Tax Relief Blog
House passes Pension Protection Technical Corrections Act – final action delayed till after recess
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Annuity tax problems and issues
IRS eases rules for partial annuity exchanges
Mike Habib, EA
myIRSTaxRelief.com
In 2003, IRS issued a revenue ruling formally sanctioning partial annuity exchanges as qualifying for tax-free treatment under Code Sec. 1035. At the same time, it issued a notice warning that it would go after taxpayers who use partial exchanges to avoid tax under Code Sec. 72(e)(2). It has adopted the interim guidance as final rules in a new revenue procedures. The final guidance reflects modifications that are mostly pro-taxpayer.
Background. Code Sec. 72(e) governs the federal tax treatment of distributions from an annuity contract that are not received as an annuity. Under Code Sec. 72(e)(2), such amounts generally are taxed on an income-first basis. For this purpose, all annuity contracts issued by the same company to the same policyholder during any calendar year are treated as a single annuity contract. (Code Sec. 72(e)(12)) Code Sec. 72(q)(1) imposes a 10% penalty on withdrawals or surrenders of annuity contracts, unless one of the exceptions in Code Sec. 72(q)(2) applies. No gain or loss is recognized on the exchange of an annuity contract for another annuity contract. (Code Sec. 1035(a))
Partial exchanges. In late ’99, IRS acquiesced to a Tax Court decision holding that the direct transfer of a portion of funds from one annuity contract to another qualifies as a nontaxable exchange under Code Sec. 1035. (Conway v. Comm., 111 TC 350 (1998), acq., 1999-2 CB xvi) See Federal Taxes Weekly Alert 12/2/1999)
Tax Negotiation Buyer Beware Report
How to compare tax relief and resolution service companies?
Customer…Beware!
How To Keep From Getting Ripped Off?
Many “Tax Negotiation” companies out there will absolutely rip you off. These unscrupulous firms will take your money regardless of whether they can help you or not. They’ll lie to you and tell you they can get all the penalties and interest wiped out. They’ll lie to you and tell you they’ll settle with the IRS for “pennies on the dollar” when they know damn well you don’t possibly qualify for the Offer in Compromise program.
How do they get away with this? Easy, most of the people you talk to at these unscrupulous firms are sales representatives. They have NO license to protect. You don’t actually speak to the EA (Enrolled Agent), the CPA (Certified Public Accountant) or the attorney that these firms claim to have. Nope, you speak to some slimy unlicensed salesman. Some of these firms make up titles like Tax Resolution Specialist, or Tax Consultant. What a scam! In fact, many of these unscrupulous firms aren’t tax firms or law firms at all, they’re just sales organizations!
Securities, stocks, capital assets tax problem resolution
Final regs clarify treatment of loss from abandoned securities
Mike Habib, EA
myIRSTaxRelief.com
IRS has issued final regs that provide guidance on the availability and character of a loss deduction from abandoned securities under Code Sec. 165. The regs, which adopt proposed regs issued in 2007, apply to securities abandoned after Mar. 12, 2008.
Taxes and Capitalization of tangible assets – Part III
New proposed regs address complex issue – capitalization of tangible assets – Part III
Mike Habib, EA
myIRSTaxRelief.com IRS has issued new comprehensive proposed regs on when amounts are treated as paid to acquire, produce, or improve tangible property. They replace controversial proposed regs that were issued on the same subject in 2006 and that IRS has now withdrawn. The new proposed regs would be effective for tax years beginning on or after the date that they are finalized.
Since the beginning of the week, we have included a series of articles on the topic. This article, the third in the series, explains how the proposed regs would differentiate between currently deductible repairs and improvement or betterments to property that have to be capitalized. For how the proposes regs would define materials and supplies that are deductible under Code Sec. 162, and prescribe new rules for when the deduction for these items may be claimed, see Part I . For how the proposed regs would treat amounts related to the acquisition or production of real or personal property, see Part II.
Observation: The regs would make several significant liberalizations by doing away with the so-called “restoration principle” and putting in place a new routine maintenance safe harbor. They also attempt to reflect the large body of case law on repairs vs. improvements and adopt all-encompassing guidelines where none existed before. However, the regs if adopted nonetheless may be difficult to apply to a particular taxpayer’s facts and circumstances, as evidenced by the plethora of examples, many on them complex, that attempt to illustrate how the regs would affect “typical” capital and non-capital expenditures.
Out with the plan of rehabilitation doctrine. Under the judicially developed plan of rehabilitation doctrine, a taxpayer must capitalize otherwise deductible repair costs if they are incurred as part of a general plan of renovation or rehabilitation. The new proposed regs would specifically provide that repairs made at the same time as an improvement, but that do not directly benefit or are not incurred by reason of the improvement, don’t have to be capitalized under Code Sec. 263(a) . However, a taxpayer would have to capitalize under Code Sec. 263A otherwise deductible repair costs if the taxpayer improves a unit of property and the otherwise deductible repair costs directly benefit or are incurred by reason of the improvement to the property. (Prop Reg § 1.263(a)-3(d)(4)) The preamble adds that when the proposed regs are finalized, the judicially-created plan of rehabilitation doctrine will be obsolete, particularly with regard to the assertion that the doctrine transforms otherwise deductible repair costs into capital improvement costs solely because the repairs are performed at the same time as an improvement, or are pursuant to a maintenance plan, even though the repairs do not improve the property. (Preamble to Prop Reg 03/07/2008)
Complex Tax issue — capitalization of tangible assets–Part II
New proposed regs address complex issue–capitalization of tangible assets–Part II
Mike Habib, EA
myIRSTaxRelief.com
IRS has issued new comprehensive proposed regs on when amounts are treated as paid to acquire, produce, or improve tangible property. They replace controversial proposed regs that were issued on the same subject in 2006 and that IRS has now withdrawn. The new proposed regs would be effective for tax years beginning on or after the date that they are finalized.
Taxes and S corporations undergoing F reorganizations
New guidance for S corporations undergoing F reorganizations
Mike Habib, EA
myIRSTaxRelief.com
A new revenue ruling provides guidance for S corporations that undergo a type F reorganization where the operating S corporation becomes a qualified Subchapter S subsidiary (QSub) of a new holding corporation. It also explains which employer identification number (EIN) each entity is to use and provides guidance for corporations that have already engaged in such a transaction.
The IRS and the capitalization of tangible assets
New proposed regs address complex issue–capitalization of tangible assets
Mike Habib, EA
myIRSTaxRelief.com
IRS has issued new comprehensive proposed regs on when amounts are treated as paid to acquire, produce, or improve tangible property. They replace controversial proposed regs that were issued on the same subject in 2006 and that IRS has now withdrawn. The new proposed regs would be effective for tax years beginning on or after the date that they are finalized.
This article explains how the proposed regs would define materials and supplies that are deductible under Code Sec. 162, and prescribe new rules for when the deduction for these items may be claimed. Future articles will explain other key aspects of the new proposed regs, such as how to treat amounts paid to sell property, transaction costs related to acquisitions, and what constitutes a repair versus an improvement or betterment to property.
1031 Like-Kind Exchanges Tax FAQ
Like-Kind Exchanges Under IRC Code Section 1031
Mike Habib, EA
myIRSTaxRelief.com
Whenever you sell a business or an investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.
