Ed Zollars' Tax Update Podcast

This week we look at Proposed Regulations under Section 152 to clarify the treatment of divorced parents, regulations that would both serve to document what has developed under the current temporary regulations and case law and add some new quirks-including the ability to revoke a waiver that was to apply to a future year by the custodial parent.The materials for the podcast can be found at http://www.edzollars.com/2007-05-08_Dependent.pdf .  And that noise you hear jingling in the beginning of the podcast is my cat deciding to walk in the room at the beginning of the podcast and the tags on his collar.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

A taxpayer without a regular place of business can still obtain a deduction for travel away from home if the taxpayer can establish that he/she has a home.  In two cases (Jason Ayala v. Commissioner and Manuel Ayala, Jr. v. Commissioner) the taxpayers failed to show they had a home and lost the deduction.  But the IRS also failed in its attempt to assess a negligence penalty on these taxpayers.The materials for the podcast can be downloaded from http://www.edzollars.com/2007-04-27_Home.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The IRS on April 23 released guidance on the application of monetary penalties to practitioners, their employers, firms and related entities for violations of Circular 230 as authorized by the American Jobs Creation Act of 2004.  This guidance gives some insight into the IRS’s views on how they will make use of this new enforcement tool, as well as some indication of what the IRS might view as an appropriate quality control system for a tax practice.  If, as expected, SSTS No. 9 goes from an exposure draft to a final standard for CPAs, this document may be one to consider when a CPA firm sets out its tax quality control standards.  And given the existence of the “aspirational? standard for best practices in Circular 230 Section 10.33, the importance of SSTS No. 9 may not be limited to CPAs.The materials for this podcast can be found at http://www.edzollars.com/2007-04-24_Monetary_Penalties.pdfThis podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

When Section 6501(c) refers to a false and fraudulent return, does the IRS need to show that the taxpayer was involved in the fraud to get the benefit of the unlimited statute of limitations to assess tax?  Or is it enough to show only that the preparer was involved in preparing a false return with the intent to evade tax on behalf of the taxpayer?  That's the issue the Tax Court considered in the case of Allen v. Commissioner, 128 TC No. 4.The supporting materials for this podcast can be downloaded from http://edzollars.com/2007-03-10_Preparer_Fraud.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The IRS has again issued guidance indicating their displeasure with a marketed shelter that promises benefits via the literal application of partnership provisions in the IRC.  In CCA 200704028 the IRS outlines both the shelter that was marketed that claimed the magic of returning most of the investment via a credit against state taxes and then a capital loss deduction for the investment for federal tax purposes as well.  The IRS outlines three separate rationales for disallowing the claimed treatment.The materials for the podcast can be downloaded from http://edzollars.com/2007-02-24_Credit_Denied.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Congress doesn't necessarily make the law work as consistently as practitioners want it to work.  This week we look at four different provisions in the Internal Revenue Code and their somewhat different view on whether "enough" is being done to get a tax benefit--for Sections 469, 179, 1362/1375 and 1402.The materials for the podcast can be found at http://edzollars.com/2007-02-17_Passive.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

Back in February of 2006, I did a podcast on medical reimbursement plans and went over the Speltz case where the taxpayer prevailed in a medical reimbursement plan provided for her husband who worked for the taxpayer’s daycare business as an employee.  That was a case where the taxpayer kept excellent records and truly kept track of all the necessary details.  This week the Tax Court gave opinions in two cases where taxpayers were not as meticulous with such plans—and the results were not nearly as good. We look at the cases of Snorek v. Commissioner, TC Memo 2007-34 and Francis v. Commissioner, TC Memo 2007-33 for taxpayers who adopted medical reimbursement plans but found that there was more to sustaining the deduction than just doing that. The materials for this week’s presentation can be downloaded from http://edzollars.com/2007-02-17_Medical.pdf I also discuss my early experiences with Microsoft Vista, Word 2007 and Excel 2007.  I also reference a tipcard for Excel 2007 you can get from the foll

Congress passed a number of incentives in the Tax Relief and Health Care Act of 2006 meant to make Health Savings Accounts (or HSAs) more attractive to taxpayers.  We'll take a look at the provisions this week and consider their impact on our clients.The materials for the podcast can be downloaded from http://edzollars.com/2007-02-03_HSAs.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

We look at the case of a traveler who got bitten when she attempted to make use of the hotel to get a package picked up by a private delivery service-a package that happened to contain her petition to the Tax Court which she was filing on the last day available.  When the delivery service reported picking up the package the following day, the IRS argued that she had blown her chance to file in Tax Court--and the Tax Court agreed.The case is Austin v. Commissioner, TC Memo 2007-11 and the materials can be downloaded at http://edzollars.com/2007-01-27_Late_Filing.pdf.We also discuss the IRS announcement this week that 2006 returns won't be due until April 17 due to April 16 being a city holiday in the District of Columbia and its impact at the state level, and this week's release by Microsoft of the consumer version of Windows Vista and Office 2007.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

This week we look at an IRS memorandum that argues against the position taken by a taxpayer arguing that his transaction literally complies with Section 731 and 732.  The IRS argued that the transaction, which involved the partnership acquiring a residence for the partner to redeem his interest, actually represented the equivalent of a distribution of cash followed by the purchase of the house--a transaction that would have triggered a significant taxable gain.The materials for this podcast can be downloaded from http://edzollars.com/2007-01-20_Literally_Too_Good.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

The IRS has issued Notice 2007-7 that explains the distribution provisions in the Pension Protection Act of 2006.  In the podcast, we look at some of he provisions contained in this notice that would be of special interest to advisers of closely held businesses and their owners.The materials for the podcast can be downloaded from http://edzollars.com/2007-01-12_IRS_PPA_Notice.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Sometimes life just doesn't seem fair.  Like when you exercise stock options from your former employer, and the stock price drops 20% from the date you told your employer to exercise the options until just a few days later.  And, even worse, at the last minute you revoked instructions to your former employer to immediately sell the shares upon exercise and instead decided to hold the shares.  In this case, the taxpayer attempted to salvage something from this by arguing that the later date was the measuring date for the compensation value since that was the date that the employer actually received the funds for the shares.This is the story we look at in the case of Walter v. Commissioner, TC Memo 2007-2, a story that doesn't have a happy ending for the taxpayer.The printed materials are found at http://edzollars.com/2007-01-06_Options.pdf .The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

The mark to market election under Section 475(f) can have a major impact for individuals that were unsuccessful in their attempt to become a day trader-which turns out to be the majority of those who try.  However, the election has rather strict requirements on when the election must be filed, and as the taxpayer in Knish v. Commissioner, TC Memo 2006-268, learned as he tried to unsuccessfully argue for the validity of his election filed 18 months after the date that Revenue Procedure 99-17 required it have been filed.The materials for this podcast can be downloaded at http://edzollars.com/2006-12-31_Mark_to_Market.pdf .The podcast is sponsored by Leimberg Information Services, found on the web at http://www.leimbergservices.com .

This week the IRS decided to send a warning to accrual basis taxpayers that the IRS has some very specific ideas on the proper application of the recurring item exception.  We look at Revenue Ruling 2007-3 and the issues it raises for deductions on contracts entered into near year end.The materials for this podcast can be downloaded from http://edzollars.com/2006-12-23_Accrued_Expenses.pdf .The podcast is sponsored by Leimberg Information Services .

Congress got around to passing the extenders in the Tax Relief and Health Care Act of 2006 early on Saturday morning, which picked up a number of the items that expired at the end of 2005 and had not yet been extended.  One provision added in the bill gives relief to individuals who have old, unused minimum tax credit which is discussed in this podcast.The materials can be downloaded at http://edzollars.com/2006-12-09_Giving_Credit.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

The issue of whether an individual is or isn't considered an active participant in a retirement plan can be complex, as the taxpayer found out in the case of Colombell v. Commissioner, TC Summary 2006-184.  As the taxpayer discovered, the mere fact she was not earning any benefit under the plan (nor was she likely ever to do so) did not mean she was not an active participant, as the regulations define that term.The materials can be downloaded from http://edzollars.com/2006-12-02_Participant.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Given that the IRS and courts had a short week, we look back this week at a ruling from a few weeks back, as well as a related ruling from a year ago, that deal with the accountable plan rules, and how the IRS interprets the options for implementing those rules.  We look at Revenue Rulings 2006-56 and 2005-52.The materials can be downloaded at http://edzollars.com/2006-11-25_Accountable_Plan_Per_Diem.pdf .The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

The IRS has released a simplified method that businesses can elect to use to compute the amount of their refund for the federal long distance excise tax that the IRS finally agreed the law did not allow them to collect.  The simplified method is elective, and uses April and September 2006 phone invoices to compute a percentage that is applied to all telephone expense throughout the relevant period.Materials, including the IRS notice and questions and answers, can be downloaded at http://edzollars.com/2006-11-18_Telephone_Tax_Refund.pdf .The podcast was recorded this week at the Founders Inn in Virginia Beach, Virginia where I spoke at the Virginia Accounting and Auditing Conference.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

83(b) elections were all the rage, especially for those with stock options during the dot com bubble--and now many of those individuals regret the election.  This week the Tax Court considered the case of Anthony Kadillak (Kadillak v. Commissioner, 127 TC No. 13) who sought to escape the consequences of his 83(b) election and subsequent forfeiture of a portion of the shares through various means. The materials can be downloaded at http://edzollars.com/2006-11-11_83b_and_AMT.pdf .I'm going to Ohio this week, speaking in Dublin, Ohio just outside of Columbus on Monday, and Canton on Tuesday.  After that, I will do a technology update at the Virginia Beach version of the Virginia Accounting & Auditing Conference on Thursday.The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

The podcast this week deals with the case of Estate of Landers, TC Memo 2006-230, where an estate's co-administrator attempted to seek a finding that there was reasonable cause for late filing based upon his reliance upon his (now deceased) co-administrator, who was a tax professional, and who suffered a broken hip two months before the extended due date of the estate tax return.The case offers a look at what does and doesn't constitute reasonable cause for late filing, as well as the issue of whether a nonprofessional can be excused for not being aware of the due date of a return if he claims he relied upon a professional to inform him of the due date.The materials are located at http://edzollars.com/2006-11-01_Late_Filing_Tax_Professional.pdf .The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com.