To raise the revenue needed to extend the research and development credit and other tax breaks, Congress repealed installment-sale reporting for accrual-method taxpayers in section 536(a) of the Ticket to Work and Work Incentives Improvement Act of 1999. As a result, IRC section 453(a)(2) now says accrual-method taxpayers must include
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Tax
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IRC sections 263(a) and 263A generally require taxpayers to capitalize all costs related to the installation or production of an asset. However, newly issued revenue ruling 2000-7 (IRB 2000-9) allows businesses to currently deduct the costs of retiring and removing old assets even though the costs were incurred while installing
Don’t Be Passive
In the 1980s taxpayers often created losses by structuring transactions to generate accelerated depreciation, interest and other deductions, which they used to offset other earned and unearned income. As a result, Congress enacted the IRC section 469 passive activity loss (PAL) rules, specifically designed to limit a taxpayer’s ability to
Standards for Tax Services Proposed
The AICPA tax executive committee recently published exposure drafts of proposed Statements on Standards for Tax Services (SSTSs) and an interpretation of SSTS no. 1, Tax Return Positions. Although the guidelines, issued by the tax executive committee as Statements on Responsibilities in Tax Practice (SRTPs) between 1964 and 1977, have
Corporate Sponsorship Arrangements
he corporate underwriting of events and activities run by exempt organizations has been a very controversial issue during the last decade. These arrangements can take many forms, such as providing refreshments and T-shirts to participants in a local charity’s walkathon, underwriting a special museum exhibition, acting as the exclusive provider
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Media Circus Caused Lower Property Values But Not a Loss After O.J. Simpson was charged with murder, his Brentwood, California neighborhood was overrun with reporters, law enforcement officials and curious bystanders. As a result, the owners of the adjacent house and land experienced a sudden decline in the value of
A Matter of Form (5500)
EXECUTIVE SUMMARY THE DEPARTMENT OF LABOR AND THE IRS HAVE revised Form 5500, Annual Return/Report of Employee Benefit Plan. Plan administrators and employers sponsoring employee benefit plans need to use the streamlined form for 1999 filings. THE REVISIONS, WHICH REPLACE THE FORM 5500 series with a single form, are expected
Transfers Incident to a Divorce
Divorce can be a very complex matter, both emotionally and financially. The financial complexity is illustrated by the many tax implications of divorce. People going through divorces often find themselves in disputes with the IRS. The Tax Court recently decided one such matter. John and Louise Young were married in
Tax Simplification Proposals
or many years, the AICPA has found the IRC’s increasing complexity to cause problems affecting taxpayers’ compliance with the tax laws. While it is accepted that in some instances the tax system never can be truly simple, the Institute (among others) has believed some areas are unduly complicated and can
Court Rules on Lottery Payoffs
In United States v. Estate of Shackleford, the Eastern District Court of California ruled a taxpayer’s estate did not have to use IRS valuation tables to calculate the value of lottery annuity payments. It said use of IRC section 7520 tables would result in unrealistic and unreasonable values because of
S Corporation Stock Basis
When an insolvent S corporation negotiates a reduction in its liabilities, it recognizes cancellation of debt (COD) income. Because the corporation is insolvent, the income is nontaxable. Can shareholders in the S corporation increase the basis of their stock by the amount of their share of COD income? In 1986,
A Taxing Problem
INVESTMENTS When a fund’s manager factors taxes into investment decisions, investors should do better. A Taxing Problem BY PETER D. FLEMING EXECUTIVE SUMMARY INCOME TAXES CAN EAT UP A SUBSTANTIAL PORTION of the investment return on an equity mutual fund. For tax conscious investors, tax-managed mutual funds offer a
Taking Back the Dependency Exemption
In divorce situations, the custodial parent is generally entitled to take the dependency exemptions for the children (IRC section 152(e)). This applies as long as both parents provide more than half the children’s support and the children live with either or both parents for more than six months each year.
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Rating Goodwill The IRS amended IRC section 197 to provide a ratable 15-year amortization period for goodwill and other intangibles acquired after January 25, 2000. According to the revisions, section 197 intangibles include covenants to compete, franchises, trademarks, trade names, permits, going concern value, customer lists, market share and workforce
Advocate Reports Taxpayer Concerns to Congress
W. Val Oveson, CPA, has been very busy ferreting out tax policy and administrative problems that make compliance burdensome for taxpayers. In his annual report to Congress, Oveson, who has been National Taxpayer Advocate since 1998, identified the top seven issues that impede taxpayer compliance. The earned income tax credit
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