Ed Zollars' Tax Update Podcast

Gadgets and Gizmos

Mon, 01 Jun 2009 16:05:00 +0000

This week's presentation is based on a presentation I made for the Virginia Society of CPAs' 8th Annual Industry Conference in Williamsburg on May 28, 2009 on gadgets and gizmos. The presentation includes a look at:

Novatel's Mifi
Apple's Airport Express
Apple iPhone 3G
Blackberry Bold, Pearl and Storm
Apple iPod Touch
Netbooks

The slides can be important to follow along, so you may wish to download them at http://www.edzollars.com/2009-05-29_Gadgets.pdf .

The podcast is sponsored by Leimberg Services, located at http://www.leimbergservices.com .

The Education of the Taxpayer from a Business Perspective

Mon, 18 May 2009 21:41:00 +0000

Education incentives have been a favorite of Congress in recent years, but this week we look at the old favorite of education as a business deduction, a provision covered by regulations last updated back in 1967. The Tax Court had cause to look into this in the case of Ray v. Commissioner, TC Summary Opinion 2009-71.

Materials for this week's podcast can be downloaded at http://www.edzollars.com/2009-05-20_Education.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

The Limits on Taking a Return Position

Sat, 09 May 2009 13:21:00 +0000

Last year there was lots of discussion regarding the changes to §6694 and how tax professionals were to apply the standards there against return positions. However, while the standard to be applied may have changed, there were standards in place before and this week we look at the case of a CPA that ran afoul of the lower standards. In the case if USA v. Kapp, (2009 TNT 84-30), the Ninth Circuit Court of Appeals sustained the issuance of an injunction against a CPA prohibiting him from taking a position on returns that failed the older §6694(a) standard for nondisclosed positions.

The case is of interest because the panel gives a practical walkthrough of analyzing the level of support that existed for a position, as well as noting those items of support that Mr. Kapp wished to rely upon but which did not serve to help his cause.

The materials for the podcast are at http://www.edzollars.com/2009-05-11_Preparer.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Net Operating Loss Guidance: Let's Try This One Again

Sun, 03 May 2009 14:04:00 +0000

The IRS has issued a revised ruling on the use of a net operating loss under the new rules Congress added in February. The new ruling, Revenue Ruling 2009-26, updates and liberalizes the guidance previously given in Revenue Ruling 2009-19 issued on March 16. The new guidance allows taxpayers to simply file a carryback for the appropriate number of years to make the election, but there are special due date rules you have to worry about.

The materials are at http://www.edzollars.com/2009-05-04_NetOperatingLoss.pdf.

The podcast is sponsored by Leimberg Information Services on the web at http://www.leimbergservices.com.

What's Up Doc? Employee or Not?

Sat, 25 Apr 2009 12:46:00 +0000

The definition of an employee is this week's key issue--and we look at the matter in the case of Maimon v. Commissioner, TC Summary Opinion 2009-53. Dr. Maimon attempted to argue that he was not an employee of the professional corporation he worked in (and owned some shares in), but rather was an independent contractor. He was interested in holding this position because he had ended up personally paying over legal fees and, ultimately, a $1 million settlement, in a case involving his medical services.

The case is interesting because the Court held Dr. Maimon was not an officer and thus actually stepped through the common law tests for employment status. In the end the court found Dr. Maimon was an employee, but the case gives a good outline of the analysis to go through even in cases that aren't quite as "bad facts" as this one.

Materials for the podcast are available at http://www.edzollars.com/2009-04-25_Employee.pdf .

The podcast is sponsored by Leimberg Services, located on the web at http://www.leimbergservices.com .

A Matter of Time (And Innocent Spouses)

Mon, 20 Apr 2009 21:24:00 +0000

The Tax Court recently decided a pair of cases related to the innocent spouse provisions of §6015 and time limits on filing for relief. In the case of Mannella v. Commissioner, 132 T.C. No. 10 the Tax Court held that even if the notice of intent to levy and rights under the innocent spouse provisions were never seen by the taxpayer, the two year period for relief under §6015(b) and (c) that is specifically imposed by statute begin to run.

However, the Court held in this case and the earlier case of Lantz v. Commissioner, 132 T.C. No. 8 that the IRS regulation that imposed a similar two year time limit on equitable relief under §6015(f) was invalid, thus allowing the taxpayers to move forward with a claim for equitable relief.

The materials for this podcast are at http://www.edzollars.com/2009-04-19_6015.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

A Defining Moment-Brokerage Trade or Business

Sat, 07 Mar 2009 12:23:00 +0000

The IRS has shown recent interest in disputing whether real estate agents meet the requirements to be treated as real estate professionals that can use the rules of §409(c)(7) to treat rental real estate under the standard passive activity rules rather than having such items automatically treated as passive. The IRS position is that since the law refers to a "brokerage" trade or business and such individuals generally are not licensed as real estate brokers they cannot qualify.

In the case of Agarwal v. Commissioner, TC Summary 2009-29, the Tax Court did not agree with the IRS on that matter, instead allowing the taxpayer, who was a real estate agent who worked as an independent contractor under contract with a licensed brokerage firm, to qualify for §409(c)(7) treatment. The podcast also discusses a 2007 case where it was the IRS who was (successfully) arguing that you can't use state law licensing definitions when the issue was whether an bookkeeping and tax preparation firm that was not licensed as a CPA firm was a personal service corporation. In both of these cases, the Tax Court found that under the IRC we would look to the commonly understood definition of the terms, and that state licensing definitions did not control.

Materials for this podcast can be found at http://www.edzollars.com/2009-03-09_RealEstate.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

The Case of the Missing Cattle-Overvaluation Penalty

Sat, 28 Feb 2009 20:58:00 +0000

Can nonexistent cattle be overvalued? The Ninth Circuit, disagreeing with the Tax Court and other circuits, says it cannot be in the case of Keller v. Commissioner, 2009 TNT 37-17 reversing on this issue the Tax Court's decision in TC Memo 2006-131.

The materials for this podcast can be downloaded at http://www.edzollars.com/2009-03-02_Cattle.pdf .

The podcast is sponsored by Leimberg Services at http://www.leimbergservices.com .

It's a Matter of Trust Funds—the Responsible Person Penalty

Sun, 22 Feb 2009 21:59:00 +0000

This week we look at a case dealing with the trust fund recovery penalty under §6672. In the case of Richard A. Smith v. United States, 2009 TNT 30-6, CA10, (http://ca10.washburnlaw.edu/cases/2009/02/07-4210.pdf) the Tenth Circuit refused to overturn the holding in the US District Court of Utah that Mr. Smith was a responsible person, even though he had no ownership interest in the entity in question. The case highlights the dangers for employees in accounting functions when the organization they work for begins to have cash flow problems, and payroll tax payments begin to be skipped.

The materials are available at http://www.edzollars.com/2009-02-23_Responsible.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Losses and Choices-Stimulus Bill Net Operating Loss Rules

Sat, 14 Feb 2009 22:27:00 +0000

The new American Recovery Reinvestment Act of 2009 has a number of tax provisions, and this week's podcast looks at the small business net operating loss provisions of the Act. This provision will require action for some taxpayers within 60 days after the bill is signed into law, as well as giving us a "sliding" window for when we start using a net operating loss for the year we elect to have it apply to.

The podcast materials are located at http://www.edzollars.com/2009-02-16_NOL.pdf .

The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

Housing Fiasco of a Different Sort-Casualty Loss Issues

Sat, 07 Feb 2009 16:08:00 +0000

Housing problems are all over the news (and with some of our clients), but today's story is a housing problem of a different sort. We look at a case where lots of things went wrong in building a taxpayers' dream home where the taxpayers attempted to claim a casualty loss on their tax return. In the cases of Grief v. Commissioner and Bui v. Commissioner, TC Summary Opinion 2009-18, the Tax Court finds that this couple is not going to get any relief from the IRC.

The materials for this week's podcast can be downloaded at http://www.edzollars.com/2009-02-09_Casualty.pdf .

I also note in the podcast that I'm posting updates on Twitter (http://www.twitter.com) . My Twitter name is "edzollars" and if you want to follow me there that's fine.

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

A Matter of Timing-When Income and Deductions are Reported

Sat, 31 Jan 2009 20:09:00 +0000

What if a customer tells you they are going to reduce what they pay you for the work you just delivered to them because you owe them to fix for a bad job you did on an earlier contract? If you are on the accrual basis, can you reduce your accrued receivable or record an expense if you are disputing that claim? That is the issue being dealt with this week in the case of Trinity Industries v. Commissioner, 132 TC No. 2.

The written materials can be downloaded at http://www.edzollars.com/2009-02-02_Timing.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Home is Where the Job Is

Sun, 25 Jan 2009 18:16:00 +0000

This week I look at a case involving a Northwest Airlines mechanic who was laid off and ended up using his "bumping" rights in other cities while hoping to return to his original home base. The question of whether the taxpayer could deduct the expenses of working in the various locations is considered by the Seventh Circuit Court of Appeals after the Tax Court decided no deduction was allowed in the case of Wilbert v. Commissioner, 2009 TNT 12-12, CA7, affirming TC Memo 2007-152.

The materials can be downloaded at http://www.edzollars.com/2009-01-25_TaxHome.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Sharing the Credit-IRS Rules on Section 36 Provision

Mon, 19 Jan 2009 12:26:00 +0000

Last year when Congress added the first-time homebuyer credit found in Section 36, they included the ability for unmarried individuals who jointly acquire a residence to allocate the credit among themselves, and gave the IRS the ability to write the rules to allow this to happen. In Notice 2009-12 the IRS has outlined those rules, and they proved to be very taxpayer friendly.

The materials for the podcast can be downloaded at http://www.edzollars.com/2009-01-20_UnmarriedCredit.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Debt, Foreclosures and the Tax Law

Fri, 16 Jan 2009 16:39:00 +0000

The new year opens up with a podcast based on a topic that was part of a panel I was a part of at the Arizona Forum for Improvement of Taxation's winter conference. I spoke with attorney Tracy Essig of Phoenix regarding these matters.

The materials can be downloaded at http://www.edzollars.com/ForeclosureDebtandTaxes.pdf .

The podcast is sponsored by Leimberg Information Service, found on the web at http://www.leimbergservices.com .

Medical Expenses: Testing the Limits

Sat, 27 Dec 2008 15:06:00 +0000

Medical expenses were the issue this week in the case of Magdalin v. Commissioner, TC Memo 2008-293. In this case the taxpayer had paid expenses for obtaining eggs and the services of a surrogate mother, and argued that these expenses should be treated as deductible medical expenses, pointing to the IRS's 2003 private letter ruling (PLR 200318017) that allowed a woman the expenses related to in vitro fertilizaiton, including expenses paid for an egg donor. The IRS (and the Tax Court) didn't find the situations to be comparable and denied the deduction--but it gives us a chance to look at the rules around §213.

The materials are at http://www.edzollars.com/2008-12-28_Medical.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Self-Employed or Not?

Thu, 27 Nov 2008 17:00:00 +0000

After a bit of a break while I was out speaking in the past couple of weeks in Nevada, California, Ohio and Virginia we return to a Thanksgiving Day podcast dealing with self-employment taxes and employee status. We look at the Tax Court's ruling in McWhorter v. Commissioner, TC Memo 2008-263 where a taxpayer argued he was not subject to self-employment tax because he should have been treated as an employee.

The materials can be downloaded at http://www.edzollars.com/2008-11-27_Self_Employed.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

Section 6694 Saga Developments-An Update After Latest Revision

Sun, 09 Nov 2008 14:08:00 +0000

The podcast this week is based on a presentation I made Thursday at the Arizona Tax Institute on the current state of Section 6694. The session was scheduled back a few months ago, but proved timely given recent tax law changes. A copy of the slides can be downloaded at:

http://www.edzollars.com/2008-11-09_6694Slides.pdf .

The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

S Corporation Debt and How to Not End Up With Basis

Sun, 02 Nov 2008 03:31:00 +0000

We continue with issues related to S Corporation debt and the many ways to end up not being able to use debts to deduct losses flowing through. This week we look at the Tax Court's opinion in the case of Russell v. Commissioner, TC Memo 2008-246.

The materials for the podcast can be downloaded from http://www.edzollars.com/2008-11-03_SDebt.pdf .

The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

Closing the Open Door-S Corporation Debt

Tue, 28 Oct 2008 22:34:00 +0000

The IRS has issued final regulations on S Corporation open account debt that will change the way that many clients have to deal with their loans to the corporation. These changes are effective immediately, so we have to understand how these rules work. The podcast is being recorded this week while I'm at the Hilton Garden Inn in Owings Mills, Maryland.

The materials are available at http://www.edzollars.com/2008-10-31_S_OpenAccount.pdf .

The podcast is sponsored by Leimberg Services, located on the web on http://www.leimbergservices.com .

Too Late to Elect

Sun, 28 Sep 2008 12:54:00 +0000

Another taxpayer found out well after filing his return with less than stellar results from his trading activities that there had been an option to file an election under §475(f) to use mark to market accounting which also converts the transactions from short term capital gain/loss to ordinary gain/loss. Since the taxpayer had over $90,000 in net losses.

The materials can be downloaded at http://www.edzollars.com/2008-09-29_LateElection.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

"Creative Planning" Creates Fraud Penalty

Sun, 21 Sep 2008 16:57:00 +0000

This is a "travel" podcast of sorts this week--the materials were prepared on a Southwest Airlines 737 flying from Phoenix to Baltimore, and recorded in the Hotel Roanoke in Roanoke, Virginia. This week's topic doesn't deal with any of that--rather it deals with the issue of a CPA that got "creative" in planning with himself and his clients, and in his case he finds the Tax Court isn't amused. The case is Baisden v. Commissioner, TC Memo 2008-215 where a CPA attempted to get around the self-employment tax by paying "royalties" from his sole proprietorship to himself. The case doesn't deal with that issue (he had conceded that matter by then) but rather deals with whether he was subject to the fraud penalty.

The materials are available for download at http://www.edzollars.com/2008-09-22_Fraud.pdf .

The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

We Just Disagree-What is the Meaning of In Connection With?

Mon, 15 Sep 2008 14:52:00 +0000

We look this week at a difference in application of IRC §162(k) between the Ninth Circuit Court of Appeals and the United States Tax Court given the Tax Court's decision in Ralston Purina v. Commissioner, 131 TC No. 4 that dealt with the taxpayer's attempt to claim a deduction for dividends paid to participants in its ESOP when it had to redeem certain stock from the ESOP to pay out terminated participants in that plan.

The materials can be downloaded from http://www.edzollars.com/2008-09-15_ESOP.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

At Death Do Payments Stop? Alimony Revisited

Sun, 07 Sep 2008 20:16:00 +0000

The Ninth Circuit Court of Appeals this week affirmed the Tax Court's decision in the case of Johanson and Melzig v. Commissioner, TC Memo 2006-105 involving alimony. In its original decision, the Tax Court expressed exasperation at having to yet again decide an issue the parties could have resolved in the decree itself-whether the payments would cease on the death of the recipient spouse as required by §71(b) for the payments to be treated as alimony. Yet again, the recipient claimed the payments would not and the payor claimed they would, and the Tax Court had to then divine how a California state court would have ruled under California law.

The materials can be found at http://www.edzollars.com/2008-09-08_Alimony.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Delayed Rebate-Tax Status of Accrued Rebates

Sun, 31 Aug 2008 22:34:00 +0000

Accounting issues we often run into involve the differences between tax and GAAP treatment of items, and this week we look at one such case involving the time for recognizing an expense. In this case, the matter involved rebates and we look at a Chief Counsel Memorandum (ILM 200834019) outlining the IRS's view on why the taxpayer in this case could not recognize the expense related to rebates at the time a sale was made.

Materials for this week's podcast can be downloaded at http://www.edzollars.com/2008-09-01_Rebates.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Authoritative Support-Getting the Required Support for a Tax Position

Mon, 25 Aug 2008 12:53:00 +0000

We review the requirements found in the regulations for obtaining the required support for a tax position, concentrating on the methods outlined in Reg. §1.6662-4(d) in the definition of "substantial authority" which are cross referenced multiple times when considering other levels of authority.

The materials can be downloaded from http://www.edzollars.com/2008-08-25_Penalty.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Keeping Things Open-Life Insurance Demutualization Case

Sun, 17 Aug 2008 19:42:00 +0000

This week we look at the Recent United States Court of Federal Claims decision in Fisher, Trustee v. United States, 2008 TNT 154-7 where the court sided with the taxpayer and held that the proper treatment of amounts received in lieu of shares in the demutualization of Sun Life were to be treated under the open transaction doctrine rather than treated as a sale of shares with a zero basis.

The materials can be found at http://www.edzollars.com/2008-08-18_OpenTrans.pdf .

The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

Section 108 Proposed Regulations for S Corporations

Sun, 10 Aug 2008 14:11:00 +0000

The IRS issued new proposed regulations to explain the reduction of the NOL substitute in an S corporation setting when cancellation of debt is excluded from the S corporation's income under Section 108. While the regulations are in proposed form only, the "deemed NOL" rules have existed in the IRC since 2002, and Section 108 is likely to be an issue for S corporations who face economic challenges.

The materials for this podcast can be found at http://www.edzollars.com/2008-08-04_108andS.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

I Wish That Hadn't Worked--Section 83(b) Election Regret

Sun, 03 Aug 2008 13:05:00 +0000

This podcast is the sequel to a November 2006 podcast on the same case--that of Kadillak v. Commissioner where an individual who was caught by the "dot bomb" crash of the technology stock of his former employer attempted to mitigate the damage caused by his ISO exercise and 83(b) election made at the height of the craze. A year later, Mr. Kadillak was no longer employed by the organization, the stock price had tanked, and when he sold the stock that he didn't have to surrender got stuck with a $3,000 per year AMT capital loss deduction (probably for lifetime) to "offset" a large prior year AMT liability.

This week the Ninth Circuit ruled on the case and, unfortunately for Mr. Kadillak, agreed with the Tax Court's decision. We look at the Section 83(b) election, it's downside risk that Mr. Kadillak obtained "up close and personal" experience with and some general observations on counseling clients about the "what if" problem when they are sure they know what the future will hold.

The materials are available at http://www.edzollars.com/2008-08-04_83b.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Home Run-A Look at Some Tax Provisions in the New Housing Law

Sun, 27 Jul 2008 22:29:00 +0000

In a special podcast, we look at the just passed American Home Rescue and Foreclosure Prevention Act of 2008, taking a detailed look at a few tax provisions in that bill of interest. We look at the new, refundable first time homeowners credit, the property tax deduction for nonitemizers and the soon to start restrictions on the ability to get a full Section 121 exclusion if a property has not always been used as a principal residence that will apply to usage after January 1, 2009.

Note that this presentation is based on a brief review of the provisions that I've just completed based on what I believe to be the version of the bill that passed--but be sure to confirm these details, as well as watch for the required IRS guidance on a number of these matters.

The materials are available for download at http://www.edzollars.com/2008-07-28_Housing.pdf .

The podcast is sponsored by Leimberg Information Servicees, located on the web at http://www.leimbergservices.com .

Heeding Warnings-Taxpayer Penalized After Preparer Shopping

Sun, 27 Jul 2008 13:17:00 +0000

In the past year we've talked a lot about the preparer standards and tax return positions. This week, in the case of Wadsworth v. Commissioner, TC Memo 2008-171, we see a real world situation where a tax professional decided a position was not one that he could accept and what happened when the client decided to find another person who would take the requested position. As you might expect, the taxpayers don't fare well in the eyes of the court when they attempt to claim reliance on the advice of the professional that did sign off on the position.

The materials for this week are available at http://www.edzollars.com/2008-07-28_Preparer_Shop.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Virtual Machines and Tax Practice

Mon, 21 Jul 2008 01:00:00 +0000

I gave a presentation at the offices of the Arizona Society of CPAs on the use of virtual machines to deal with the transition from Windows XP to Vista in a tax practice. This podcast is based on that presentation, and it will be fairly useful to actually have the materials in front of you as you listen to this one. The materials are at http://www.edzollars.com/Virtual_Machine.pdf.

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

Getting Started Automatically—IRS Modifies Rules for Start Up and Organization Costs

Sun, 13 Jul 2008 23:11:00 +0000

The IRS issued new temporary regulations that deal with start-up and corporate and partnership organization costs. Interestingly enough, the new regulations now create an automatic election to expense/amortize all such costs, and treat problems related to the identification of costs or the proper year to begin amortization as accounting method issues.

The materials are located online at http://www.edzollars.com/2008-07-14_Section_195.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

S Corporations and AAA

Sun, 06 Jul 2008 23:06:00 +0000

The IRS this week issued some relatively unsurprising guidance on the treatment of life insurance and an S corporation's accumulated adjustments account, so this week we'll look at the more general issues of the relevance (and lack of relevance) of AAA for an S corporation and its shareholders, and how the item is computed.

The materials are available at http://www.edzollars.com/2008-07-07_AAA.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

IRS Releases New FAQ on HSAs

Sun, 29 Jun 2008 14:48:00 +0000

The IRS has issued new guidance in the form of a series of questions and answers related to Health Savings Account in Notice 2008-59. This podcast goes over the various items covered in this notice, and some of the planning and design opportunities available under this notice.

Written materials for this podcast can be downloaded from http://www.edzollars.com/2008-06-30_HSA_Guidance.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Proposed Regulations for Preparer Penalties - Part Two

Thu, 26 Jun 2008 13:32:00 +0000

This is part two of a series of two podcasts on the proposed regulations for preparer penalties released recently. .

The materials are at http://edzollars.com/2008-06-23_Penalty.pdf .

The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

Proposed Regulations for Preparer Penalties - Part One

Mon, 23 Jun 2008 02:49:00 +0000

This is the first of what will be a series of two podcasts on the proposed regulations for preparer penalties released here recently. Considering the length of the regulations and podcast, the first hour is in this file to listen to and digest, with part two to be posted later in the week.

The materials are at http://edzollars.com/2008-06-23_Penalty.pdf .

The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com .

Who is Knocking at Your Door? Computer Security for Financial Professionals

Sun, 15 Jun 2008 14:43:00 +0000

Securing our client's data is the responsibility of all of those in tax practice. This past week I gave a presentation at the Arizona Society of CPA's Financial Planning Conference on this matter, and that presentation serves as the basis for this week's podcast.

The slides used for this presentation are available at http://www.edzollars.com/2008-06-16_Knocking.pdf .

The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

Step or No Step-Holman Case

Sun, 08 Jun 2008 13:53:00 +0000

This week we look at the step transaction doctrine and where the line is drawn when we deal with the application of the step transaction doctrine in the formation of a family limited partnership. The IRS attempted to use their victory in the Senda case to get the same result in the case we'll look at this week, Holman v. Commissioner, 130 TC No. 12. But in an opinion that reminds of the importance of the facts of the specific case in question, the Tax Court refused to take that step.

Materials for this week's podcast can be downloaded from http://edzollars.com/2008_06_09_Holman.pdf .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Poor Records Not Equated to Fraud

Fri, 30 May 2008 14:22:00 +0000

This week we look at a Court of Claims case that deals with an IRS examination and the imposition of the fraud penalty--a penalty the Court of Claims found was not justified. The case is the one of Gagliardi v. United States, 2008 TNT 98-20, and is instructive both in the outline of the law, as well as allowing us to consider the ways an examination like this could spin out of control and result in a taxpayer being assessed the fraud penalty in a case like this.

The materials can be downloaded from http://www.edzollars.com/2008-06-02_FraudandtheDentist.pdf.

The podcast is being uploaded a bit early this week since I'll be traveling Saturday to New Orleans for the AICPA's Spring Tax Division meeting held there Monday and Tuesday.

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

Not a Mere Technicality-SEP Disqualified

Sat, 24 May 2008 13:36:00 +0000

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.

Partnership Liabilities, Tax Shelters and Different Views of the Same

Sat, 17 May 2008 14:45:00 +0000

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 .

All IRS Employees Are Not Equal

Sat, 10 May 2008 22:19:00 +0000

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 .

Sloppiness and the Tax Shelter

Sun, 04 May 2008 21:38:00 +0000

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 .

Qualified Joint Venture and Memo on Self-Employment Tax

Mon, 28 Apr 2008 13:07:00 +0000

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 Mailbox Rule Comes Up Once Again

Sun, 20 Apr 2008 20:00:00 +0000

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.

Was it a Gift or Compensation? The Tax Court Knows

Wed, 16 Apr 2008 17:41:00 +0000

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 .

Upon Further Review-Self-Employment Tax Issues

Sat, 22 Mar 2008 23:28:00 +0000

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 .

CPA Says Error, IRS Says Accounting Method

Sun, 16 Mar 2008 14:41:00 +0000

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 .

Risky Business - LLC Debt Restoration Provision Fails to Provide At Risk Status

Sun, 09 Mar 2008 14:04:00 +0000

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 .

Safe Harbor for Section 1031 Exchanges

Sun, 02 Mar 2008 23:01:00 +0000

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 .

Not Quite Good Enough-Timely Filing One More Time

Sun, 24 Feb 2008 14:09:00 +0000

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 .

Transforming Rental Income to Self-Employment Income - Qualified Joint Ventures

Sun, 17 Feb 2008 13:40:00 +0000

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, located on the web at http://www.leimbergservices.com .

Economic Stimulus Package of 2008 (Tax Matters)

Sat, 09 Feb 2008 14:44:00 +0000

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 .

So You Want Your LLC to Be An S Corporation

Mon, 04 Feb 2008 09:00:00 +0000

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 .

A Capital Idea-But Not In the Eyes of the Court

Sun, 27 Jan 2008 12:23:00 +0000

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 .

Consenting to Disclosure or Use of Return Information

Mon, 21 Jan 2008 09:00:00 +0000

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 .

Knight Time for Investment Fees in Trusts

Thu, 17 Jan 2008 02:21:00 +0000

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 .

Economic Substance, Promissory Notes and Partnerships

Mon, 14 Jan 2008 09:00:00 +0000

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 .

Debt Relief, Recourse Mortgages and Tax Research

Mon, 07 Jan 2008 09:00:00 +0000

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 .

IRS's New View on §§6694 and 6695

Tue, 01 Jan 2008 14:01:00 +0000

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 Services, located on the web at http://www.leimbergservices.com .

Class Warfare in the Family (with an S Corporation)

Mon, 31 Dec 2007 07:00:00 +0000

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 .

End of Year Trifecta of New Tax Bills

Thu, 27 Dec 2007 23:56:00 +0000

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 .

Home is Where the Partnership Isn't

Wed, 26 Dec 2007 09:00:00 +0000

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 .

S Corporation Owner Health Insurance Deduction

Mon, 24 Dec 2007 15:35:00 +0000

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.

Washing Out a Loss-IRS Rules on IRA's Relationship to Section 1091

Sat, 22 Dec 2007 14:07:00 +0000

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 .

Rolling Changes: IRS Releases Two Revisions to Circular 230 10.34

Wed, 26 Sep 2007 21:53:00 +0000

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 .

Total Devastation-Damage to a Residence and Eligiblity for Section 121

Fri, 31 Aug 2007 12:44:00 +0000

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 .

North, to Alaska-Thompson, Valuation and Reasonable Cause

Sun, 26 Aug 2007 13:27:00 +0000

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 .

It Has to Be Something! Tax Court Penalizes Taxpayer for Sloppy Records

Fri, 20 Jul 2007 23:18:00 +0000

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 .

Home Equity of a Different Sort-Claiming Deductions for a Home the Taxpayer Doesn't Own

Sat, 14 Jul 2007 15:36:00 +0000

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.

Substantial Understatements—the Penalty under §6662(b)(2)

Mon, 09 Jul 2007 01:18:00 +0000

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.

The Value of Standards-SSVS No. 1 Released and the Impact on CPAs in Tax Practice

Wed, 04 Jul 2007 13:23:00 +0000

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 web at http://www.leimbergservices.com .

Section 6662(b)(1) Penalties on Client-A Review

Sat, 30 Jun 2007 15:41:00 +0000

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 .

Testing the Limits-The IRS Loses Statute of Limitations Case

Thu, 21 Jun 2007 13:02:00 +0000

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 .

Delay of Game-IRS Grants Temporary Relief For Section 6694(a) Changes

Sun, 17 Jun 2007 13:52:00 +0000

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 .

Into the Penalty Box-Updated Prepared Penalty Provision in New Law

Fri, 01 Jun 2007 23:15:00 +0000

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 .

Kiddie Tax Update: Correction to New Law Podcast

Tue, 29 May 2007 13:20:00 +0000

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 .

On Second Try-Tax Law Changes Come Back After Veto

Sat, 26 May 2007 00:47:00 +0000

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 .

Payment Encore: Liability of Taxpayer for Embezzlement by Payroll Service

Fri, 18 May 2007 18:06:00 +0000

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 .

It Depends-IRS Proposes New Divorced Parents Regulations

Wed, 09 May 2007 00:15:00 +0000

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 .

Home is Not Where the Heart Is-Section 162(a)(2)

Fri, 27 Apr 2007 23:08:00 +0000

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 .

Cost of Bad Practice: IRS Notice Implementing Monetary Penalties Under Circular 230

Tue, 24 Apr 2007 13:18:00 +0000

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.pdf

This podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

An Extension We Don't Want-Tax Preparer's Fraud Taints Return for Statute of Limitation

Sat, 10 Mar 2007 14:06:00 +0000

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 .

Credit Denied-IRS Attacks Partnership State Tax Credit Shelter

Sun, 25 Feb 2007 01:46:00 +0000

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 .

There's English and There's the IRC-Passive, Active Conduct and Carrying On

Sun, 18 Feb 2007 02:20:00 +0000

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 .

A Family Affair-Spouses and Medical Reimbursement Plans

Sat, 10 Feb 2007 13:59:00 +0000

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 following site:

http://www.mrexcel.com/excel2007tipcard.html

You'll the author of the above site also has a daily video podcast filled with Excel tips. Information about the podcast can be found at:

http://www.mrexcel.com/podcast.shtml

And, as you might expect, information about his offerings in general can be found at http://www.mrexcel.com .

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

The New and Improved Health Savings Account

Sat, 03 Feb 2007 00:29:00 +0000

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 .

But I Left it at the Hotel-The Late Filing Issue

Sat, 27 Jan 2007 17:38:00 +0000

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.

Literally Too Good To Be True-IRS Memorandum on Partnership Transaction

Sat, 20 Jan 2007 02:43:00 +0000

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.

Put on Notice-IRS Explains the Distribution Provisions in the Pension Protection Act of 2006

Sat, 13 Jan 2007 15:13:00 +0000

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 .

When Did That Happen? Options and Exercise Date?

Sat, 06 Jan 2007 23:42:00 +0000

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 .

Maybe Not Better Late Than Never-Mark to Market Election under Section 475(f)

Sat, 30 Dec 2006 21:12:00 +0000

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 .

Timing is Everything-IRS Issues Year End Expense Guidance

Sun, 24 Dec 2006 03:57:00 +0000

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 .

Giving Credit Where Credit is Overdue-Holiday AMT Gift

Sat, 09 Dec 2006 16:55:00 +0000

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 Dictionary vs. the Regulations-Active Participation in Retirement Plans

Sat, 02 Dec 2006 19:57:00 +0000

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 .

Close Doesn't Count-Accountable Plan Rulings

Sat, 25 Nov 2006 16:32:00 +0000

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 .

A Ringing in Your Ears-Telephone Tax Refunds and Businesses

Fri, 17 Nov 2006 19:07:00 +0000

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 .

To 83(b) or not to 83(b)-That is the Question

Sat, 11 Nov 2006 13:50:00 +0000

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 .

Sorry, But No Dice-Reliance Upon a Tax Professional Co-Administrator

Sat, 04 Nov 2006 01:00:00 +0000

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.