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
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Tax
“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
Applying At-Risk Rules Risky
On remand from the Sixth Circuit, the Tax Court has held that a deficit restoration obligation (DRO) added to the operating agreement of a limited liability company didn’t allow its member to create recourse debt. Despite the DRO, the at-risk rules under IRC § 465 barred a current deduction because
Open Transaction Doctrine Applied to Demutualization
The Court of Federal Claims ruled that gain was not recognized in the sale of stock received in exchange for policy ownership interests in an insurance company’s demutualization. A mutual insurance company is owned by the policyholders rather than shareholders. When it reorganizes as a traditional stock company, the policyholders
Phone Company on the Hook for Incentives
The Eleventh Circuit Court of Appeals upheld a Georgia district court decision holding that federal and state incentive payments to a local telephone company were gross income. The appellate court accepted the lower court’s analysis that the payments were not excludable as nonshareholder capital contributions. IRC § 118(a) excludes from
Safe From the IRS but Not Necessarily From the State
My comments relate to Stephen Huggard’s article titled “Voluntary Disclosure to the IRS: A Viable Option” (March 08, page 40). This article was very well written and right on point. Huggard makes an excellent final comment in the article stating that, “As long as the taxpayer is careful, he or
Highlights
The rescue package, the Emergency Economic Stabilization Act of 2008, allows the Treasury Department to buy up problem assets in an effort to improve the balance sheets of financial institutions and keep credit flowing. The final version of the plan passed by Congress and signed by President Bush on Oct.
Depreciate Property in Like-Kind Exchanges Consistently
The Treasury has issued final regulations (Treasury Decision 9314) explaining how to depreciate modified accelerated cost recovery system (MACRS) property that has been acquired in a section 1031 like-kind exchange or through a section 1033 involuntary conversion when both the acquired and relinquished property are subject to MACRS in the
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