Tax
Advising Private Foundations
In the arsenal of estate planning, private foundations have traditionally ranked among the big guns. With their relative formality and extensive tax rules, they have been considered the province of the truly wealthy – people with $1 million or more to dispose of charitably. The belief that lesser largesse could
Split-Interest Prohibition Upheld
The Third Circuit Court of Appeals joined other jurisdictions in affirming IRC § 2055(e)’s prohibition of charitable deductions from an estate for transfers of interests in trust property that are not definitely divided between charitable and noncharitable beneficiaries, even where the arrangement shows little likelihood of being abusive in the
Top Return Errors for Taxpayers and Paid Preparers
Source: www.irs.gov .
Step Right Up
The Tax Court upheld as having economic substance a partnership’s nearly $12 million distribution of notes to redeem partners’ interests in real estate on which the partnership claimed a step-up in basis. The IRS had denied the partners’ resulting nonrecognition of gain on grounds that the distribution consisted of either
Data Point: 87
The proportion of multinational enterprises that believe transfer pricing is a risk when managing financial statements, as compliance requirements have increased due to developments in financial reporting. More than half of the enterprises surveyed have undergone a transfer pricing examination since 2003, with 27% resulting in adjustments by tax authorities.
Georgia Tax Court Eyed
Practitioners hope to see a state tax court started in Georgia, one of 27 states lacking a dedicated tax court or administrative appeals forum fully independent of a state revenue agency. Besides removing proceedings from any appearance of bias, an independent tax tribunal offers several other advantages including a less
AICPA Issues Guidance for 2007 Returns on Trustee Costs
The AICPA has produced guidance for members preparing 2007 fiduciary income tax returns, in keeping with the recent holding of the U.S. Supreme Court in Knight v. Commissioner. The case (101 AFTR2d 2008-380) affirmed that investment advisory fees of estates and nongrantor trusts generally are subject to the 2% of
Return Preparers Subject to New Regulations
Section 7216 of the Internal Revenue Code imposes criminal penalties on tax return preparers who knowingly or recklessly make unauthorized disclosures or uses of information furnished to them in connection with the preparation of an income tax return. Newly finalized regulations should prompt all return preparers to evaluate their processes
2007 in Review: Congressional Impact on CPA Profession
Last year, CPAs had plenty of reasons to pay attention to policymakers’ proposals. Legislation under consideration has the potential to improve tax practices, alter audit practices, and even pave the way for greater competition. AICPA VP Testifies Before Senate Panel on International Accounting Standards Last fall, the Senate Banking
Economic Substance Prevails Against Another Son of BOSS
The IRS scored a major success in its war against Son of BOSS-type tax shelters in Jade Trading LLC . The Court of Federal Claims used the application of the economic substance doctrine in Coltec Industries to disallow losses involving partnerships and euro call options. In 1999, after clearing approximately
New Form 990 Phased in for Smaller EOs
Smaller exempt organizations received transition relief as the IRS released its revamped Form 990, Return of Organization Exempt From Income Tax, for tax years 2008 and following. Organizations with gross receipts under $1 million or total assets under $2.5 million will be allowed to use Form 990-EZ for tax year
Supreme Court Upholds Trust Expense Floor
The Supreme Court ruled in a unanimous opinion that administrative expenses of nongrantor trusts or estates generally are subject to the 2% of adjusted gross income floor as miscellaneous itemized expenses, resolving a split among circuit courts on the issue. The case, Knight v. Commissioner (101 AFTR2d 2008-380), was styled
Pitt Falls in FICA Case
The Third Circuit Court of Appeals recently held that payments to tenured faculty and administrators at the University of Pittsburgh who relinquished tenure rights under an early-retirement plan were subject to FICA taxes. The ruling was contrary to an Eighth Circuit case with similar facts ( North Dakota State University
A 401(k) Tax Break That’s Often No Break
Withdrawing company stock from a 401(k) to take advantage of a tax break called net unrealized appreciation (NUA) sounds like a no-lose proposition, and most advisers tell their eligible clients to go for it. But there’s just one big problem: When you run the numbers, this maneuver
100 Million Unnecessary Returns: A Simple, Fair, and Competitive Tax Plan for the United States
Michael Graetz, a Yale Law School professor, has written many books and studies related to major tax reform. His previous books on income tax reform may be familiar to readers— The Decline (and Fall) of the Income Tax (1997) and the 1999 paperback version The U.S. Income Tax: What It
Partnership Incorporation Provides Planning Opportunities
It is common for business owners to conclude that they must change the legal form of the entity through which a business has been conducted. When incorporating a business that has been a partnership, CPAs should pay close attention to the form of the conversion because the method used can
Dunn Does It Again
The Eleventh Circuit Court of Appeals vacated a Tax Court judgment and allowed a valuation discount of 100% of an estate’s built-in capital gains tax. The court based the contingent tax liability and resulting discount on an assumed immediate liquidation of the decedent’s interest in a closely held investment holding
New and Increased Filing Penalties for Businesses
Among the revenue offsetting provisions of HR 3648, the Mortgage Forgiveness Debt Relief Act of 2007, were increases in penalties on partnerships and S corporations for failure to timely file returns. The monthly penalty for failure to file required partnership returns on time (absent any extension) was increased from $50
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