Tax Relief Blog
“In this world, nothing is certain but death and taxes.” – Benjamin Franklin
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Fuel Tax Credit
Yes, we are all fed up with the cost of fuel.
No, I’m sorry to report, not everyone is eligible for the fuel tax credit.
MO AG Sues Tax Resolution Firm
JK Harris didn’t provide promised services to Missourians who sought help with tax problems, Nixon says in lawsuit
Jefferson City, Mo. – A South Carolina company that advertises it can help consumers resolve their state and federal tax problems didn’t provide the services it promised, Attorney General Jay Nixon says. Nixon filed a lawsuit today seeking full restitution from JK Harris & Company LLC (JKH) for its Missouri customers who received neither the services for which they paid as much as $4,500 each nor the refunds they requested.
“JK Harris promises it can help consumers who are having tax problems, but the Missourians who complained to my office told a different story – one of unreturned phone calls, lost paperwork, and a worse financial situation than when they started,” Nixon said.
The JKH Web site tells consumers the company has a step-by-step strategy – known as “The Process” – to help consumers with their tax problems. According to JKH, “The Process” includes providing immediate relief to consumers by attempting to stop collection activities by the IRS; assigning a case specialist to review the consumer’s information and begin work on resolving the customer’s tax problems; and submitting an offer to the IRS to resolve the customer’s tax problems.
Real Estate Gift Tax
Tiered discount allowed in real estate FLP gift tax case In Astleford, a memorandum decision, the Tax Court permitted a taxpayer to apply a tiered discount in the context of a family limited partnership owning interests in real estate.
Facts. On 8/1/96, Mrs. Astleford formed the Astleford Family Limited Partnership (“AFLP”) to facilitate the continued ownership, development, and management of various real estate investments and partnership interests she owned and to facilitate gifts that she intended to make to her three adult children. On the same day, Mrs. Astleford transferred to AFLP ownership of an elder care facility. Also on the same day, Mrs. Astleford gave each of her three children a 30% limited partner interest in AFLP and retained for herself a 10% general partner interest.
On 12/1/97, Mrs. Astleford made additional capital contributions to AFLP by transferring to AFLP a 50% interest in Pine Bend Development Co. (“Pine Bend”), a general partnership, and her interest in 14 other real estate properties. The Pine Bend general partnership agreement did not contain any provisions relating to the transfers of interests in Pine Bend or whether such transferred interests would be general partner or assignee interests. Pine Bend owned 3,000 acres of land of which 1,187 acres consisted of agricultural farmland (“Rosemount property”).
Cost of Goods Deductibility
Deduction for cost of goods sold limited to negotiated discount price IRS concluded in this ILM that the step transaction doctrine applied to the repayment to companies of the difference between the full list price of merchandise and the negotiated discount price, and therefore the companies’ deduction for cost of goods sold (COGS) was limited to the negotiated price.
Facts. U.S. companies paid the full list price for merchandise and were reimbursed for the difference between the full list price and the negotiated discount price.
IRS analysis. The Service concluded that this transaction met all three tests applied by the courts in determining whether the step transaction doctrine should be invoked:
Mortgage Interest Deductibility
Beneficial owners can deduct home mortgage interest and taxes The Tax Court held that taxpayers were entitled to deduct mortgage interest and real estate taxes they paid on property owned by their son, because they were the beneficial owners of the property.
The taxpayers resided at the property for all of 2003. During that time, title to the property was in the name of their son, as was the mortgage on the property. Their son had obtained a mortgage loan and took title to the house to procure it for the taxpayers who were unable to secure a loan because of financial difficulties. The son did not live on the property, and the taxpayers paid for all maintenance of, and taxes on, the property. Mortgage payments from 2001 until the time of the trial were made through Camrock General Engineering, Co. Camrock was the taxpayers’ company; one taxpayer was its registered agent and the other its president. After the taxpayers moved from the residence, they served as landlords; they rented the property to a tenant and performed all services related to that tenancy
The taxpayers claimed on their 2003 federal income tax return deductions for home mortgage interest and real estate taxes of $3,522 and $3,194, respectively, on the residence property. The IRS contended that because the taxpayers had no legal obligation to make the mortgage payments and did not hold title to the property, they were not entitled to deduct the mortgage payments. The Service further argued that the taxpayers did not make the mortgage payments; the payments were made by Camrock.
US Malta Tax Treaty
USA & Malta sign new income tax treaty
[U.S. Treasury Press Release, 8/8/08]:
The U.S. Treasury Department has announced that a new income tax treaty between the United States and Malta was signed on Aug. 8, 2008 . The treaty will have withholding tax ramifications for U.S. citizens working in Malta and citizens of Malta working in the United States. The treaty has 29 articles. Article 2 states that the treaty applies to federal income taxes under the Internal Revenue Code, but excludes Social Security and unemployment taxes. Article 14 covers income from employment. Generally, income earned by a U.S. or Malta resident is exempt from income tax in the other treaty country if the resident was not in that country for more than 183 days of the taxable year.
CA LLC Fee Invalid
California LLC fee again held invalid
Ventas Finance I LLC v. Calif. FTB, Cal. Ct. App., Dkt. Nos. A116277; A117751, 08/11/2008
The California Court of Appeal once again has ruled invalid the state fee imposed on limited liability companies (LLCs) under former Rev. & Tax. Cd. § 17942 (the “§ 17942 fee”). Affirming the lower court, the Appeal Court held that the § 17942 fee as applied to Ventas, an LLC that conducted business in California and other states, was not fairly apportioned and, therefore, violated the Commerce Clause because the levy was based on total income without apportionment to income attributable to, or derived from, California sources. The court rejected the Franchise Tax Board’s (FTB’s) request for judicial reformation of the former statute to allow an apportioned fee refund since Ventas did business in California and other states unlike in the earlier Northwest case (that held the fee invalid) where the LLC conducted no California business. However, the court concluded that neither federal due process nor any principle of California law requires the FTB to refund the entire amount that Ventas paid. Consequently, the refund should be limited to the amount Ventas paid for the years in issue that exceeds the amount that would have been assessed, without violating the Commerce Clause, using a method of fair apportionment. The postjudgment order awarding attorney fees was also reversed, and remanded for the lower court to redetermine eligibility and the amount of reasonable fees in light of the partial reversal of the lower court’s judgment.
IRS pledges better collection of business taxes
IRS official pledges improved collection of billions in unpaid payroll taxes from businesses
WASHINGTON (AP) — A top IRS official promised Congress Tuesday that the agency “will do better” in collecting billions in taxes that businesses supposedly withheld from employees’ paychecks but never remitted to the government.
Linda Stiff, a deputy Internal Revenue Service commissioner, agreed with senators — who criticized the agency’s enforcement efforts — that the loss of about $58 billion in payroll taxes estimated to be owed the government is unacceptable. She said the IRS has made collecting those taxes a high priority.
While too high, the $58 billion “represents a snapshot of unpaid employment taxes” as part of a long-term improvement effort, Stiff testified at a hearing of the Senate Homeland Security Committee’s investigative panel. “Our numbers show dramatic improvement in the last several years, but we know we still have a long way to go.”
IRS Targets Foreign Income
IRS targets U.S. source income paid to foreign persons IRM 4.10.21, U.S. Withholding Agent Examinations – Form 1042
IRS has issued a new Internal Revenue Manual () section, IRM 4.10.21, U.S. Withholding Agent Examinations – Form 1042, on reporting and withholding requirements for U.S. source income that’s paid to foreign persons.
