The Pension Protection Act of 2006 introduced a new notification requirement for small tax-exempt organizations that are not required to file an annual information return under IRC § 6033(a)(1). In July, the IRS released final regulations spelling out what small tax-exempt organizations must do to meet this requirement. Practitioners should
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Tax
Accountable Plan Reimbursements for Tools and Equipment
In a recent private letter ruling, the IRS clarified how employer reimbursement of employee expenses for tools, equipment, training or certification required as a condition of employment may qualify as an accountable plan under IRC § 62. Reimbursements under an accountable plan are excluded from gross income of employees and
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FIRST CIRCUIT DENIES TEXTRON WORK PRODUCT PRIVILEGE In a 3-2 decision, the First Circuit Court of Appeals overturned its earlier three-judge ruling and a district court to hold that the work product doctrine did not protect from IRS summons the tax accrual workpapers of aviation and industrial conglomerate Textron Inc.
Application of Six-Year Statute of Limitations Denied Again
The Tax Court, whose denial of a six-year statute of limitations in Bakersfield Energy Partners had been recently upheld by the Ninth Circuit, held in two more cases that an overstatement of basis did not allow the extended assessment period for a substantial omission of gross income under IRC §
Qualifying Child Definition Amended
The Fostering Connections to Success and Increasing Adoptions Act of 2008, PL110-351, made several changes to the qualifying child (QC) definitions effective for tax years beginning after Dec. 31, 2008. Section 501(a) of the act amended the age requirement (IRC § 152(c)(3)) to also require the QC to be younger
Salaries a BIG Offset
C corporations that elect S status are often subject to the built-in gains (BIG) tax under IRC § 1374. One of the aspects of the BIG tax that can be a trap for the unwary is the treatment of accounts receivable for cash-basis corporations. The fair market value of accounts
IRS Not Limited to Three Years for FPAA
The Fifth Circuit held that IRC § 6229(a) sets no deadline by which the IRS must issue an FPAA (final partnership administrative adjustment). Its interpretation of the relationship between the limitations period in sections 6501(a) and 6229(a) mirrors that of the Tax Court, the D.C. Circuit and the Federal Circuit
Tax Consequences of Mortgage Discharge
In the current real estate climate of decreased property values and excess inventories, many rental property owners are facing reduced cash flows due to vacancies. At the same time, the fair market value of their property may be close to or even less than the amount owed on the mortgage
“Unforeseen Circumstances” Exclusion From Gain on Sale of Home
Despite the recent downturn in the American housing market, one of the highest-value assets owned by most taxpayers remains their home. While many taxpayers have seen the value of their home decline, those in locales where home values have remained relatively strong—such as parts of some Southern and Midwestern states—could
Highlights
FASB issued Accounting Standards Update (ASU) 2009-06 to provide additional implementation guidance on accounting for uncertainty in income taxes and to eliminate the disclosures required by FASB Accounting Standards Codification (ASC) Paragraphs 740-10-50-15(a) through (b) for nonpublic entities, including pass-through and not-for-profit entities. The new guidance involves requirements under what
Unrelated Child as a Qualifying Relative
One requirement for claiming a qualifying child (QC) for purposes of the dependency exemption deduction is that the child must be related to the taxpayer, that is, the taxpayer’s child (including stepchild or foster child), sibling, half-sibling, step-sibling or descendant of any of them (IRC § 152(c)(2)). However, dependents alternatively
Final Regulations Issued on S Corporation COD Income Exclusion and Tax Attributes
The IRS and Treasury Department issued final regulations (TD 9469) this week governing how an S corporation reduces its tax attributes under IRC § 108(b) when the S corporation has discharge of indebtedness (COD) income that is excluded from gross income under section 108(a). The regulations address situations in which
Shulman: ‘Big Shift’ Possible in Preparer Standards, But No Details Yet
IRS Commissioner Douglas Shulman discussed return preparer standards, enforcement in a globalized economy and a new IRS initiative focused on high-wealth individuals’ tax compliance during a speech to the AICPA’s National Tax Conference in Washington on Monday. Return Preparer Oversight In June, Shulman announced during a hearing of the House
Government Loses LILO Case
In a rare setback for the IRS in its litigation against lease-in, lease-out (LILO) tax shelters, the Court of Federal Claims held that an arrangement Consolidated Edison Co. of New York (Con Ed) had with an electric utility in the Netherlands should be respected for federal tax purposes because it
Coalition Urges Congress to Ban Tax Strategy Patents
A coalition of various organizations, including the AICPA, has written to members of Congress to ask for a ban on the patenting of tax strategies. The letter says tax strategy patents “pose a significant threat to taxpayers and their advisers,” and urges Congress to prohibit them. In the past few
IRS Releases Annual Inflation Adjustments, Many Unchanged for 2010
The IRS has released its annual revenue procedure updating the tax bracket amounts and making inflation adjustments for various credits and other tax items (Revenue Procedure 2009-50). Because inflation has been minimal, many of the numbers are unchanged from 2009 or have only been adjusted slightly. The Social Security Administration
IRS Memo Allows Taxpayer to Deduct Interest on $1.1 Million Mortgage
The IRS Office of Chief Counsel has issued a memorandum in which it reinterprets the definition of “acquisition indebtedness” under IRC § 163(h)(3) to allow a taxpayer to deduct interest on the first $1.1 million of his or her mortgage instead of the usual $1 million limit (CCA 200940030). This
Phone Tax Challenge Reinstated
A panel of the U.S. Court of Appeals for the District of Columbia ruled that taxpayers could challenge under the Administrative Procedure Act (APA) the IRS’ method of refunding long-distance telephone excise taxes. The 2-1 decision in Neiland Cohen v. U.S. reversed and remanded a dismissal of the case by
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FBAR FILING EXTENDED FOR SOME The IRS extended for certain taxpayers the due date for filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for tax year 2008. The reporting form originally was due June 30 this year. In Notice 2009-62, the Service said two types
ARRA Changes 2009 Estimated Tax Rules
For tax years beginning in 2009 only, the American Recovery and Reinvestment Act of 2009 (ARRA) reduced the amount of estimated tax that individual taxpayers with income from small businesses must pay. As 2009 draws to a close, practitioners should make sure their clients are aware of and taking advantage
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