The Seventh Circuit affirmed a district court’s ruling that FICA must be withheld on contributions made by salary reduction to a section 403(b) retirement plan. The circuit also affirmed the trial court’s upholding of a penalty for failing to deposit the taxes. The University of Chicago made contributions to purchase nontransferable
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TOPICS
Tax
Subsequent Deferrals Under Section 409A
Nonqualified deferred compensation plans must now comply with a vast set of new rules. The transition relief expired on Jan. 1, and the final regulations under IRC § 409A are now in effect. These rules include the subsequent deferral election rules, which could bring unpleasant surprises for employers and employees.
Creating Joint Ownership: Avoiding the Tax Traps and Other Pitfalls
Many property owners add their children and other family members to the title of their property without thinking through the consequences. Many seem to favor joint tenancy—a convenient way to ensure that assets will ultimately pass to family members without the need for probate and other costs. Joint tenancy—commonly referred
Partners’ Agreement Subject to At-Risk Rules
The Court of Federal Claims denied a taxpayer’s claim that the terms of his partner’s closing agreements with the government allowed him to use previously disallowed passive losses to offset nonpassive income. Lyman Bush was a limited partner in two partnerships, Lone Wolf McQuade and Cinema 84, which were among
IRS Releases Revised Per Diem Rates and Rules
In October, the IRS provided an optional method by which employees and self-employed individuals may compute the amounts deemed paid or incurred for business meals and incidental expenses for which they are not reimbursed. Revenue Procedure 2008-59, which was effective Oct. 1, 2008, also updated rules for substantiating employees’ ordinary
Securities Trader Status Not Satisfied
The Tax Court ruled against a couple’s deduction of securities losses as ordinary rather than capital and against expenses as trade- or business-related, saying the taxpayers failed to qualify as securities traders and therefore were subject to the capital loss and itemized deduction treatment of investors. William Holsinger and Joann
Reporting Unrelated Business Income
With the United States officially in a recession, state and federal funding sources on which charitable organizations rely are drying up. In addition to funding cuts, charities are struggling with across-the-board expense increases while trying to serve a broader charitable population. Colleges and universities are seeing a marked increase in
IRS OKs Rolling Average
The IRS now considers a rolling-average method of inventory costing used for financial statements to be acceptable as well for income tax reporting, assuming the taxpayer satisfies one of two safe harbors. Additionally, the IRS furnishes automatic consent to change to a rolling-average method. Companies in various industries view the
IRS Issues Further Guidance on 50% First-Year Bonus Depreciation
The IRS issued Rev. Proc. 2009-16, which provides further guidance on how taxpayers can elect out of the bonus depreciation provision added by the Housing and Economic Recovery Act of 2008. The new revenue procedure supplements Rev. Proc. 2008-65. Sec. 168(k)(4) allows corporations to elect out of claiming the 50%
Amazon Loses Round in N.Y. Nexus Fight
A New York state trial court dismissed Amazon.com’s challenge to a law that establishes sales tax nexus through in-state “associates” whose Web sites feature links to the online retailer. Amazon and another Web seller, Overstock.com, separately sued the state’s Department of Taxation and state officials last spring after New York
Bookshelf Review
The Sex of a Hippopotamus: A Unique History of Taxes and Accounting by Jay Starkman Twinset Inc., 2008, 456 pp. The Sex of a Hippopotamus by Jay Starkman is a well-documented and interesting read for professionals in the accounting and tax fields. In particular, this book is appealing to instructors,
Automatic Penalty Assertions Begin for Delinquent Forms 5471
In December, the IRS posted to its Web site guidance encouraging taxpayers to submit delinquent Forms 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, before Jan. 1, 2009—the date on which the Service began to automatically assert appropriate penalties under IRC § 6038 on late-filed Forms
Accountant Workpaper Privilege Upheld by First Circuit
The U.S. Court of Appeals for the First Circuit on Wednesday upheld a U.S. District Court decision that the work-product privilege applies to certain accountant workpapers (Textron Inc., No. 07-2631 (1st Cir. 1/21/09)), affirming in part, vacating in part, and remanding 507 F. Supp. 2d 138 (D.R.I. 2007). Textron is
IRS Updates Maximum Values for Employee Automobile Use
The IRS has updated for 2009 the maximum allowable value of an employer-provided vehicle for which the cents-per-mile and fleet-average rules may be used in determining the value of an employee’s personal use of the vehicle as a taxable fringe benefit. Revenue Procedure 2009-12, issued by the Service on Wednesday,
New Regs Govern Overseas Disclosure and Use of Taxpayer Information
Editor’s note: This article appears in the February 2009 issue of The Tax Adviser, the AICPA’s monthly journal of tax planning, trends and techniques. Sec. 7216 and the regulations thereunder were promulgated to set guidelines and impose restrictions on the use and disclosure of taxpayer information by tax return
Proposed Regs Provide Model for Stock Basis Recovery and Identification
On Jan. 21, the Treasury Department issued proposed regulations (REG-143686-07) that provide shareholders with guidance on allocating and recovering stock basis in section 301 distributions. Their purpose is to present a single model for stock basis recovery when a shareholder receives a constructive or actual distribution to which section 301
Effects of Emergency Economic Stabilization Act Provisions on Individuals
Editor’s note: This article appears in the January 2009 issue of The Tax Adviser, the AICPA’s monthly journal of tax planning, trends and techniques. On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008, P.L. 110-343. The act provides alternative minimum tax (AMT) relief,
IRS Issues Guidance on Electing Out of 50% Additional First-Year Depreciation
Editor’s note: This article appears in the January 2009 issue of The Tax Adviser, the AICPA’s monthly journal of tax planning, trends and techniques. The IRS has issued Rev. Proc. 2008-65, which provides guidance on new Sec. 168(k)(4), added by Section 3081 of the Housing and Economic Recovery Act of
IRS Explains How Unmarried Taxpayers Allocate First-Time Homebuyer Credit
The IRS has issued Notice 2009-12 to explain how the IRC § 36 first-time homebuyer credit should be allocated between unmarried taxpayers who buy a principal residence together. Section 36 was added to the Code last year by the Housing and Economic Recovery Act of 2008, PL 110-289. It gives
IRS Issues Final Preparer Penalty Regs
Editor’s note: This article appears in the February 2009 issue of The Tax Adviser, the AICPA’s monthly journal of tax planning, trends and techniques. The IRS issued final regulations (T.D. 9436) implementing the changes to the Sec. 6694 tax return preparer penalties made by the Small Business and Work
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