The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in whole or in part, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice
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For news from the AICPA and state societies, visit www.cpa2biz.com, which also offers online CPE, AICPA professional literature, practice management aids and links to state society Web sites. The findings were based on inspections conducted between 2004 and 2006. The PCAOB released a report on the deficiencies to help
Donor-Advised Funds: Preparing for Closer Scrutiny
EXECUTIVE SUMMARY Donor-advised funds (DAFs), as an alternative to private foundations, have been a popular means of charitable giving, but fund managers, donors and their advisers must reckon with new laws and regulations stemming from the Pension Protection Act of 2006. A DAF allows the donor
New Accounting-Change Process Proposed
The IRS is requesting comments on a proposal to revamp how taxpayers may obtain the Service’s consent to change their method of accounting for tax purposes. Notice 2007-88 describes a “standard consent process” that would become the exclusive method not only for changes currently eligible for automatic consent but other
IRS Simplifies Late Filing Relief
In Rev. Proc. 2007-62 (released Oct. 9, 2007), the IRS has provided a new simplified method for taxpayers to request relief for late S corporation elections. A small business corporation may make an election to be an S corporation at any time during the preceding tax year or at any
Indianapolis Power & Light Trips Circuits
In a split decision, the Third Circuit Court of Appeals required a grocer to include in gross income a payment characterized as a loan from a supplier. The loan could be forgiven if the grocer, Karns Prime and Fancy Foods Ltd. of Harrisburg, Pa., purchased a certain volume of goods.
Ease the Burden of Busy Season
With busy season just around the corner, here are some suggestions from firms that have learned how to make what could be their annual trial by fire less stressful and more productive. By treating their staffs with an extra measure of consideration and carefully planning and analyzing
Double Take: Unequal Taxation of Equals
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,
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
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