Ed Zollars' Tax Update Podcast

Simplified employee pensions (SEPs) are a popular retirement plan for extremely small businesses, with one of the key attractions being that don't require many of the formalities of regular qualified plans.  But that has led to taxpayers treating them too informally, and in the case we look at this week (Brown v. Commissioner, TC Summary 2008-56) a taxpayer discovered the hard way what can be the consequences of failing to faithfully follow the simplified rules for this type of plan.The materials for this podcast can be found at http://www.edzollars.com/2008-05-26_SEP_Issue.pdf .I'll be in New Orleans next Monday at the AICPA Spring Tax Division meeting, so the next podcast may come out on a slightly different schedule. The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com.

The Fifth Circuit came down with a ruling in Kornman & Associates, Inc. v. United States on whether a taxpayer who set up a Son of BOSS style shelter would get the benefit that was expected--and the taxpayer was disappointed.  The case offers a chance to review the unusual impact that liabilities have in a partnership context, as well as the question of just what is a liability for this purpose.The materials for this podcast can be downloaded at http://www.edzollars.com/2008-05-19_Partnership_Liabilities.pdf .The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

Since we've discussed mailing returns in previous podcasts, this time we look at the problems a taxpayer who tries to hand file a return can run into getting that done correctly.  In the case of Allnut, Sr. v. Commissioner, 2008-1 USTC ¶50,310 the taxpayer failed to make delivery as required by the regulations, and the court found that what the taxpayer had to live with the date a document could finally be documented as being in the District Director's office--which was less than year years before the date the IRS issued an assessment.Materials for this week are available at http://www.edzollars.com/2008-05-09_Hand_Carried.pdf.The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

Partnership taxation is one of those areas where things may not work exactly as many practitioners expect, and those unexpected workings are things that tax shelter promoters have attempted to make use of.  But if you are going to try and use the technical details of the tax law to force the IRS to grant you a tax benefit that otherwise doesn't seem like something that should happen, it's helpful to follow the detailed requirements yourself.  Unfortunately for the taxpayer in 7050 Ltd. v. Commissioner, TC Memo 2008-12, that didn't quite happen--and while one bullet was dodged, another problem proved fatal to the benefit the taxpayer was after, and the court never had to deal with whether the shelter actually would have worked if executed as it was supposed to have been.The materials are available at http://www.ezollars.com/2008-05-05_Sloppy.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

This week we follow the continuing saga of the self-employment tax and qualified joint venture that we've been following since the early part of this year.  This week we analyze CCA 200816030 issued by the IRS that outlines the "new improved" IRS position on self-employment tax and the Qualified Joint Venture election under §761(f).The materials for the podcast are available at http://www.edzollars.com/2008-04-28_SEandQJV.pdf .The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

The issue of whether §7502(c) provides the exclusive means to prove timely filing of a document by a taxpayer is addressed yet again by the courts--and what the Third Circuit had to say, the IRS didn't like hearing.  In the case of Philadelphia Marine Trade Ass'n.-Int'l Longshoremen's Association Pension Fund et al. v. Commissioner, 2008 TNT 74-16 the Third Circuit held that the reports of the death of the common law mailbox rule were, in the words of Mark Twain, greatly exaggerated.  That places the Third Circuit in the same camp with the Eighth, Ninth and Tenth Circuits, and opposed to the positions of the Second and Sixth Circuits.The materials for this podcast are located at http://www.edzollars.com/2008-04-21_Mailbox.pdf.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

After a hiatus at the end of tax season, we return with a new show dealing with an issue of whether a payment to a person was compensation income or a gift.  The case in question is the case of Larsen v. Commissioner, TC Memo 2008-73.The materials for the podcast are at http://www.edzollars.com/2008-04-16_GiftorComp.pdf.We also briefly discuss an interesting episode of a podcast I found on small service business operating issues at a place you might not look--check out http://macbreaktech.com/63/making-mac-your-business/ for an interesting listen that really isn't very MacIntosh (or even computer) centric--just a general discussion of issues facing small service businesses.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimberservices.com .

The self-employment tax is our topic for this week, specifically dealing with two topics.  We revisit an issue last visited in the early days of the podcast (back in June 2005) of the treatment of LLC members for self-employment tax purposes.  We look specifically at the case authorities we have (which are scant, and not terribly promising for LLC members), the IRS's proposed regulations that were controversial when issued, and what options exist for dealing with the issue today.As well, we revisit an issue raised in a February podcast, as the IRS unofficially "clarifies" their position on the self-employment tax treatment of Qualified Joint Ventures that is presented in the Form 1065 instructions and were discussed in the Tax Talk Today webcast and podcast from back in January.The materials can be downloaded at http://www.edzollars.com/2008-03-24_Self_Employment.pdf.The podcast is sponsored by Leimberg Information Systems, located at http://www.leimbergservices.com .

The question of whether a problem on a return was an error or a method of accounting is important, as we'll discuss this week looking at the Sixth Circuit's ruling in the case of Huffman v. Commissioner, where the appeals court sustained the 20006 ruling of the Tax Court (126 TC 322) that the CPA's consistent flawed attempt to calculate inventory as prescribed by the regulations for the dollar-value, link-chain LIFO method.  The resolution of this matter in favor of the IRS allowed the IRS to get at what would otherwise have been out of reach errors in years closed for assessment by moving that income into years that were open under the provisions of §481.The materials for this podcast can be found at http://www.edzollars.com/2008-03-17_CPA_Says_Error.pdf .The podcast is sponsored by Leimberg Information Service, available on the web at http://www.leimbergservices.com .

This week we look at the Tax Court's second pass at the case of Hubert v. Commissioner, TC Memo 2008-46, a case that sent back to the Tax Court by the Sixth Circuit Court of Appeals to decide if the LLC debt restoration provision made the taxpayer the payer of last resort under the Sixth Circuit's test.  The Tax Court comes back saying no.The materials can be found at http://www.edzollars.com/2008-03-10_Risky_Business.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The IRS has issued a safe harbor treatment for §1031 exchanges involving property that previously had or subsequently has personal use.  Revenue Procedure 2008-16 outlines the tests taxpayers can meet to be given safe harbor status on the question of the properties being held for investment or business use to qualify for §1031 status.The materials for the podcast can be found at http://www.edzollars.com/2008-03-02_1031_Exchange.pdf .The podcast is sponsored by http://www.leimbergservices.com .

We revisit the issue of what exactly is timely filing, revisiting an issue last covered in a podcast back in October of 2005.  This time we look at the Tenth Circuit's opinion in the case of Gibson v. Commissioner, a case that illustrates how a taxpayer who thought he was complying with the requirements to prove a timely filing of his Tax Court petition managed to find a way to not get the benefit he thought he had.The materials are available at http://www.edzollars.com/2008-02-25_Timely_Filing_PodcastII.pdf . The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

This podcast was originally recorded to go up last week, but the new tax bill displaced it so a week late we'll look at something that might have escaped your notice in the tax bill passed last May.  This podcast discusses an issue highlighted in, of all places, the instructions to Form 1065.  The issue is the side effect that occurs when married taxpayers holding rental property in an LLC or other form eligible to elect Qualified Joint Venture Treatment under §761(f) elect to be treated as a Qualified Joint Venture.  The effect is that the rental income (or loss) is no longer exempted from being treated as self-employment income, but now is treated as such.  We'll discuss why this is the case, as well as the interesting location the IRS chose to give us the details of this impact as well as how to actually make the election under §761(f) for any entity.The materials for the podcast are located at http://www.edzollars.com/2008-02-11_Joint_Venture.pdf .The podcast is sponsored by Leimberg Information Services,

Congress passed the Economic Stimulus Package of 2008 this week that makes a few, but significant, tax law changes for 2008.  This podcast talks about what Congress did and what we need to do about it.Materials are available at http://www.edzollars.com/2008-02-09_Economic_Stimulus.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

A listener who was following along in some discussions on the Arizona Society of CPAs sent me an email suggesting that perhaps it might be useful to look at the issues involved with LLCs and S corporations.  This week we will look at this issue, one that often doesn't get covered well since the topic cuts across what is often covered in partnership discussions (the use of LLCs) and S corporations (where often LLCs are presented as an alternative to, rather than a potential form of, an S corporation).The podcast covers issues that arise when a single member LLC is used to hold S corporation stock, as well as when an LLC elects corporate status and wishes to be taxed under the S corporation rules.The materials are at http://edzollars.com/2008-02-04_S_Corporation.pdf .The podcast is sponsored by Leimberg Information Services, located online at http://www.leimbergservices.com .

The issue of what is a capital asset is looked at in the Ninth Circuit's decision in Trantina v. United States, 2008 TNT 7-8.  In this case, an insurance agent was arguing that payments received from State Farm should have been taxed to him at capital gain rather than ordinary income rates.  Unfortunately, the United States District Court disagreed with the taxpayer, and the Ninth Circuit did so as well.The materials are at available for download at http://www.edzollars.com/2008-01-28_Trantina.pdf .The podcast is sponsored by Leimberg Informaton Services at http://www.leimbergservices.com .

This week we look at Revenue Procedure 2008-12 and final regulations under §7216, both of which deal with taxpayer authorizations for the use or disclosure of tax return information by tax preparers.  The new regulations contain a number of new requirements that will be imposed on tax preparers, and the Revenue Procedure contains specific language that must be used for taxpayers who are filing the Form 1040 series of forms.  These new requirements will take effect on January 1, 2009.The written materials for the podcast can be downloaded from http://www.edzollars.com/2008-01-21_Consents.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

The Supreme Court today decided the issue of whether investment fees paid by a trust was subject to the 2% of adjusted gross income limitation.  The Supreme Court in Knight v. Commissioner held that expenses are to be tested to determine if they are expenses that would not commonly or customarily be incurred by an individual--and only if they pass that test do they avoid the 2% limitation.The materials are available for download at http://www.edzollars.com/2008-01-17_Knight_Time.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

We look at a case where the IRS failed in an attempt to argue that a transaction had no economic substance or otherwise failed under the anti-abuse partnership regulations.  The case is Countryside Limited Partnership v. Commissioner, TC Memo 2008-3 where the taxpayers used the partnership distribution rules to allow two partners to have their interests in the partnership liquidated with no tax cost just prior to the partnership selling a significant asset at a gain.The materials are located at http://www.edzollars.com/2008-01-14_Partnership.pdf .The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

We look at a case that illustrates the application of Section 108 in a situation with recourse debt.  While this case would likely have been covered by the relief in the Mortgage Foregiveness Debt Relief Act of 2007 if the property had been taken in 2007, it's still useful to review since many foreclosures won't qualify for the newly passed relief, but may still meet the insolvency test that worked for the taxpayers in this case.The case is Keith v. Commissioner, TC Summary 2007-214 where the IRS's position did not garner much respect from the Tax Court.  We'll also look at what tax research gotchas may have caused the IRS to raise the positions that Tax Court so rapidly dismissed as just wrong and how to avoid those problems in your own practice.The materials are located at http://www.edzollars.com/2008-01-08_Debt_Forgiveness.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .