Tax

Deducting Fringe Benefits Many companies provide their employees with fringe benefits. Congress has imposed income inclusion requirements on employees and deduction limits on employers. Recently, in a case of first impression, the Eighth Circuit Court of Appeals decided whether the income and deduction must be equal. Sutherland Lumber–Southwest Inc. allowed

Under IRC section 761(c), partners are allowed to amend their agreements as long as such changes are made by the time the partnership information return is due (not including extensions). Furthermore, under section 704(b), allocations of items such as income, gain, loss, deduction or credit provided for in a partnership

Valuing a Decedent’s Closely Held Stock A contentious issue in estate taxation is the valuation of stock in a closely held corporation. The fair value of such stock at the valuation date may be difficult to determine since no market quotations are available. Treasury regulations section 20.2031-2(f) and revenue ruling

Sham Transactions What constitutes a “sham transaction” for tax purposes? U.S. case law has evolved to incorporate business purpose and economic substance as critical elements in determining what constitutes a sham. Under the subjective business purpose test, the court attempts to measure the taxpayer’s intent. Traditionally, it has done this

Expanded Innocent Spouse Relief IRC section 6015 allows certain taxpayers to claim relief from joint tax liability if they qualify as an innocent spouse. There are strict qualification rules. Recently the Tax Court allowed a taxpayer to raise the issue even though she failed to meet all the qualifications. Dorothy

Small Businesses to Give Input on Audits The IRS has launched the Small Business/Self-Employed (SB/SE) Exam Reengineering Project to improve the audit process for small-business owners and self-employed individuals by reducing audit times, ensuring fairness in the process and encouraging tax compliance. IRS project teams will interview other IRS employees

TAX NEWS Some Get Incorrect Refund Notices As a result of the Economic Growth and Tax Relief Reconciliation Act of 2001, the IRS announced refunds would go to anyone who paid taxes in 2000 and sent out approximately 112 million notices. Approximately 523,000 taxpayers, the IRS said in July, were

Consolidated Carryback of Product Liability Expenses The U.S. Supreme Court resolved a conflict between the Fourth and Sixth Circuit appeals courts in a case involving the 10-year carryback of product liability losses under IRC section 172(b)(1) for an affiliated group filing a consolidated return. In 2000, in Intermet Corp., 209

Contingency Fees Revisited The dispute over the proper taxation of contingency fees paid to an attorney continues. Several circuit courts have maintained the amounts were not taxable. A recent case expanded the exclusion. Mattie Foster won a verdict in an Alabama state court of $50,000 compensatory damages and $1 million

Save a Building, Save on Taxes The National Park Service, part of the U.S. Department of the Interior, has released a report, Federal Tax Incentives for Rehabilitating Historic Buildings, that summarizes the positive effects of the historic preservation program started 25 years ago. The Tax Reform Act of 1976 allowed