A $450B Annual Tax Gap Prompts Treasury to Pursue Aggressive Compliance Techniques Blake E. Christian explains why the IRS has an explicit focus and specific tactics. Here’s what to expect: increased regulation of tax professionals, more mandated disclosures, and an insistence on tax document matching. Plus, there will likely be an added focus on high-yield assessments.
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Solid Background on Recent Court Decisions, Valuation in US Tax Court, Estate & Gift Tax, Pension Protection, More The Primus Valuation blog offers an in-depth summary of the proceedings of last year’s ASA IRS Symposium in Los Angeles. Although a bit more than a year old, there’s very solid detail here and extensive coverage of issues still very relevant to today’s practitioners. Here’s an excerpt from a section describing a panel with questions fielded by Judge Halpern, Mel Abraham, Miles Friedman, and Guy Glaser:
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Why There is No Such Thing as a Minority Premium Robert Buchanan of PCE Valuations writes about the application of discounts to fractional interests and argues that some appraisers are mistaken when they assert that certain levels of discounts amount to a “minority premium” for certain non-controlling interests. Here’s the logic behind his thinking. Be sure to read Mr. Buchanan’s whole argument at HERE. Here are some key points:
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A County Buys a Strip Mall Under Eminent Domain Process; at Issue is Whether Chairs and Tables Require Additional Tax A Bankrate Tax Talk column at Fox Business News Personal Finance site considers a rather unusual case of a strip mall’s sale:
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The Journal of Accountancy reports the IRS is offering more flexible terms under which it will accept offers in compromise (IR-2012-53):
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Who Are America’s Wealthiest People? Small- and medium-sized businesses are the engines that drive the American economy. An IRS study of everyone who died with a net worth of at least $600,000 (and thus was required to file an estate tax return) showed America’s wealthiest citizens all have one thing in common: they all held significant blocks of stock in closely held private companies. In a nutshell, the surest way to get rich in America is to own a business. Want to know the actual numbers? According to IRS reports, over six million businesses file tax returns each year: 80…
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Roger Russell recaps the decision at Accounting Today. The Tax Court, in a recent summary opinion, ruled that an individual did not have cancellation of debt income in the year that a collection agency issued him a Form 1099-C and stopped its automated collection efforts. The IRS determined a deficiency in David Stewart’s 2008 income tax of $2,138, based on a Form 1099-C issued by the collection agency. The underlying debt was incurred on a credit card obligation in 1994, and was defaulted on in 1996. Maryland Bank National Association (MBNA) charged off the debt that same year. Find out case specifics…
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Payments an accounting firm characterized as consulting fees were really disguised dividends and should have been taxed as corporate income, the Seventh Circuit held on Thursday. The payments reduced the firm’s income to zero, and the court applied the “independent investor” test to recharacterize them as dividends paid to the firm’s owners. Alistair M. Nevius at the Journal of Accountancy, in the article Accounting firm payments to owners flunk independent investor test, reports: The Seventh Circuit held that an accounting and consulting firm organized as a C corporation could not deduct payments to related entities because they were dividends, not…
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You’ve probably already read this story—Facebook Co-Founder Renounces U.S. Citizenship in Advance of IPO, Saving Millions in U.S. Taxes —heard about it on the radio, or seen it on TV. But Paul L. Caron of The TaxProf Blog has done a remarkable job of aggregating all the media responses to the story from about 20+ outlets, and linking to previous posts this week on the developing story. On Thursday: Bloomberg: Schumer Proposes Tax on People Like Facebook’s Saverin: U.S. Senator Charles Schumer proposed legislation that would impose a 30% capital gains tax on people like Facebook co-founder Eduardo Saverin unless…
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Add Value to Appraisals. Ask First: “Who’s the Most Important Reader?” Rand M. Curtiss explains how appraisals have the most value when consultants have customized and focused them for their most important intended audience. In some cases, that may be a prospective buyer. In other cases, it might be a client auditor—or even the IRS. That can make quite a bit of difference. Here’s why.
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In United States v. David A. Taylor IRS Lays Down the Law The Wills, Trusts, and Estates Prof blog reports on a recent case demonstrating that if a fiduciary has a duty to pay a claim of the government before paying a debt—or they may be personally liable for the unpaid claims of the government! Here are some of the case details: David J. Tyler and Paula I. Tyler were a married couple who held real property on Cricket Lane in Pennsylvania as tenants by the entirety. The IRS issued deficiencies for their income taxes from 1992-1998. On August 20,…
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The IRS’s ‘Dirty Dozen’ are Getting Old So opines Gail Perry at AccountingWeb: I for one am getting pretty bored with the tax scams on this list – they hardly change at all from year to year. It’s time for some creative criminals out there to come up with something new. From the comments section: My brother ran a Schedule C Anvil Repair Shop from his garage in order to claim home office deduction, depreciation, etc. He told me the freight bills were a killer. 🙂 Posted by John Hiatt from Valley Forge, PA on Feb 16, 2012 – 4:55 pm…
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Tax Law Update Trusts and Estates Magazine’s David Handler offers a summary of significant IRS updates on a handful of important laws: Internal Revenue Service extends filing and payment deadlines for estates of decedents dying in 2010 — In Notice 2011-76 (Notice), the IRS provided relief for the estates of decedents dying in 2010 (2010 estates). The filing deadline for the Form 706, federal estate and generation-skipping transfer (GST) tax return for 2010 estates was originally Sept. 19. With the new deadline fast approaching, the IRS published this Notice on Sept. 13, providing relief for estates in several respects, including an automatic…
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IRS Begins Scheduling Tax Preparer Competency Tests The Internal Revenue Service is moving into the second phase of its tax preparer regulation initiative by beginning next week to schedule the first competency tests for tax preparers, reports Michel Cohn at Accounting Today. The IRS said Tuesday it is launching the new competency tests for Registered Tax Return Preparers as part of a larger initiative to increase its oversight of the tax prep industry. Last year, in the first phase of its efforts, the IRS required all paid tax return preparers to obtain a Preparer Tax Identification Number. Those tax return…
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Estate-Tax-Basis Form Still Not Available Arden Dale at the Wall Street Journal’s Financial Advisor blog: A Florida resident in her seventies lost her husband in early 2010. The couple had $8 million, but how much will remain after taxes is still a mystery. The key IRS form has yet to appear since last year’s estate tax law changes. Those changes have created a “practically unsolvable conundrum,” said Renee Kwok, president of TFC Financial Management in Boston, which manages roughly $600 million in assets. The firm handled all of the estate for the widow. Lawmakers gave 2010 estates a one-time choice…
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Stumped on How to Figure Discounts? The IRS Can Help. The Engineering/Valuation Program DLOM Team at the IRS has posted a job aid on the IRS site. The 112-page guide reviews definitions of marketability and discusses factors that influence it. The aid illuminates the distinctions between minority and controlling interests. It offers sample initial information document requests (IDRs). A large section of the document reviews various methods of factoring DLOM. These include benchmark approaches (restricted stock studies, pre-IPO studies, cost of flotation, and Mandelbaum factors), securities-based approaches (LEAPs, the Longstaff Study, the Chaffee Study, Bid-Ask Spread Method), analytical approaches (Wruck;…
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Lawyers and Accountants Once Put Integrity First So asserts Mark W. Everson, commissioner of the IRS from 2003 to 2007, in an opinion piece for the Sunday NY Times: Three or four decades ago, investors and regulators could rely on these professionals to provide a check on corporate risk-taking. But over time, attorneys and auditors came to see their practices not as independent firms that strengthen the integrity of capitalism, but as businesses measured chiefly by the earnings of their partners. . . . Recent decades have seen a new model take root: a business plan tied to partner earnings. Obviously,…