The 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 45 large corporations known to
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Tax
Shell Wins $19M Refund
A district court in Texas allowed Shell Petroleum to carry back capital losses and receive a nearly $19 million refund. The losses were generated by a restructuring transaction involving an exchange of highbasis property for new subsidiary stock followed by loss-generating dispositions of the stock. In 1992, Shell Oil was
Health Accounts Illustrated
The IRS has provided guidance on a variety of issues pertaining to health savings accounts (HSAs). The 42 questions and answers of Notice 2008- 59 address such issues as eligibility for individuals with “limited purpose” coverage by a health flexible spending account (FSA) or health reimbursement arrangement (HRA). The guidance
AICPA To Webcast Seminars On NQDC, AMT
A Web seminar, “Nonqualified Deferred Compensation Under Section 409A: Implementation Roundtable,” will be held Oct. 2 from 2 to 4:30 p.m. ET. Tax, PFP and PCPS section members may participate free or may pay a discounted price of $74 and receive 21/2 hours of CPE credit (non-section members pay $99).
All That Glitters Is Not Deductible
The Tenth Circuit Court of Appeals upheld a district court’s ruling that a company could not carry back a loss because the statute of limitations had passed. Taxpayers that incur net operating losses are permitted under IRC § 172 to carry them back two years and forward 20 years. A
Startup Expensing Election Now Deemed
Taxpayers may elect under IRC § 195 to deduct in the first year of operation up to $5,000 of startup expenses (reduced by the excess of total startup costs over $50,000) of an active trade or business and generally must amortize the remainder over 15 years. In July, the IRS
Court Hangs Up On Phone Tax Refund
The Court of Federal Claims held that the statute of limitations applies to taxpayers who paid the telephone excise tax through carriers and were not required to file returns related to it. Until May 2006, the IRS contended that telephone toll charges that varied only with elapsed time but not
Tax Treatment of Rebates May Be Clearing Up
EXECUTIVE SUMMARY The IRS has attempted for many years to categorize rebates as deductions rather than exclusions so that the restrictions of IRC § 162 can be applied. But the courts have allowed exclusion treatment for direct seller-to-buyer rebates. Though the IRS has had some success in the courts
Taxpayer Ignores CPA’s Advice At His Peril
An owner of a California health care company was found liable by the Tax Court for an accuracy-related penalty for a deduction he claimed in spite of his CPA’s advice against it. Larry Wadsworth was a general partner of Gold Coast Medical Services (GCMS), which provided medical products and services
IRS Boosts Online Payment Agreement Application
It’s now easier for tax practitioners and taxpayers to make changes to installment agreements, thanks to the addition of several new features to the Service’s Online Payment Agreement application. The interactive application now allows: Individuals to revise due dates and payment amounts on existing agreements. Individuals to revise existing regular
GRAT Expectations
The Service adopted final regulations governing inclusion in estates of trust property of grantor retained trusts, charitable retained trusts and similar trusts. The final regs (TD 9414) are effective for estates of decedents dying after July 13, 2008, and modify and clarify a number of features of their proposed version
Housing Act Tightens Home Sale Exclusion
A revenue-raising provision of the Housing and Economic Recovery Act of 2008 enacted in late July (PL 110- 289) disallows exclusion of gain from the sale of a principal residence under IRC § 121 attributable to periods the dwelling is used as a vacation or rental home or other nonqualified
Smart Stops on the Web
TAX A TAX TOOLBOXwww.irs.gov/taxpros/article/0,,id=118004,00.htmlThis Smart Stop from the IRS provides a host of basic tools for tax professionals, handily compiled onto one page for easy access. The information ranges from recent tax law changes to standards of practice and Circular 230 information to the contact info for the Taxpayer Advocacy
Substantially Equal Periodic Payments From an IRA
In the current economic climate, unexpected circumstances may cause many individuals to consider the early withdrawal of IRA funds. Minimizing the tax consequences of these withdrawals requires careful consideration of opportunities to avoid the 10% penalty on premature distributions. While all distributions from a traditional IRA are subject to income
GAO: Businesses Owe $58B in Payroll Taxes
Although payroll tax debts are one of the IRS’s top collection priorities, the Service hasn’t made optimal use of its enforcement tools against the 1.6 million businesses owing $58 billion for employees’ income, Social Security and Medicare taxes, the Government Accountability Office said. Earlier GAO audits found that payroll taxes
Criminal Enforcement Ramps Up
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Rules Clarified for Claiming the Exemption (and Related Tax Breaks) for Children of Divorced Parents
New final rules clarify who may claim qualifying children in the case of divorced or separated parents. Treasury Decision 9408, amending Treas. Reg. § 1.152-4, clarified the “counting nights” rule to identify a custodial parent. In promulgating the final regulations, the IRS took into consideration comments of the AICPA (Aug.
A Showcase of Tax Research
In this third installment of “In Practice,” we distill research published in tax and accounting journals that should be of interest to busy tax practitioners. The pervasiveness of tax considerations in the affairs of everyone from students to CEOs makes the field a particularly fertile one for studying financial behavior.
Derivatives and Hedging: Accounting vs. Taxation
EXECUTIVE SUMMARY Hedge documentation is important in both financial reporting and income taxation.For financial accounting purposes, on the date of the hedge, an entity must identify the hedged item, the instrument used, the type of risk hedged, the means of assessing hedge effectiveness, and the risk management objective and strategy.
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