Sep 202012
 
IRS Treatment Of Forgiven Student Loan Debt Causing Concerns

In the wake of the housing market collapse, many people have become familiar with the concept of cancellation of debt (COD) income.  The basis for COD income is found in IRC § 61(a)(12) which states that gross income includes “income from the discharge of indebtedness.”  Understanding the logic of this provision can be tricky.  When a loan is given, neither the lender nor the borrower have any gain or loss.  The lender has no loss because it expects to be repaid and the borrower has no gain because it expects to have to repay loan.  Thus, at this point, there More…

Sep 072012
 
Church May Have Violated IRC By Endorsing Romney For President

St. Raphael Catholic Church of El Paso Texas appears to have violated the IRC by endorsing Mitt Romney in its bulletin.  “I am asking all of you to go to the polls and be united in replacing our present president with a president that will respect the Catholic Church in this country,” the entry in the church’s August 5 bulletin says. “Please pass this on to all of your Catholic friends.” 501(c)(3) organizations are strictly prohibited for engaging in political activity under several provisions of the IRC.  The rules that apply with respect to lobbying activities are set forth in More…

Aug 312012
 

A Florida Miccosukee Indian tribe is learning that not even sovereign Indian nations can escape the long arm of the IRS.  An attorney for the tribe appeared in front of a three-judge panel of the 11th U.S. Circuit Court of Appeals on Thursday to argue that the IRS has no explicit authority to subpoena banks for tribal records.  The judges did not seem to be impressed with the tribe attorney’s argument that, “”when it comes to Indian tribes there has to be specific mention in the statute that applies to them,” pointing out that Indian tribes are included in broad More…

Aug 272012
 
Employers: What To Do If You Receive A Notice Of Wage Levy

When a taxpayer fails to satisfy their tax liabilities, the IRS has an wide variety of collection tools that it may call upon in order to force the taxpayer’s compliance. One (infamous) method is that of a wage levy, which requires employers to assist the IRS in its tax collection efforts by seizing the taxpayer’s income at the source. When the employer receives a Form 688-W, Notice of Levy of Wages, Salary, and Other Income, they have little option but to follow the IRS’ instructions.  The IRC requires that the employer deduct a certain amount of the employee’s pay and More…

Aug 142012
 
Life Insurance Planning Will Be Very Important If Estate Tax Exemption Rolls Back

While many people are aware that life insurance policies are generally exempt from income tax, they may not be aware that the value of these policies may be included in their estate for the purpose of calculating estate taxes.  Under IRC § 2042, the value of a decedent’s gross estate includes the value of any life insurance policy that is either (1) receivable by the executor of the decedent’s estate (i.e. where the estate is a beneficiary); or (2) receivable by any other beneficiary when the decedent had any “incidents of ownership” over the policy at the time of death.  More…

Aug 012012
 
Winning Big At The Olympics Could Cost Some Serious Tax Dollars

According to an analysis done by American For Tax Reform, the cost of winning a medal at the 2012 London Olympics is not simply measured in blood, sweat, and tears, there are some serious tax consequences as well. Under the Internal Revenue Code, the American Olympians must count the value of the actual medals, as well as the cash prize they receive from the government for winning those medals, as taxable income.  At today’s commodity prices, the value of a gold medal is about $675, while a silver medal is worth about $385 and a bronze medal is worth about More…

Jul 202012
 
Tax Court Decision Upholds Annual Exclusion Treatment For Gifts Of Family Limited Partnership Interests

A recent U.S. Tax Court decision has established the parameters for qualifying gifts of an interest in a family limited partnership as annual exclusion transfers.  Under § 2503 of the Internal Revenue Code, a person may gift away up to $13,000 each year per individual without suffering any gift tax consequences.  This is commonly referred to as the “annual exclusion.”  In order to be considered a transfer that is eligible for the annual exclusion, the gift has to be of a “present interest,” and not just an interest in a future right or benefit.  Courts have held that in order More…

Jul 162012
 

Assuming that the new healthcare law survives this year’s election in the current form, the new Medicare tax found within its provisions will likely complicate the tax consequences that stem from the sale of certain business interests.  Beginning in 2013, Section 1411 of the Internal Revenue Code will impose a new Medicare tax equal to 3.8% on the “net investment income” of U.S. individuals, estates and trusts.  Section 1411(c)(4) applies a “deemed asset sale” approach to the disposition of a partnership or S corporation interest in order to determine the amount of net investment income which arises from the transaction. More…

Jul 062012
 
Taxpayer Advocate Service Report Highlights Growing Problem Of Taxpayer Identity Theft

In our last post, we discussed the release of the National Taxpayer Advocate’s 2013 Objectives Report To Congress and the material therein which addressed the issue of the IRS’ increasing use of automation when dealing with taxpayers.  The report also details the growing concern of taxpayer identity theft, something we have previously discussed on numerous occasions. According to the report, “[i]dentity theft wreaks havoc on our tax system in many ways.  Victims of identity theft not only must deal with the aftermath of an emotionally draining crime, but may also have to deal with the IRS for years to untangle More…

Jul 022012
 
New Taxes In The Healthcare Law

Now that the United States Supreme Court has ruled on the constitutionality of the Patient Protection and Affordable Care Act (“PPACA”), President Obama’s signature healthcare legislation, we will all have to become more familiar with the taxing provisions contained within the bill.  Beyond the individual mandate, which now has the dubious distinction of being perhaps the most famous “tax” imposed by the PPACA, there are numerous other revenue-raising provisions found within the law’s hundreds of pages of statutes, rules, and regulations. The vast majority of the PPACA’s revenue raising potential will come from just a few of the many tax More…