Although circuits have split on the issue previously, two recent decisions concluded that medical residents are not subject to FICA, based on the student exception of IRC § 3121(b)(10). The provision states that the term “employment” “shall not include…service(s) performed in the employ of…a school, college, or university…if such service
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Tax
VEBA’s Excess Set-Aside is UBI
The Court of Federal Claims ruled that a tax-exempt voluntary employees’ beneficiary association (VEBA) recognized income subject to the unrelated business income tax (UBIT) because it exceeded the amount the VEBA could set aside to pay benefits. The UBIT was enacted to prevent tax-exempt organizations from competing with taxable entities
Plan Design in the Balance
An overview of the advantages and disadvantages of a cash balance plan.
No Good Deed Goes Unpunished
A volunteer president of the board of directors of a nonprofit day care center was held personally liable for the day care’s payroll taxes and therefore was not entitled to a refund of the taxes he paid on behalf of the organization. The Seventh Circuit Court of Appeals rejected the
CFC Credit Rules Eased
In response to the liquidity crisis, which has made it difficult for taxpayers to fund their operations, the IRS quickly responded on Oct. 3 with Notice 2008-91, temporarily expanding the short-term financing exception to IRC § 956. This measure will permit corporations to access cash from their controlled foreign corporations (CFCs)
Congress Extends, Amends Research Credit
The recently enacted Emergency Economic Stabilization Act of 2008 includes the long-awaited extension of the IRC § 41 research credit. The credit had expired at the end of 2007, but the act extends it to apply to amounts incurred after Dec. 31, 2007, and before Jan. 1, 2010. Under section
Stock Loan Treated as Sale
The value of a couple’s stock securing a loan could not be deducted as a theft loss, even though the stock was sold without the borrowers’ knowledge, the U.S. District Court for the Northern District of California ruled. Other claims, including whether, as the government argued, the loan was really
Deadline for Transition to BSA Electronic Filing Approaching
The Financial Crimes Enforcement Network (FinCEN) said Magnetic Media filers must transition to BSA Electronic Filing (E-Filing) by Dec. 31. The Web-based BSA E-Filing system is user-ID and password-protected and does not require storage media such as tapes and disks to submit Bank Secrecy Act (BSA) reports. The system supports the
IRS Offers Online Course on New 990
Training and information resources on the Service’s “Stay Exempt” Web site for exempt organizations (www.stayexempt.org) now include a four-part “mini-course” on filing the revised Form 990, Return of Organization Exempt From Income Tax. The audio and slide-show presentation is more than two hours long, broken up into five sessions.
Upcoming Infocast to Focus on Partnership Tax Developments
The AICPA will present a live, interactive partnership tax update Friday, Dec. 12, that covers recent changes CPAs will need to be aware of to stay on top of partnership and LLC client needs. The program, scheduled for 1 to 3 p.m. ET, will focus on recent regulatory, judicial and
Infocasts to Focus on S Corp Tax Development
The AICPA will present a live, interactive S corporation tax update today covering recent changes CPAs will need to be able to communicate to 2008 S corporation clients and to prepare their returns. The program, scheduled for 1 p.m. to 3 p.m. ET, will focus on recent regulatory, administrative, judicial and
TIGTA: Unenrolled Preparers Often Wrong
Unenrolled, unlicensed preparers had only a 35% accuracy rate in preparing income tax returns, in a test conducted by the Treasury Inspector General for Tax Administration. More than one-third of the erroneous returns contained misstatements or omissions that TIGTA considered willful or reckless. TIGTA auditors posed as taxpayers earlier this
Lease Buyout Portion of Purchase Ruled Deductible
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
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
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