The first steps…

The first steps to Building your Client’s Financial Foundation

 Is your client’s financial foundation stable? While most of us prefer to discuss investment strategies initially, a very important precursory step needs to occur first. A solid financial foundation enables individuals and families to create security in which to build upon. The three most important components to a solid financial foundation are present financial situation, cash reserves and adequate protection.

Transaction Treated as Sale of Stock, Built-In Gain Tax Triggered

A taxpayer found that the transaction he entered into to attempt to delay gain recognition to get outside the built-in gain period of his S corporation failed to succeed in the case of Anschutz Company v. Commissioner, 135 TC No. 9.

IRS Held Liable for Fees When Agent Failed to Consult IRS Copy of Return

A failure of the IRS to consult their own copy of the tax returns filed by the taxpayer for prior years was held sufficient in Burgess v. Commissioner, TC Summary Opinion 2010-98, to grant the taxpayer a partial award of fees.  The examination in question began in April 2007 and was concluded with the issuance of a notice of deficiency in September 2007.  The taxpayer had been delinquent in filing tax returns for a number of years.

Being Too Busy With Other Financial and Tax Matters to Remember a Rollover Not Good Enough to Get Relief

In PLR 201029025 the IRS refused to grant an extension of time to make a rollover of a distribution from a retirement plan beyond 60 days for a taxpayer who simply had such a complex financial and tax situation occurring at the time of the transaction that he failed to note the funds did not end up being transferred to an IRA within 60 days of the distribution.

How Does Someone Become a Great Leader?

After reading Gary Cohen’s Just Ask Leadership: Why Great Managers Always Ask the Right Questions, I discovered the answer was simple: just ask. Well, it may not be that simple, but it sure is a great start.

Appraisal for Conservation Easement That Relied on Discount Based on Tax Court Decisions Found Fatally Flawed

The issue was the taxpayer’s appraisal report in the case of Scheidelman & Perry v. Commissioner, TC Memo 2010-151.  Because the appraisal failed to meet the standards for a qualified appraisal, the taxpayer lost the entire charitable deduction claimed for a conservation easement

Marriage Costs Couple Two Homebuyer Credits

The IRS often gets asked by the offices of various members of Congress to write explanatory letters which they can then forward to their constituents asking about various issues.  Amusingly, most often the letters are simply explaining why the bad result exists primarily due to how the law is written (meaning very often what their elected representative voted for).  A recent letter in response to an inquiry of Congressman Zach Wamp of Tennessee points out a quirk in the homebuyer credit (INFO 2010-0117).

Whether Land on Building Was Owned or Leased Held to Determine If Transactions With Landlords Were Sales

In Technical Advice Memorandum 201027045, the IRS Chief Counsel’s office determined that the issue of whether a taxpayer owned the land on which it constructed buildings would determine whether or not its transfers of buildings would be treated as sales. The taxpayer in the case was a retailer who had two methods of building stores and paying for the construction under consideration. In most cases the retailer acquired land, built a building on the land and then sold the property to a third party to lease it back under an initial 22 year term with the right to extend the lease for two separate ten year periods at substantial rents.

Tax Implications of the Validity of the Defense of Marriage Act In Light of the Gill Decision

Shortly after the IRS issued revised guidance dealing with the recognition of community property rules for California domestic partners, a District Court in Massachusetts held in Gill v. Office of Personnel Management that the federal Defense of Marriage Act Section 3 which, for federal purposes, limited recognition of marriages to those between a man and woman, violated the United States Constitution. While this decision is almost certainly not the final word in the matter, the issue does have federal tax implications for any same sex couples who have a legally recognized marriage from the minority of states that allow such marriages-and it’s an issue a tax preparer has to resolve when preparing any return for such individuals.

Tax Court Decides Taxpayer’s Foundation, with an Unusual Mission, Did Not Qualify for §501(c)(3) Status

The Tax Court ended up having to decide one of the more unusual cases of the year in the case of Free Fertility Foundation, 135 TC No. 2. The Foundation was established by William Naylor to provide his sperm, free of charge, to women looking to become pregnant via artificial insemination or in vitro fertilization. Mr. Naylor was protesting the IRS denial of his application for the Foundation to be treated as a private operating foundation under §501(c)(3).