Tax Relief BlogDoctors get socked with big tax and penalties for donations tied to consolidation of their practice
Berquistist and Kendrick, et al., (2008) 131 TC No. 2
Articles Posted in Tax Controversy
Staffing company tax problem
No FUTA exemption for staffing company that was considered the employer for state UI purposes Chief Counsel Advice 200827007
The IRS has denied a federal unemployment tax (FUTA) exemption to a staffing company because it did not consider the company to be the common law employer of the workers in question
Private Trust Companies
Proposed revenue ruling gives green light to use of private trust companies Notice 2008-63, 2008-31 IRB
A new notice contains a proposed revenue ruling that would allow families to use private trust companies (PTCs) in their estate planning without adverse income, estate, gift or generation-skipping transfer (GST) tax consequences for the trust creators or beneficiaries in carefully defined situations. IRS requests comments on the proposed ruling.
Taxpayer Advocate Annual Report
National Taxpayer Advocate annual report to Congress identifies priorities and issues for upcoming year [IR 2008-87]:
An annual report on the priority challenges and issues facing the Office of the Taxpayer Advocate (OTA) was delivered to Congress on July 8.
The report, National Taxpayer Advocate’s 2009 Objectives Report to Congress, cited three areas for “particular emphasis” in fiscal year 2009, which begins on Oct. 1.
Charitable Remainder Trust
Charitable remainder trust can be divided into separate trusts without adverse tax consequences Rev Rul 2008-41, 2008-30 IRB Mike Habib, EA
In the context of two fairly detailed factual situations, a new revenue ruling makes it clear that a charitable remainder trust (CRT) can be divided into two or more separate CRTs without adverse tax consequences. If properly effected, the separate trusts will continue to qualify as CRTs, the division won’t be a sale, and no excise taxes will arise under Code Sec. 507(c), Code Sec. 4941 or Code Sec. 4945.
Background. In general, a charitable remainder trust (CRT) provides for a specified periodic distribution to one or more noncharitable beneficiaries for life or for a term of years with an irrevocable remainder interest held for the benefit of charity. A CRUT pays a unitrust amount at least annually to the beneficiaries as opposed to a charitable remainder annuity trust or CRAT, which pays a sum certain at least annually to the beneficiaries. (Code Sec. 664)
Opportunity Letter – Offshore Account
Judge: IRS can seek tax information from Swiss banking giant UBS in expanding investigation
Associated Press WorldStream via NewsEdge :
MIAMI_A federal judge agreed Tuesday to allow the IRS to serve legal papers on Swiss banking giant UBS AG in an expanding investigation into U.S. taxpayers who may have used overseas accounts to hide assets and avoid taxes.
Rules for claiming a dependent child
Final regs on dependent child of divorced or separated parents or parents who live apart T.D. 9408, 07/01/2008; Reg. § 1.152-4
Mike Habib, EA
IRS has issued final regs on the rules for claiming a child as a dependent by parents who are divorced, legally separated under a decree of separate maintenance or a written separation agreement, or who live apart at all times during the last 6 months of the calendar year. They are effective for tax years beginning after July 2, 2008, and reflect amendments under the Working Families Tax Relief Act of 2004 (WFTRA) and the Gulf Opportunity Zone Act of 2005 (GOZA).
Background. A taxpayer may deduct an exemption amount for a dependent, defined generally as a qualifying child or a qualifying relative. Code Sec. 152(e), as amended by § 404 of GOZA, carries rules for parents who (1) are divorced or legally separated under a decree of divorce or separate maintenance, (2) are separated under a written separation agreement, or (3) live apart at all times during the last 6 months of the calendar year. A child of parents described in (1), (2), or (3), is treated as the qualifying child or qualifying relative of the noncustodial parent if the child receives over one-half of his support during the calendar year from the child’s parents, the child is in the custody of one or both of the child’s parents for more than half of the calendar year, and:
- the custodial parent signs a written declaration that the custodial parent will not claim a child as a dependent for a tax year and the noncustodial parent attaches the declaration to the noncustodial parent’s tax return (Code Sec. 152(e)(2); or
- a qualified pre-’85 instrument allocates the dependency exemption to the noncustodial parent and the noncustodial parent provides at least $600 for the support of the child during the calendar year. (Code Sec. 152(e)(3))
A custodial parent is the parent having custody for the greater portion of the calendar year and the noncustodial parent is the parent who is not the custodial parent. (Code Sec. 152(e)(4)) If a child is treated as the qualifying child or qualifying relative of the noncustodial parent under Code Sec. 152(e), then that parent may claim the child for purposes of the dependency deduction under Code Sec. 151 and the child tax credit under Code Sec. 24, if the other requirements of those provisions are met.
Property Seizure Compliance
TIGTA results of 2008 review IRS compliance with legal guidelines when conducting property seizures [Audit Report No. 2008-30-126]:
IRS has usually followed the numerous legal and internal guidelines that apply to seizures of taxpayers’ property, the Treasury Inspector General for Tax Administration (TIGTA) said in a recent audit. TIGTA based its opinion on a review of a random sample of 50 of the 683 seizures conducted from July 1, 2006, through June 30, 2007.
Auditors identified 25 instances in which IRS did not comply with a particular Code requirement but, according to TIGTA, this represented an error rate of only about 1%. The problems identified in the audit included the following10 instances in which expenses and proceeds resulting from the seizure weren’t properly applied to the taxpayers’ accounts; five instances in which the sales of seized properties weren’t properly advertised; five instances in which the correct amounts of the liabilities for which the seizures were made weren’t provided on the notices of seizures sent to the taxpayers; and five instances that were redacted from the publicly released version of the audit.
Shareholder Constructive Distribution
Loan repayment to shareholder’s spouse wasn’t constructive distribution Beckley, 130 TC No. 18 (2008)
The Tax Court has ruled that payments made by a corporation to the wife of one of its shareholders represented repayment of money she advanced to a predecessor corporation. Despite the absence of a written loan agreement, the repayment wasn’t a constructive distribution to the shareholder.
Carbon Dioxide and the IRS?
Gain from selling carbon dioxide allowances didn’t generate foreign personal holding company income PLR 200825009
IRS has privately ruled that gain from the sale of surplus carbon dioxide allowances didn’t constitute foreign personal holding company income (FPHCI) under Code Sec. 954(c). It concluded that the emissions allowances were excepted because they were intangible property used in the controlled foreign corporations’ trade or business.
