by Lester B. Snyder Vandeplas Publishing, 2007, 281 pp. In the backward world envisioned 135 years ago by Samuel Butler in Erewhon , taxation is regressive, on the theory that a business fortune is evidence of society’s esteem toward its holder. Rather than the social Darwinism that Butler parodied, however,
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Tax
No Theft Loss for “Phantom” Income
The section 165 theft loss deduction seldom benefits taxpayers to the extent they think it should. This can be especially true if the thief is their investment manager and they discover only belatedly they’ve been paying taxes on investment income that never existed. Between 1992 and 2000, Michael and Anita
A Point of No Return
Is filing of a return required for a conviction of false return preparation? A recent case held it was not. Linda Borden of Florida was convicted by a federal jury in March 2007 of 27 counts of preparing or presenting false or fraudulent returns under IRC section 7206(2). However, she
Give and Take at the SSA
Starting in January 2008, the maximum earnings subject to Social Security tax will rise 4.6%, from $97,500 to $102,000, marking the first time the taxable maximum exceeds $100,000. The Social Security Administration expects nearly 12 million workers will pay higher taxes as a result. The $4,500 increase in maximum taxable
Circular 230 Revisions Finalized
The Treasury Department issued final regulations amending a number of Circular 230 standards, including sections on conflicts of interest, contingent fees, conduct for which practitioners may be sanctioned and publicity of disciplinary hearings. Most of the changes became effective upon their issuance on Sept. 26. The final regulations concerning conflicts
New Form 990 Taken to Task
The IRS is assessing hundreds of comments, including those by an AICPA task force, on its draft revised Form 990, Return of Organization Exempt From Income Tax . The task force suggested a new summary should emphasize exempt purpose and activities, rather than compensation and fundraising and total expense ratios.
Saving Taxes in Transfers of Personal Goodwill
While many of the reasons for a family business to choose being a C corporation have been eliminated over the years (the deduction of shareholder health insurance, for example), there are still situations in which the limitations on S corporation ownership are an issue. However, businesses, other than personal service
House Passes Tax Strategy Patent Ban, FHA Overhaul Legislation
On Sept. 7, the House of Representatives passed major patent reform legislation, which would ban the issuance of patents on tax strategies. The AICPA is a strong advocate of Congress’ work in this area. The comprehensive patent reform bill (HR 1908) also contains provisions unrelated to patents on
Tax Court to Rule on Sex Change
The U.S. Tax Court in Boston is reviewing whether expenses of a sex-change operation are deductible. Rhiannon G. O’Donnabhain, born anatomically male, was diagnosed by her psychotherapist in 1996 with gender identification disorder (GID), which she says caused her extreme discomfort since childhood. In 1997, O’Donnabhain began taking feminizing hormones
TIGTA: Hobby Loss Rule Hobbled
The Office of the Assistant Secretary of the Treasury for Tax Policy will propose legislative changes to IRC section 183 to strengthen and clarify the hobby loss rule. The office agreed to do so at the urging recently of the Treasury Inspector General for Tax Administration, which faulted the statute’s
IRS to Study Like-Kind Exchanges
The IRS will study reporting and compliance issues regarding like-kind exchanges of property under IRC section 1031. The move comes in response to a September report by the Treasury Inspector General for Tax Administration that faulted the IRS for what it called little oversight of the method for deferring capital
A Moot Point (and a Half) for Exxon
When it comes to overpayment interest due them, most taxpayers probably wouldn’t quibble too much over a difference of 1.5 percentage points, especially if that margin applied only to compounding of previously earned interest. But Exxon Mobil isn’t most taxpayers. For it, that fraction was worth $140 million, for which
Highlights
The Center for Audit Quality issued a set of white papers to address issues practitioners may encounter as a result of the “liquidity crisis” spurred by deterioration in the markets for subprime mortgages and related securities. The CAQ Professional Practice Executive Committee said firms would benefit from the
IRS Revises Measure of Ability to Pay
The IRS has updated the Collection Financial Standards used to determine a taxpayer’s ability to pay a delinquent tax liability. The changes went into effect Oct. 1. For bankruptcy purposes, the new tables are not effective until Jan. 1, 2008. The revised standards include some basic changes such as the
Tax Patents Reportable Transactions
The IRS and Treasury Department issued proposed regulations that add patented transactions to Treas. Reg. § 1.6011-4 on reportable transactions. REG-129916-07 also makes conforming changes to IRC section 6111 on disclosure of reportable transactions by material advisers. Comments and public hearing requests are due by Dec. 26. The AICPA and
AICPA Assesses Form 990 Redesign
The AICPA proposed a list of suggestions for the IRS to mitigate what the Institute considers increased burdens that will result from the new draft of Form 990, Return of Organization Exempt From Income Tax. The AICPA’s 990 Task Force said the changes improve transparency of reporting, aiding in performance
Government Employment Tax Delinquencies Improved
The IRS has improved its coordination among offices to collect approximately $45 million in delinquent payroll taxes owed by federal government units, plus that owed by state and local governments, the Treasury Inspector General for Tax Administration reported. The report followed a 2002 TIGTA audit finding that more than 12,000
Five-Card Withhold ’Em
On the heels of a Tax Court decision that held a poker tournament to be a wagering activity subject to IRC § 165 gambling loss limitations (Tschetschot v. Commissioner, TC Memo 2007-38, appeal pending in Eighth Circuit, filed 9/7/07, docket no. 9498-03), the IRS has issued a revenue procedure specifying
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