he Tax Court held in Edward A. Robinson III, 119 TC no. 4 (2002), that interest paid on income tax underpayments and deficiencies was nondeductible personal interest even if the tax resulted from the taxpayer’s trade or business. This ruling, which potentially applies to more than 20 million noncorporate businesses,
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Tax
Government Accounting
The Federal Accounting Standards Advisory Board issues Technical Bulletin 2002-2, Disclosures Required by Paragraph 79(g) of SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting ( www.fasab.gov/pdf/tb20022.pdf ). The bulletin explains to users, preparers and auditors what disclosures a federal financial reporting
Athletes Pay Even If They Don’t Play
TAX MATTERS Source: Tax Foundation, www.taxfoundation.org .
New Rules for IRA Distributions
EXECUTIVE SUMMARY ON JANUARY 11, 2001, THE IRS PROPOSED NEW regulations for required minimum distributions from qualified retirement plans and IRAs. These regulations have completely overhauled and vastly simplified the prior provisions that date to 1987. IRA OWNERS MAY TAKE ADVANTAGE OF THE NEW regulations immediately. Participants in qualified retirement
Money Laundering
The Treasury Department issues three rules relating to the USA Patriot Act and financial institutions’ and CPAs’ roles in the fight against money laundering ( www.treas.gov/press/releases/po3436.htm ). The new regulations, which the Treasury’s Financial Crimes Enforcement Network will administer, amends and adds provisions to the Bank Secrecy Act, which governs
Professional Issues
The portfolios of financial advisers’ clients suffered heavy losses in 2001 and early 2002 as the S&P 500 stock index fell sharply. But by bringing in new business and thus increasing their total client holdings by 16.7%, the advisers limited to 5.3% the decline in assets under their management, says
Banking
Comptroller of the Currency John D. Hawke says banks owned by financial conglomerates should better protect their interests—by insisting on reasonable compensation—when dealing with affiliated organizations that want to sell products to bank customers ( www.occ.treas.gov/ftp/release/2002-78.doc ). Hawke recommends several additional ways—including adopting corporate governance standards—banks can preempt government intervention
Why Compensation Committees Need Your Help
EXECUTIVE SUMMARY WHETHER WORKING IN THE FINANCE DEPARTMENT of a public company or advising that company as an outside consultant, CPAs are in a unique position to guide compensation committees in their role as corporate overseers and to help them better align compensation practices with shareholder interests. CPAs
Employee Benefits
U.S. companies will pay on average 15.4% more in 2003 to provide their workers with health insurance than they did this year, when rates climbed 13.7%, says consulting group Hewitt Associates ( http://was.hewitt.com/hewitt ). Some corporations will absorb most of the increase, but others will ask employees to contribute more
Auditing
The Institute of Internal Auditors ( www.theiia.org ) issues for its members a summary of several regulatory organizations’ current and proposed corporate governance requirements aimed at improving the accuracy, completeness and transparency of financial statements. The regulations specify what boards of directors, audit committees and corporate managers must do to
Policy Management Tips
With the crisis in investor confidence many businesses face today, it never has been more important for a company to have clearly documented policies and procedures covering all aspects of its operations. Occasional updates are not enough to prevent accounting errors and to help avoid litigation or operating problems. CPAs
Tax-Exempt Bonds for Religious Institution Don’t Violate Constitution.
TAX CASE Under IRC section 103 taxpayers may exclude from gross income interest on so-called private activity bonds that also qualify under IRC section 141, which includes the private loan financing test. To meet this test a government unit must issue the bonds. The availability of tax-exempt financing to religious
Computing the Accumulated Earnings Tax
TAX CASE As the difference between ordinary income tax rates and capital gains tax rates increases, corporations have sought to minimize dividend payments to shareholders with the objective of helping them secure capital gains taxed at a lower rate. To prevent companies from doing this, Congress adopted the excess accumulated
FYI
The SEC appoints Scott A. Taub, CPA, its deputy chief accountant. A recent partner of Andersen’s professional standards group in Chicago, Taub previously had served with the commission as a professional accounting fellow. John T. Smith, CPA, joins the International Accounting Standards Board as a part-time member, filling the post
International
The International Federation of Accountants releases two international public sector accounting standards (IPSASs) ( www.ifac.org ). IPSAS 19, Provisions, Contingent Liabilities and Contingent Assets, defines the terms to which its title refers and establishes the criteria for recognizing and disclosing provisions and the rules for measuring them. IPSAS 20, Related
Waiting for the Sun to Set
TAX MATTERS Source: Tax Foundation, www.taxfoundation.org .
Accounting
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 Institute’s accounting standards staff releases a technical practice aid (TPA) ( www.aicpa.org/members/div/acctstd/general/tpa5.htm ) to clarify financial accounting and reporting issues
Nondeductible Alimony
TAX CASE Divorce can create a host of personal and financial problems for the parties involved. A misunderstanding about the tax consequences of a settlement agreement can exacerbate these difficulties. John Lovejoy instituted divorce proceedings against his wife. He made support payments to her while the divorce was pending. These
Deducting Tuition and Related Fees as Medical Expenses
any schools and programs provide education and treatment to students with learning and other disabilities, including emotional and behavioral disorders. Insurance rarely covers such costly programs. CPAs can assist parents in determining the deductibility of tuition, related fees and medical expenses for dependents with disabilities. WHICH EXPENSES QUALIFY? Under IRC
Duplicate Loss on Disposition of Subsidiary
Duplicate Loss on Disposition of Subsidiary Before the Tax Reform Act of 1986 amended IRC section 336, it was possible for owners to remove assets from a corporation without a corporate-level tax. Section 336 now requires taxpayers to recognize a gain or loss on any assets they remove from a
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Current developments in taxation of individuals: Part 2
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