Transportation Fringe Benefits Employer-provided transportation benefits have been—and continue to be—very popular. Employers may give their employees a choice between receiving (taxable) cash or (tax-free) transportation benefits. Only when an employee chooses to receive the cash or when the value exceeds a specified dollar exemption limit is he or she
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Tax
Tax Matters
No Transaction Equals No Deduction A CPA traveled to Russia to investigate business opportunities. He deducted expenses of $21,000 on his tax return for the trip. The Tax Court held that he was not “carrying on a trade or business.” The court concluded the CPA was investigating “potential trade” opportunities
The Safe-Harbor Solution
EXECUTIVE SUMMARY EFFECTIVE IN 1999, The Small Business Job Protection Act of 1996 introduced safe-harbor formulas for 401(k) plans that eliminate the need for companies to perform annual nondiscrimination testing. These changes should allow small employers to contribute higher amounts on behalf of highly compensated employees (HCEs). NONDISCRIMINATION TESTS effectively
What a PEO Can Do for You
EXECUTIVE SUMMARY MORE THAN EVER BEFORE, BOTTOM-LINE-CONSCIOUS companies are outsourcing HR functions by making use of professional employer organizations. PEOs perform a wide variety of tasks ranging from payroll management and employee benefit design and administration to tax filings and compliance with state and federal workplace legislation. GIVEN THE MYRIAD
Employee Benefits
Comptroller General Addresses CPAs on Accountability, Retirement Security David M. Walker, U.S. Comptroller General, “came home” to address the AICPA employee benefits conference “from a different perspective.” A CPA who began a 15-year term as head of the General Accounting Office in November 1998, Walker is a past chairman of
Employee Benefits/Financial Reporting
New ED on Benefit Plan Investment Disclosures The AICPA employee benefit plans committee and AcSEC issued an exposure draft of a proposed statement of position, Accounting for and Reporting of Certain Employee Benefit Plan Investments and Other Disclosure Matters, for public comment. The comment period, which began in mid-May, runs
Divorce Tax Implications
According to IRC section 1041, no gain or loss is recognized on a transfer of property between spouses in a divorce. However, there are circumstances in which a transfer of property to a third party on behalf of a spouse (or former spouse) also qualifies for nonrecognition treatment. A transfer
Cancellation of Debt as a Gift
When parents are asked to help their children financially, they frequently respond with gifts and loans. Sometimes, the loans may be to businesses the children own. What is the tax effect if a parent cancels or forgives a loan made to a child’s corporation? On June 17, 1981, Lavonna Stinson
International Accounting
IASC Puts Derivatives on the Balance Sheet The International Accounting Standards Committee issued in March its long-awaited standard on accounting for financial instruments. International Accounting Standard no. 39, Financial Instruments: Recognition and Measurement, clarifies the need for disclosing derivatives and other hedge transactions, as well as conventional financial assets and
What Constitutes Control?
EXECUTIVE SUMMARY FASB ISSUED A REVISED ED SEEKING TO DEFINE what constitutes control of an entity. Under current rules, the condition for a controlling financial interest is ownership of a majority voting interest–unless control is temporary or does not rest with the owner of the majority voting interest. FASB’s goal
From the Tax Adviser
The form of the business should be a major factor. From The Tax Adviser: Tax Aspects of Global Expansion In general, the IRC taxes domestic corporations on their worldwide income, regardless of where they earn it. So that income is not taxed twice, a company is allowed to claim
Tax Matters
Tax Matters TAX NEWS Tax Gross-Ups Make Parachutes More Golden The battle to retain talent in a tight labor market and the consolidation trend that continues in many sectors of the economy are responsible for the popularity of “golden parachute” provisions for top executives. If a parachute payment
Are You Euro-Fluent?
EXECUTIVE SUMMARY IN JANUARY, THE EUROPEAN UNION introduced a new currency named the euro. By 2002, it will be used by at least 11 EU nations, whose national currencies will pass into history. TO HELP PEOPLE GET ACCUSTOMED TO the euro, the European Commission allowed for a three-year transition period
International Accounting
NEWS REPORT INTERNATIONAL Calls Heard for More Independent IASC FASB does not believe the International Accounting Standards Committee (IASC) is ready to issue accounting standards that will be accepted worldwide. In a letter to the IASC, FASB and the trustees of the Financial Accounting Foundation said the IASC
Spinoff to Permit Employee Stock Purchases
If a key employee threatens to leave and start a competing company, one way to deal with the situation is to allow him or her to purchase an ownership interest in the existing business. However, if the business is large or has multiple divisions or locations, selling the employee an
Line Items
Learning for Extra Credit The IRS issued proposed regulations that explain the Hope Scholarship and Lifetime Learning credits, which were introduced in 1998. The regulations provide guidance on who can claim the credits and which expenses qualify. For taxpayers with eligible dependents who are students, the proposed regulations also explain
High Income Taxpayers
Nearly all the 1.3 million taxpayers with an adjusted gross income (AGI) of $200,000 or more (1% of all taxpayers) paid some income tax in 1995.
When Should Advertising Be Capitalized?
EXECUTIVE SUMMARY THE QUESTION OF WHEN TO CAPITALIZE ADVERTISING costs has long presented a problem for CPAs. While the easy solution is for companies to expense advertising as it is incurred, both the IRS and FASB say in some circumstances it should be capitalized. THE MOST FORMIDABLE BARRIER A COMPANY
Rescinding transactions.
CPAs often are asked to “fix” (or, at the very least, lessen) the tax effects of improperly thought-out or ill-advised sales, exchanges or elections. While they are certainly not able to remedy all the mistakes their clients make, there are some situations when they can be instrumental in helping clients
Defining the Temporary Workplace
For most taxpayers getting to and from work—no matter how arduous, frustrating or costly their daily commute—is a nondeductible personal expense. Taxpayers whose residences are their principal places of business, however, may deduct daily transportation expenses between a home office and other temporary or regular work locations related to their
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From The Tax Adviser
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Current developments in taxation of individuals: Part 2
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