Ed Zollars' Tax Update Podcast

The IRS celebrated the end of 2007 by releasing three Notices late on December 31 that provide guidance on the application of the revised preparer penalties contained in the Small Business and Work Opportunity Tax Act of 2007 that was passed last May.  The IRS had previously released interim relief in Notice 2007-54, but that relief was set to expire as 2007 did.The centerpiece of this guidance is Notice 2008-13, which provides interim guidance on applying the §6694 preparer penalty standards.  The interim rules are not nearly as onerous as many had feared they would be, and need to be incorporated rapidly into our practices as tax season approaches.  Note, as well, that this guidance applies only until the IRS releases revised regulations, something the notice indicates they plan to do during 2008.The materials for this podcast can be downloaded at http://www.edzollars.com/2008-01-01_6694.pdf .  Those materials include the full text of all three notices.The podcast is sponsored by Leimberg Information Servic

In this podcast, we look at a case where a shareholder attempted to argue that, in fact, the S corporation's election had been terminated a decade before due to an agreement with the founding shareholder that, in the taxpayer's view, created a second class of stock.  The case is Minton v. Commissioner, T.C. Memo 2007-372.  The shareholder is not successful, though she does eventually succeed in unilaterally ending the S status of the corporation.  We'll look at both why the Tax Court didn't go along with her claim that a 1986 agreeement created a second class of stock, and the issues raised by her ability to unilaterally kill off the S election and what that suggests for those of us working with S corporations and/or succession plans.The materials are available at http://www.edzollars.com/2007-12-31_S_Corporation_Class.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

In this podcast we look at highlights of three of the five bills affecting taxation that Congress passed prior to leaving town, specifically the Tax Increase Prevention Act of 2007, Mortgage Forgiveness Debt Relief Act of 2007 and Tax Technical Corrections Act of 2007, all three of which have provisions that should be of interest to many of your clients.  The written materials for the podcast can be downloaded from http://www.edzollars.com/2007-12-29_New_Laws.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

In a recent Tax Court decision on the home sale exclusion under Section 121, the IRS and the taxpayers split the decision--the IRS lost in its attempt to claim the taxpayer did not use the property in question as his principal residence, but the taxpayer lost a portion of the deduction because a portion of the property was titled in the name of a partnership--and the court did not buy the taxpayer's theories that either the partnership was never formed or that the property had been distributed.  The case is Farah v. Commissioner, T.C. Memo 2007-369.The materials for the podcast can be downloaded from http://www.edzollars.com/2007-12-26_Section_121.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The IRS has issued Notice 2008-1 that details how an S corporation shareholder can qualify for the self-employed health insurance deduction under §162(l) even if the policy is in the name of the shareholder. The notice is at odds with the implication contained in IRS Headliner 163 issued in May of 2006 that seemed to many to strongly suggest that personal ownership of the policy was fatal to the deduction. We had previously discussed why, perhaps, that wasn't the case in a podcast back in June of 2006 that suggested listeners look at Revenue Ruling 61-146 and consider whether a similar program would not solve the problem the Headliner pointed out with individual policies. What the IRS has now done is, effectively, adopted that solution with official blessing. The materials can be downloaded from http://www.edzollars.com/2007-12-26_S_Corporation.pdf. The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

After a not so short hiatus, the Tax Update podcast is again posted, this time looking at IRS Revenue Ruling 2008-5 that deals with issue of a taxpayer selling securities at a loss in a taxable account and then purchasing identical securities in a regular or Roth IRA.  The issue is one that practitioners have discussed for years, but which the IRS just now is getting around to issuing a formal ruling on.The written materials for the podcast can be downloaded at http://www.edzollars.com/2007-12-21_IRA_Issue.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Two days, two revisions:  the IRS on September 25 issued proposed regulations to revise Circular 230 §10.34, and the next day finalized regulations that also made changes to the same provision (among others).  We take a look at both sets of changes, and their impact on tax practice.The materials can be downloaded from http://www.edzollars.com/2007-09-26_Circular_230.pdf .The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

The IRS released a Chief Counsel Advice (CCA 200734021) that dealt with how to interpret the language found in Section 121(d)(5) that, in certain cases, will allow a taxpayer to treat a residence that is destroyed as if it were sold for purposes of ignoring up to $250,000/$500,000 of gain under Section 121(a).The materials for this week's podcast are found at http://www.edzollars.com/2007-09-01_Residence.pdf .The podcast is sponsored by Leimberg Information Services, found at http://www.leimbergservices.com .

The Second Circuit Court of Appeals decided that the Tax Court had been too quick to dismiss a penalty under §6662 in the Estate of Thompson, decided last week, but that the Court was not forced to accept the taxpayer's valuation when it rejected the IRS's own expert's valuation even if the Court had decided the burden had been shifted under §7491.The materials for the podcast are available at http://www.edzollars.com/2007-08-26_Estate_Tax_Value.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

We once again revisit the Cohan rule, but this time in the context of a much larger taxpayer than we normally look at, in the case of Tyson Foods, Inc and Subsidiaries vs. Commissioner, TC Memo 2007-188.  The taxpayer's was attempting to argue, based on Cohan rationalization, that they should be able to depreciate a $2,000,000+ debit remaining on their books after making an agreed upon adjustment under IRS exam.  The IRS (and eventually the Tax Court) did not agree that such a treatment should be allowed.The materials for the case are at http://www.edzollars.com/2007-07-21.pdf . The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Equitable ownership of a home can grant a taxpayer a deduction for mortgage interest and taxes even when the taxpayer is not the legal owner.  While the taxpayer in the case of Nair v. Commissioner, TC Summary Opinion 2007-116, did not have such ownership, the opinion does outline the requirements a taxpayer would need to demonstrate to have such equitable ownership. As well, Mr. Nair's failed attempt to obtain a casualty loss deduction also offers some insights into the issue of establishing basis for items that are involved in a casualty loss deduction. The materials for the podcast can be downloaded from http://www.edzollars.com/2007-07-15.pdf. The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com.

We finish up the look at §6662, this time looking at the substantial understatement penalty, as well as the exceptions to this penalty. The material for this week's podcast can be downloaded from http://www.edzollars.com/2007-07-09_Substantial_Understatements.pdf. The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

For Independence Day we take a look at a new set of standards released by the American Institute of CPAs' Consulting Services Executive Committee that will take effect for engagements entered into after January 1, 2008.  The Statement on Standards for Valuation Services No. 1, Valuation of a Business, Business Ownership Interest, Security, or Intangible Asset can have an impact on tax practice where the value of an asset covered by this standard has an impact on a tax issue.  CPAs will need to be aware of when this standard may become applicable and the options when that might take place.  Those that work with CPAs in tax practice, include tax attorneys who are working with the client's CPA, need to be aware of this change and the impact of this standard on both what the CPA can do and the cost of having the CPA perform certain functions.The materials for this podcast can be downloaded from http://www.edzollars.com/2007-07-04_SSVS.pdf .The podcast is sponsored by Leimberg Information Services, located on the

Given that in both the changes to Circular 230 paragraph 10.35 back in 2005 and the recent revisions to Section 6694, it seems appropriate to review the penalties that can be imposed on a taxpayer under this section, a section whose outlines of level of comfort in a position have borrowed in revising both of those provisions.  This week we look at §6662(b)(1)'s negligence and disregard of rules and regulations penalty, planning to look next at the substantial understatement provisions of §6662(b)(2).  The materials for this podcast can be found at http://www.edzollars.com/2007-06-29_Client_Side_Penalties.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at www.leimbergservices.com .

This week we look at recent cases where the IRS lost a statute of limations case.  In the case of Bakersfield Energy Partners, LP, 128 TC No. 17, the question was whether an overstatement of basis used in computing a Section 1231 gain could result in omission from gross income that triggers the six year statute of limitations under §6629 and §6501.   The Tax Court decided the answer was no.The materials can be downloaded at http://www.edzollars.com/2007-06-22_Limits.pdf .The podcast is sponsored by Leimberg Information Services, located on the web on http://www.leimbergservices.com .

The IRS this past week issued Notice 2007-54 which grants partial relief from some of the changes made to the preparer penalties under Section 6694(a), delaying full implementation of the provisions until next year.  We discuss the extent of the relief granted, as well as some of the reactions to this change that I've noticed in online discussion groups.The materials for this podcast, including the above notice, can be found at www.edzollars.com/2007-06-15_Delay_of_Game.pdf .The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

We further analyze the new law, this time looking in detail at the preparer penalty provisions and the change in the trigger for where the preparer penalty under Section 6694(a).The materials are available at www.edzollars.com/2007-06-02_Preparer_Penalty.pdf .The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

Kaye Thomas emailed me with an observation regarding one issue in the new law.  It turns out that though prior drafts of the bill and the Joint Committee's report on the bill indicated expanding the general rule on the Kiddie Tax one more year, that provision is not included in the final bill.  Rather, only the "student" provision is added to the bill. The materials have now been updated, and can be downloaded from the original link at http://edzollars.com/2007-05-25_New_Law.pdf .

The new Congress has passed its first major tax bill with changes that are meant to grant relief to small businesses, but which also have revenue raisers that will impact a number of clients.  The President has indicated he will sign the bill, so over the Memorial Day weekend we can all read up on the new law to start our summer.The materials are available for download at http://edzollars.com/2007-05-25_New_Law.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

We look at the recent case of Pediatric Affililates, P.A., (2007-1 USTC ¶50,477) where the Third Circuit Court of Appeals upheld the U.S. District Court of New Jersey's determination that the taxpayers were liable for unpaid payroll taxes that their payroll service had walked off with.  The case is instructive for the types of responsibilities under the tax law a taxpayer is unable to delegate to a third party.The materials can be downloaded at www.edzollars.com/2007-05-18_Payroll_taxes.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at www.leimbergservices.com .