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
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Tax
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
©2008 AICPA
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
Abusive Insurance and Retirement Plans
EXECUTIVE SUMMARY Some of the listed transactions CPA tax practitioners are most likely to encounter are employee benefit insurance plans that the IRS has deemed abusive. Many of these plans have been sold by promoters in conjunction with life insurance companies. As long ago as 1984, with the addition of
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IRS ISSUES PROPOSED RETURN PREPARER REGS The Service issued proposed regulations implementing changes made last year to the return preparer penalties in IRC §§ 6694 and 6695 and related provisions (REG-129243-07; see also “From The Tax Adviser,” page 90). Comments are due by Aug. 18, 2008. Among the many
When (and Where) Is It Filed?
The Fourth Circuit recently upheld a Tax Court decision that a deficiency notice beat the three-year statute of limitations only because the taxpayer had hand-delivered his returns to the wrong office. The IRS is generally required by IRC § 6501(a) to assess income tax deficiencies no later than three years
Common-Law Mailbox Rule Reopened
The Third Circuit Court of Appeals has reaffirmed as still valid the “common-law mailbox rule”—that a properly mailed document is presumed to reach the IRS within normal delivery time—despite holdings by other circuits that the rule was supplanted by the 1954 Tax Code provision that allows a postmark date to
LILO Comes Up One Leg Short
The Fourth Circuit Court of Appeals held that a LILO (lease in, lease out) transaction by banking company BB&T Corp. was not a genuine leasehold interest but only a circular transfer of funds. In so ruling, the Fourth Circuit upheld a district court’s denial of deductions arising from the deal.
Institute Pushes for Change in Preparer Penalty Standard
Reps. Joe Crowley, D-N.Y., and Jim Ramstad, R-Minn., introduced a bill (HR 4318) in the House to make tax preparers subject to penalties under IRC § 6694 if a position for an undisclosed, non-tax avoidance item lacks substantial authority. A provision in a larger troop funding bill, which was enacted
Congress Passes Expat Rules
Just before the Memorial Day holiday, the U.S. House and Senate passed by unanimous consent and voice vote, respectively, HR 6081, the Heroes Earnings Assistance and Relief Tax Act. The act provides benefits to military personnel, funded in part by new rules for taxing individuals who expatriate. The bill also
The Scholarship Trap for Foreign Students
Many U.S. colleges and universities recruit foreign students, especially for graduate programs and athletics. Such students often receive full scholarships that include room and board, making them subject to U.S. income taxes. These students may be unfamiliar with the U.S. tax system, but they need to understand
Long-Term Care Insurance and Tax Planning
EXECUTIVE SUMMARY Long-term care (LTC) insurance benefits are tax-free to the insured for either reimbursement of qualified expenses or payments up to a per-diem limit indexed for inflation—$270 in 2008. Premiums for LTC insurance are tax-deductible according to limits that are also indexed to inflation and increase with the age
Equal Treatment for All Taxpayers
The Tax Court reversed its prior decision in a “retail tax shelter” case, granting further relief from assessments to approximately 400 taxpayers. It did so because the IRS secretly—and fraudulently—entered into more favorable settlements with some test case litigants before the test cases were decided. The action marked a reversal
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COURTS ON BOARD WITH CSX CASE At least one other court has ruled that supplemental unemployment compensation benefits (SUCBS or SUBs) paid by employers to laid-off employees are subject to FICA taxes, after the Federal Circuit so ruled in the long-running case CSX Corp. v. U.S., 101 AFTR2d 2008-1120 (see
Debt Forgiveness Taxed
Two exceptions to the general provision of IRC § 61(a)(12) recognizing income from the discharge of indebtedness were tested recently in separate cases, but the taxpayers were not successful in either. Argued before the U.S. Bankruptcy Court for the Eastern District of Tennessee, Higgins v. Commissioner involved discharge of indebtedness
Unitary Business Principle Clarified
A recent addition to the Lexis database of Supreme Court decisions could spare the electronic legal research service’s former owner from a $4 million tax bill. In MeadWestvaco v. Illinois , the nation’s top court said an Illinois appellate court improperly applied the operational function test of the unitary business
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