Your clients might own a getaway home in the country, a cozy cottage on a lakeshore, a condo on the oceanfront or a rustic cabin in the mountains. When they sell it, they may recognize gain without the benefit of the principal residence exclusion in IRC §
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Tax
The Code Trumps Tucker
The U.S. Supreme Court recently held that an unconstitutionally assessed excise tax could not be recovered under the Tucker Act—the general provision for non-tort claims against the United States—for tax years outside the normal three-year period for filing refund claims. Thus the court overturned a decision by the Court of
Levels of Certainty
Two rulings in separate cases by the Court of Federal Claims helped clarify how penalties involving partnerships are imposed and defended against at the partnership and partner levels. Because partnerships are flow-through entities, contested partnership items were formerly litigated at the partner level. This approach, however, led to repetitive legal
Watch Out for Private Annuities
EXECUTIVE SUMMARY With the release of Prop. Treas. Reg. §§ 1.72-6(e) and 1.1001-1(j) in October 2006, the Treasury and IRS have signaled their intent to recognize gain or loss at the time of exchange of property other than money for an annuity contract. Previously, taxpayers may have recognized such gain
Capital With a Conscience
EXECUTIVE SUMMARY Private foundations must distinguish between what are sometimes called mission–related investments and program–related investments (PRIs). PRIs enable private foundations to make venture capital–type investments that might otherwise be penalized under the IRC as “jeopardizing,” that is, risky. Mission–related investments, although not technically defined, nonetheless have their
Check-the-Box Regulations Are Valid
The U.S. Supreme Court declined to review a case in which a business owner argued that “check-the-box” entity classification rules represent an invalid exercise of the IRS’s authority to issue interpretive regulations under IRC § 7805(a). In so doing, the court let stand a ruling by the Sixth Circuit
Kinder, Gentler IRS Turns to Liens, Levies
In the early 1990s, IRS enforcement activities were fairly aggressive. In several well-publicized cases, individual taxpayers lost their homes and livelihoods to the IRS because of unpaid taxes. As a result, public sentiment turned against the agency, and congressional hearings were held to address the problem. Congress
Share Loans Under IRS Microscope
TAX PRACTICE In a recently released Coordinated Issue Paper (LMSB-04-1207-077), the IRS underscored how its examinations will home in on a once-favored strategy for monetizing stock gains while deferring capital gains taxes. In doing so, the Service reiterated its legal basis for why a variable prepaid forward
Cook Won’t Excuse Estate From Table
Despite contrary holdings by other circuits, the Fifth Circuit recently held fast to its earlier decision in Cook v. Commissioner to once again overrule an estate’s discounting of an annuity interest and restrict it to the valuation tables prescribed by IRC § 7520. The decedent in the recent decision, James
Supporting Org Guidelines Available
The IRS has produced guide sheets and explanations to help applicants for supporting organization status to determine which of the three types of supporting organizations outlined in IRC § 509(a)(3) they fall under. The guides, which include checklists for the organizational test, operational test, control test, relationship requirement and other
IRS Will Not Acquiesce in Kohler
In Action on Decision 2008-001, the Service said it would not acquiesce in the Tax Court’s allowance of a taxpayer’s contested valuation of the stock of a closely held corporation following a post-death, tax-free reorganization. The court’s 2006 decision represented a $100 million victory for family owners of privately held
Capitalization Regs Reproposed
Rather than finalize 18-month-old proposed regulations on capitalization of tangible assets, the Service withdrew the 2006 proposed regulations and reproposed them in revised form March 10. The regulations are intended to better distinguish between repair or maintenance on the one hand versus improvements and provide a standard for “betterment or
LIFO Snafu Is Change in Method
The Sixth Circuit Court of Appeals recently upheld a Tax Court finding that the consistent omission of a step when computing inventory cost under the dollar-value LIFO method was a change in accounting method rather than a mathematical error. Thus a $1,754,293 cumulative difference between the correct valuation of
How Will IFRS Affect Tax Practitioners?
M any companies are in the early stages of considering what impact the transition to International Financial Reporting Standards (IFRS) from U.S. GAAP will have on financial reporting. However, are they also thinking about the impact it will have on tax reporting? While practitioners may have focused on the
Data Engine Chugging Along
The cornerstone of the IRS’s efforts to modernize its computerized return-processing system is progressing in capacity and performance, the IRS said in a news release. The Customer Account Data Engine (CADE) had handled more than 15 million individual tax returns by March 7 in the 2008 tax filing season, more
Equitable Recoupment a Timeless Remedy
An amendment to IRC § 6214(b) included in the Pension Protection Act of 2006 empowers the Tax Court to apply equitable recoupment to offset overpayments of hospital insurance taxes (the Medicare portion of FICA) against income tax deficiencies, according to the court’s ruling in Menard Inc. v. Commissioner . Although
Section 199 Final Regs Issued
The IRS issued final regulations under the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) amending provisions of the domestic production activities deduction of IRC § 199. The deduction for tax years beginning in 2008 is potentially 6% of the lesser of qualified production activities income (QPAI) or taxable
FICA Holdings Overturned
The U.S. Court of Appeals for the Federal Circuit recently reviewed three prior decisions of the U.S. Court of Federal Claims involving railroad operator CSX Corp. and whether certain payments to laid-off employees were wages for purposes of FICA (for the lower court’s main ruling, see “Tax Matters: When Are
It Takes a Thief
A lender sunk by subprime mortgage exposures and the financial subterfuge of a parent corporation did not give rise to a theft loss deduction by investors, despite criminal charges having been brought against an officer of the parent company, the IRS said in a Chief Counsel Advice. The legal memo,
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How to find the right CAS clients
The key to success with CAS is selecting the best clients. Tools like ideal client profiles (ICPs), buyer personas, and even artificial intelligence can help identify the businesses that best fit each CAS practice.
From The Tax Adviser
April 30, 2026
Current developments in taxation of individuals: Part 2
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Hedge funds: Tax structuring, planning, and compliance
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Current developments in taxation of individuals: Part 1
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