March 18, 2010, the Hiring Incentives to Restore Employment Act of 2010, PL 111-147 (the HIRE Act), extended for 2010 the increased amounts that
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ADOPTION CREDIT AND EXCLUSION EXPANDED The Patient Protection and Affordable Care Act (PL 111-148) temporarily increased the adoption expense credit and fringe benefit exclusion limit for adoption-assistance programs and made the credit refundable. The changes are effective for tax years beginning after Dec. 31, 2009. The act increased the statutory
QSub Bank’s Tax-Exempt Bond Expense Deductible
The Seventh Circuit Court of Appeals held that a bank organized as a qualified S corporation subsidiary (QSub) could deduct in full its interest paid to acquire tax-exempt bonds, reversing the Tax Court. As a general rule, expenses related to producing tax-exempt income, including interest, are nondeductible. Therefore, IRC §
Spouse Had “Reason to Know” of Disallowed Deductions
The Sixth Circuit joined the Second, Fifth, Seventh, Eighth, Ninth and Eleventh circuits in adopting the “knowledge of the transaction” test of Price v. Commissioner (887 F.2d 959 (9th Cir., 1989)) in innocent spouse cases, upholding a Tax Court finding of ineligibility for relief. IRC § 6015(b)(1)(C) requires taxpayers seeking
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