The Tax Court held that a married couple could deduct mortgage interest and property tax payments made from a corporate checking account on a home that was owned by their son. The court held that the taxpayers were equitable and beneficial owners of the property and that the checking account
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Tax
Nexus for Sales and Use Taxes
States have become more aggressive in claiming a seller has substantial nexus for sales and use tax purposes. They look for in-state activities, relationships and assets of unregistered businesses with customers in the state. Here are some tips to help businesses determine their sales and use tax collection obligations: Review
Online Retailers Battle N.Y. Nexus
Online retailers Amazon.com and Overstock. com sued the New York State Department of Taxation and state officials over the state’s new definition of Web sellers required to collect sales and use tax. New York changed the definition of vendors subject to the tax to include those who pay a commission
Full Charge On Alternators
The Tax Court required an auto parts remanufacturer to include in income charges it normally waived in exchange for used parts from its customers. In so ruling, the court underscored that where a taxpayer’s accounting method does not clearly reflect income, the government can require it to use a different
Worldcom Shareholder’s Loss Not Theft
Criminal conviction of corporate officers for misconduct is not enough to allow shareholders to claim a theft loss, the Tax Court ruled. In cases where a shareholder’s stock becomes worthless due to corporate theft, it would generally be advantageous to treat relatively small losses as capital losses (due to the
Top Things to Know About Roth 401(k)s
Roth IRAs have become popular retirement vehicles, but the low contribution limits and participant income limitations have prevented many people from taking advantage of them. The Economic Growth and Tax Relief Reconciliation Act of 2001 provided for designating Roth contributions within a qualified plan. Now many individuals previously excluded can
Is 2008 a Good Year to Elect Out of Installment Sale Accounting?
The sale of investment real estate is often a large taxable transaction, frequently involving deferred payments. Installment sale accounting is automatic under IRC § 453, although taxpayers may elect out and recognize all of the income currently. Usually, taxpayers would rather defer income, but right now, it may make better
E-Filing Lags behind Mandate
IRS estimates indicate about 60% of all tax forms will be electronically filed during 2008, far short of a 1998 congressional mandate of 80% by 2007. For a second year, the Service’s Electronic Tax Administration Advisory Committee recommended that Congress authorize the IRS to require e-filing by paid tax preparers
Knowing But Innocent
The Tax Court held that the IRS abused its discretion in denying a stay-at-home mom’s request for innocent spouse relief because it did not consider all of the relevant factors. Chrystina Nihiser filed for relief after her husband stopped paying their taxes due to financial problems with his business. Although
Supplemental Wage Withholding Explicated
With Revenue Ruling 2008-29, the IRS analyzed nine scenarios for applying withholding rules to commissions, severance pay and other forms of supplemental wages under IRC § 3402, including proper application of the aggregate versus optional flat-rate methods. The guidance supersedes revenue rulings 67-131 and 66-294.
FLPs Revisited
The Tax Court ruled, contrary to the IRS’s argument, that the step transaction doctrine did not apply where gifts of interests in a family limited partnership (FLP) were made only six days after the funding of the partnership with stock. However, the court also partially denied the taxpayers’ discounts for
What’s in Their Wallet?
The Tax Court rejected an attempt by credit card issuer Capital One to retroactively defer its recognition of income from fees for late payments of card balances. Capital One sought to do so by taking advantage of a law change allowing such payments to be characterized as changes to original
The Taxpayer Advocacy Panel:An Opportunity to Collaborate With the IRS
EXECUTIVE SUMMARY The Taxpayer Advocacy Panel (TAP) of the IRS is another way CPAs can serve their clients and all taxpayers, by listening to their concerns and recommending improvements to the Service. Some of the many measures the TAP has championed and seen adopted by the Service include the automatic
Offshore Preparers OK’d to See SSNs
The IRS modified its final rules regarding the disclosure of a taxpayer’s Social Security number to a tax return preparer located outside the U.S. to allow disclosure under specified circumstances. Previously, the rules had generally required U.S. preparers to redact SSNs from tax return forms and other information transmitted to
More Support for Check-the-Box
Following the U.S. Supreme Court’s refusal to hear an appeal attacking the validity of “check-the-box” provisions, a district court has similarly denied a legal challenge to the default business entity classification. The plaintiff in the more recent decision, L&L Holding Co. LLC v. U.S. (101 AFTR2d 2008-2081), contested an employment
Pass-Through Entity Automatic Extension Shortened
Along with final regulations adopting automatic six-month filing extensions for certain returns, the IRS proposed reducing the extension to five months for partnerships and other pass-through entities. The shorter period is intended to better enable owners to receive Schedules K-1 and other information returns in time to prepare their individual
Another SILO Pulled Down
A district court upheld the IRS’s denial of deductions by two large banks from a sale in, lease out (SILO) transaction, continuing a string of victories by the Service against the one-time promoted shelter. The opinion by the court for the Northern District of Ohio against KeyCorp and PNC Financial
Return Prep, Filing Disconnect
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Lack of Records Equals Recapture
The Tax Court held that a taxpayer had to recapture the majority of his prior-year section 179 deduction since he failed to show that the business use of his GMC Suburban remained above 50% in the following tax year. His testimony of the business use of the vehicle, although considered
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