Tax Relief Blog

2008 Housing Act

August 3, 2008 | Mike Habib, EA

Property tax deduction for non-itemizers in the 2008 Housing Act

Included in the $15.1 billion package of housing tax incentives in the recently enacted “Housing Assistance Tax Act of 2008” (the Housing Act) is a measure creating a new, temporary property tax deduction for non-itemizers (i.e., for taxpayers who claim the standard deduction rather than itemizing their deductions). Here is a brief overview of this new provision:

The provision creates a new standard deduction for state and local real property taxes paid by non-itemizers. Since most homeowners who are paying on a mortgage have enough deductions (e.g., mortgage interest and property taxes) to justify itemizing them on their return, this new provision chiefly benefits homeowners who have paid off their homes.
The deduction is available only for one year–for tax years beginning in 2008.
The amount of deduction is as much as $500 for single filers and $1,000 for joint filers. Since this is a deduction and not a credit (i.e., a dollar-for-dollar reduction in tax liability), the actual tax benefit will not be substantial: $100 to a couple in the 10 percent tax bracket and $150 to a couple in the 15 percent bracket (and only $50 and $75, respectively, to singles in these brackets).

I hope this information is helpful.

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Kansas Tax Relief

August 3, 2008 | Mike Habib, EA

IRS explains how to claim (or elect out of) 50% Kansas bonus depreciation Notice 2008-67, 2008-32 IRB

Mike Habib, EA

The Food, Conservation and Energy Act of 2008, popularly known as the Farm Act, provided temporary GO Zone-style tax relief for taxpayers in Kiowa County, Kansas, and surrounding areas, who were affected by the storms and tornadoes that began on May 4, 2007. This relief includes 50% bonus depreciation (Kansas additional first year depreciation) for qualified Recovery Assistance (RA) property placed in service by the taxpayer on or after May 5, 2007, during the tax year that includes May 5, 2007. IRS has issued detailed guidance explaining how to claim (or elect out of) this Kansas bonus depreciation.

Doctors tax penalties

August 3, 2008 | Mike Habib, EA

Doctors 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

Mike Habib, EA

Staffing company tax problem

August 3, 2008 | Mike Habib, EA

No FUTA exemption for staffing company that was considered the employer for state UI purposes Chief Counsel Advice 200827007

Mike Habib, EA

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

August 3, 2008 | Mike Habib, EA

Proposed revenue ruling gives green light to use of private trust companies Notice 2008-63, 2008-31 IRB

Mike Habib, EA

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

August 3, 2008 | Mike Habib, EA

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

July 9, 2008 | Mike Habib, EA

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)

Cell Phone Deductibility

July 9, 2008 | Mike Habib, EA

IRS discusses easing of cell phone recordkeeping requirements [Information Letter 2008-0012]:

The IRS has issued an information letter in response to a question regarding the noted difficultly that states and localities are having drafting cell phone policies that comply with IRS recordkeeping requirements.

Under IRC §162(a), individuals may take deductions for all ordinary and necessary expenses incurred in carrying on a trade or business. The expenses are considered tax-free working condition fringe benefits, not subject to FITW, FICA, and FUTA, if they are incurred by an employee on behalf of an employer. Cell phones are currently included in the definition of “listed property,” as defined in IRC §280F(d)(4).

Expenses related to listed property may not be deducted under IRC §274(d), unless the employee substantiates by adequate records, or by sufficient evidence corroborating the employee’s own statement: (1) the amount of the expenses; (2) the time and place of the expenses; (3) the business purpose of the expenses; and (4) the business relationship to the employee of the persons involved in the expenses. In addition, employees must document their personal use of the property, and the employer must include such use in the employee’s income.

LP Limited Partner Deductions

July 8, 2008 | Mike Habib, EA

Limited partner’s investment interest from trader partnership deductible above-the-line

Rev Rul 2008-38, 2008-31 IRB; Ann. 2008-65, 2008-31 IRB

Mike Habib, EA

Earlier this year, IRS issued Rev Rul 2008-12, 2008-10 IRB 520 concluding that where a non-corporate limited partner doesn’t materially participate in the partnership’s activity, his distributive share of the interest expense on debt allocable to the entity’s trade or business of trading securities is investment interest, subject to the Code Sec. 163(d)(1) deduction limitation. Because it received a number of queries as to where to report such interest, IRS has issued a new revenue ruling amplifying the earlier one and a new announcement clarifying where to report such interest.

Opportunity Letter – Offshore Account

July 2, 2008 | Mike Habib, EA

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.