A taxpayer bought the property it occupied as a tenant and was allowed a business deduction for the portion of the purchase price attributable to an excessive lease. ABC Beverage Corp. (then known as Beverage America) in 1995 acquired via its subsidiary another bottling company, including a lease with an
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TOPICS
Tax
Line Item: AMT Relief in Bailout Bill
Besides “patching” the alternative minimum tax (AMT) exemption amount for 2008 (to $69,950 for joint filers and $46,200 for singles), the Emergency Economic Stabilization Act of 2008 (PL 110-343) increased the portion of the long-term unused minimum tax credit (MTC) that can be claimed in a year. Under prior law,
Proof of Material Participation Must Be Credible
A taxpayer must prove material participation in an activity to deduct losses from that activity against nonpassive income. The Ninth Circuit reaffirmed that credible evidence must be presented to prove that one of the material participation tests of IRC § 469 has been met. In 2007, the U.S. District Court
Twin Outcomes From Cap Gemini Deal
In two more of at least four similar cases, former Ernst & Young consulting partners were denied refunds of tax they paid on stock received from a merger with Cap Gemini that lost most of its value while in restricted accounts. In 2000, Cap Gemini agreed to purchase E&Y’s consulting
Not All Plans Abusive
The article in the September issue of the JofA by Lance Wallach, CLU, (“Abusive Insurance and Retirement Plans,” page 34) sounding the alarm against the use of 419(e) plans inaccurately analyzes an October 2007 revenue ruling and two IRS notices. Mr. Wallach accurately reports that Notice 2007-83 “identified certain trust
2008 In Review: Congressional Impact on CPA Profession
The AICPA enjoyed three legislative victories in Congress this year: equalizing IRS reporting standards for taxpayers and preparers, preventing the Farm Credit System from expanding its pool of borrowers, and maintaining financial and compliance audits for the government-backed Federal Housing Administration (FHA) loan program. “SUBSTANTIAL AUTHORITY” SIGNED INTO LAW OCT.
IRS Auditor’s Pups Unprofitable
The Tax Court disallowed an IRS auditor’s deductions for breeding greyhounds as a hobby loss. Ralph Thomas Whitecavage bred and raised the dogs for racing. He received a percentage of their race winnings but did not realize a profit. The IRS determined deficiencies totaling $18,601 for tax years 2001 through
Late Returns, Late Wife
The U.S. District Court for the Western District of Louisiana held that a taxpayer could use the married filing jointly status on delinquent tax returns for the five tax years preceding the year his spouse had died. The government unsuccessfully argued that joint status was available only for the year
New Treatment for Second-Home Proceeds
The 2008 Housing and Economic Recovery Act, enacted in late July, changes the rules for the partial exclusion of gain from the sale of a residence. For sales after Dec. 31, 2008, the IRC § 121 exclusion of gain will not apply to any gain allocated to a period of
“Significant Purpose” of Tax Avoidance Trumps Document Privlege
The U.S. District Court for the Northern District of Illinois required Valero Energy Corp. to produce documents sought by the IRS, saying they were not protected by the tax practitioner privilege of IRC § 7525 because they concerned a tax shelter. In so holding, the court adopted a more expansive
Withholding From Foreign Payments: IRM Section Offers Insight
CPAs with clients whose responsibilities include withholding and remitting taxes on payments to foreign individuals and entities can help those clients understand guidelines and institute sound practices. Often, these “withholding agents” are financial institutions, but they can include any individual, business or other entity paying U.S.- source income to a
AICPA Honors Albert B. Ellentuck With Arthur J. Dixon Memorial Award
Albert B. Ellentuck is the recipient of the 2008 Arthur J. Dixon Memorial Award, the highest award given by the accounting profession in the area of taxation. The award, given by the Tax Division of the American Institute of Certified Public Accountants, was presented at the AICPA’s Fall Tax Division
AMT Relief in Bailout Bill
Besides “patching” the alternative minimum tax (AMT) exemption amount for 2008 (to $69,950 for joint filers and $46,200 for singles), the Emergency Economic Stabilization Act of 2008 (PL 110-343) increased the portion of the long-term unused minimum tax credit (MTC) that can be claimed in a year. Under prior law,
AICPA Vows to Continue Tax Patent Legislative Effort
The AICPA will continue pushing for legislation in the next Congress either to ban tax strategy patents or provide immunity to taxpayers and practitioners from liability. Supporters of a tax strategy patents ban took modest encouragement from the U.S. Court of Appeals for the Federal Circuit’s ruling Oct. 30
Federal Circuit Issues Landmark Decision on Business Method Patents
The U.S. Court of Appeals for the Federal Circuit issued a long-awaited decision that could make it more challenging to patent business processes such as tax and financial strategies. In a 9-3 ruling issued on Oct. 30 in the In re Bilski case, the court stated a new, more
Economic Substance Redux
The Court of Federal Claims ruled against another Son of BOSS shelter, upholding penalties despite the taxpayers’ reliance on the advice of tax attorneys The Welles family owned Therma-Tru Corp., a leading manufacturer of insulated doors. Between 1999 and 2000 the family negotiated the sale of the corporation to a
Widow of Ex-San Francisco Mayor Held to Be an Innocent Spouse
The widow of Joe Alioto, who served as the mayor of San Francisco from 1968 to 1976, was granted relief under section 6015(f) from paying nearly $2 million in taxes for tax years 1995 and 1996. The Tax Court had dismissed the case in September 1996 due to lack of
Line Items
SERVICE LAUNCHES LILO, SILO SETTLEMENT INITIATIVEThe IRS followed up its recent court victories against LILOs (lease in, lease out) and SILOs (sale in, lease out) with an offer to settle the estimated hundreds of the listed-transaction tax shelters still on companies’ books. The offer, sent initially on Aug. 6 to
Guidance Issued on Dividing CRTs, Assiting Divorcing Couples and Squabbling Annuitants
The IRS has issued Revenue Ruling 2008-41 confirming that charitable remainder trusts (CRTs) can be divided into separate but equal trusts for each recipient without adverse tax consequences. If properly divided, the separate trusts will continue to qualify as CRTs, and no private foundation termination excise taxes will apply under
Documenting a Casualty Loss
The ordeals of hurricanes Katrina, Rita and Wilma in 2005 and Gustav and Ike this year taught us in the Gulf Coast a lot about serving clients who have experienced casualty losses. Here are some ideas to keep in mind if you ever have to help your clients rebuild their
Features
SPONSORED REPORT
Preparing clients for new provisions next tax season
As the 2025 filing season approaches, H.R. 1 introduces significant tax reforms that CPAs must be prepared to navigate. These legislative changes represent some of the most comprehensive tax updates in recent years, affecting both individual and corporate taxpayers. This report provides in-depth analysis and guidance on H.R. 1.
From The Tax Adviser
November 30, 2025
Digital asset transactions: Broker reporting, amount realized, and basis
October 31, 2025
Recent developments in estate planning
October 31, 2025
