After the perfect wedding, the happy couple looks forward to sharing a lifetime of happiness. Life, however, does not always go as planned. Divorce happens. In addition to the emotional aspects, there are tax consequences to deal with as well. If the parties intend to have one spouse receive alimony,
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Tax
Contested Buyout Doesn’t Bar Gain
The Ninth Circuit Court of Appeals affirmed the Tax Court’s decision that a cash-method shareholder’s forced buyout triggers gain recognition in the year that the buyout payment is received, even if the shareholder continues to dispute the buyout in court. Additionally, the shareholder must recognize any interest income from investment
Now’s the Time to Comply With NQDC Regs
In April 2007, the IRS issued final regulations under section 409A pertaining to nonqualified deferred compensation (NQDC) plans. The regulations represent a culmination of efforts to bring uniformity to a field that Congress perceived was too prone to abuse of income timing, especially by executives and other highly compensated individuals.
Safe Harbor for Home Swaps
Revenue Procedure 2008-16 provides a method for section 1031 like-kind exchanges of homes that are rented out or otherwise held as income-producing properties but also used occasionally by taxpayers for personal purposes. Dwellings will be considered held for productive use in a trade or business or for investment if, in
Capone Tax Records Released
TAX NOTES In a rare move, the IRS made records relating to the three-year tax evasion investigation of Al Capone available to the public. Posted on www.irs.gov, the documents include two 1931 letters from Special Agent Frank Wilson, updating Elmer Irey, chief of
Third Circuit Silences National Muffler, Pumps Chevron Deference
The Third Circuit Court of Appeals recently upheld the validity of Treas. Reg. § 1.882-4(a)(3)(i), which disallows deductions by a foreign corporation that fails to file a U.S. tax return within 18 months of the normal due date. When assessing the validity of the regulation, the Third Circuit applied the
All Bundled Up
In the wake of the Supreme Court’s decision in Knight v. Commissioner (101 AFTR2d 2008-380), the IRS permitted full deduction of “bundled” commissions or fees paid to a trustee or executor of a nongrantor trust or estate for tax years 2007 and previously without parsing portions that qualify for “above
New Split-Interest Return Form
The IRS recently issued a revised Form 5227, Split-Interest Trust Information Return, for use in preparing returns for tax years beginning on or after Jan. 1, 2007. Among its numerous changes, the most significant are: Charitable split-interest trusts are no longer required to file Form 1041-A, Trust Accumulation of Charitable
IRS Targets High-Income Taxpayers, S Corps
One out of 11 individuals with an income of $1 million or more faced an audit in fiscal year 2007, when the number of audits for these high-income taxpayers increased 84%, from 17,015 in 2006 to 31,382. Overall, audits of individual returns rose by 7%,
Like a Good Neighbor
The Ninth Circuit has affirmed a district court and held that termination payments received by a retiring insurance agent were not capital gain but were taxable as ordinary income. The court thus joins the Seventh Circuit in so ruling on similar facts. See Warren L. Baker Jr. v. Commissioner, 92
GAO: Offshore Remittances Underwithheld
Despite the IRS’s eight-year-old qualified intermediary (QI) program, billions of dollars in U.S.-source income continue to flow overseas without proper tax withholding, the Government Accountability Office said. QIs are foreign financial institutions that contract with the IRS to provide withholding of U.S. tax and administer treaty provisions. However, they figure
Rebates to Relieve Debt
When it comes to tax rebate checks, American consumers may not be so eager to spend, spend, spend. A CCH and Harris Interactive survey asked 2,020 adults what they would do with a broad-based tax rebate. Their responses were: Pay down debt – 47% Save it – 32% Spend it
FLPs That Flop
In several recent cases, the IRS successfully challenged attempts to exclude from taxable estates assets transferred to family limited partnerships (FLPs, or “flips”) in which a decedent had retained the right to enjoy the property or income from it. Besides reducing estate taxes, purposes of FLPs include liability protection and
Charity Begins With Ownership
The Tax Court ruled that a criminal defense attorney who donated case materials in a prominent case to the University of Texas did not have sufficient ownership rights to the materials to claim a charitable deduction under IRC § 170. Even if the taxpayer did exhibit proper ownership, section 170(e)(1)(A)
PPA Regs Delayed, Guidance Issued
The IRS delayed implementation and provided transitional guidance for proposed regulations under new provisions of the Pension Protection Act of 2006 that relate to funding requirements and benefits of single-employer defined-benefit pension plans. Prop. Treas. Reg. §§ 1.430(f)-1 and 1.430(h)(3)-2, which address maintaining certain funding balances and use of substitute
On Equal Terms
Rep. Rick Boucher, D-Va. (9th District), has been at the forefront of efforts to stop patents on tax planning methods. With a fellow Virginian from across the aisle, Rep. Bob Goodlatte, R-Va., and Rep. Steve Chabot, R-Ohio, Boucher introduced HR 2365, a free-standing bill, to limit damages for infringements on
IRS Can’t Shake Yardstick at Tax Treaty
The Court of Appeals for the Federal Circuit ruled a U.K. bank was entitled to a $65 million refund because the IRS applied a regulation that increased the institution’s income by $155 million in violation of the U.S.-U.K. tax treaty of 1975. In the tax years 1981–1987, National Westminster Bank
Taxpayer Advocate Presents Annual Wish List
National Taxpayer Advocate Nina Olson presented her annual report to Congress in January recommending dozens of issues for the IRS and Congress to resolve this year. The report analyzes issues in 26 categories, including collection and tax services, privacy protection and tax preparer standards. Late tax-law changes. Olson said paper
This Sold House
The Tax Court recently held that a couple could exclude gain from the sale of one of their two residences, since during the five-year period preceding the home’s sale, it was used as the couple’s principal residence for the requisite two-year period. The taxpayers were not allowed to exclude the
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