Salary Paid by IRA to Account Owner (Even Via LLC Owned by IRA) Deemed a Prohibited Transaction

In an emailed advice (CCA Email 200952049), a member of the IRS Chief Counsel’s office opined that an IRA owner that is paid a salary for services rendered to the IRA, even if paid via an LLC owned by the IRA, has participated in a prohibited transaction under §4975(c), even though §4975(d)(10) has a reasonable [...]

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Website that Keeps Percent of Charge Established by Artist When Selling Music Must Report Net Paid to Artist on Form 1099s

In email advice (CCA Email 200952048), the IRS Chief Counsel’s office ruled that the following structure would require reporting on Forms 1099 to the artist and has the potential for backup withholding.

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Noncorporate Interest Rate on Overpayments Applies If Employer Has Employee Consents and Applies for FICA Tax Overpayment For Employee

Different interest rates apply for overpayments of tax that are paid to corporations than those paid to other entities.  Generally under §6621(a) for other taxpayers, the rate is the short term AFR plus 3%.  For corporations, the adjustment to the short term AFR is 2% for overpayments less than $10,000, and 0.5% for those above [...]

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Purchase of State Tax Refund Treated as Purchase of Asset, Not Immediate Payment of Tax

Some states have begun programs where state income tax credits made available for one taxpayer can be sold to any other taxpayer.  Generally this structure allows the state to give a tax credit to the taxpayer in excess of the taxpayer’s state income tax liability without having to make the credit refundable.  In PLR 200951024 [...]

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COBRA Subsiday Extended and Expanded

In a year end attachment to the Department of Defense Appropriations Act of 2010, the Congress extended the COBRA premium assistance program.  The bill extends until February 28, 2010 the qualifying date for individuals who are involuntarily terminated through that date.  The cut-off date had been scheduled to be December 31, 2010.

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IRS Adds Inquiries to New Form 1065, Along With New Schedule B-1

The Form 1065 for 2009, while not being as radical a change as the one we saw when going to the 2008 1065 from the 2007 version, still has some new additions that indicate areas of IRS interest for partnerships.  The changes for 2009 include:

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Partnership Basis Is a Cumulative, Not Year By Year, Calculation

The Court of Federal Claims, in LeBlanc v. Commissioner, decided December 4, 2009, had to deal with the issue of partnership basis.
What does IRC §705(b) mean when it says, in computing partnership basis, that the amount will not go below zero?  The taxpayer in this case claimed that it means that a taxpayer’s basis gets [...]

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VEBA Cannot Avoid Limit on Exempt Function Income by Claiming Investment Income Went To Pay Benefits

This case, CNG Transmission Management VEBA v. Commissioner, was decided by the Court of Appeals for the Federal Circuit, sustaining the holding of the Court of Federal Claims.  The case was decided December 14, 2009
A VEBA was found to have taxable income on its investment income, even though it asserted that the amount, being less [...]

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Casualty Loss Deduction Allowed Where Driver Was Negligent, But Not Grossly Negligent

The case in question is Rohrs v. Commissioner, TC Summary Opinion 2009-190, issued December 10, 2009.
A taxpayer claimed a casualty loss deduction under §165 for damage to his vehicle incurred in a single vehicle accident.  However, he was found at the time of the accident to have a blood alcohol level of 0.09, slightly above [...]

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Cancellation of Policy When Loan Exhausted Cash Value Not Foregiveness of Debt, But Taxable Under §72

The case in question is that of McGowen v. Commissioner, TC Memo 2009-285, issued December 14, 2009.
The Tax Court rejected a taxpayer’s argument that her income from the cancellation of her life insurance policy that took place when her outstanding loans exhausted her cash value in the policy was income from the discharge of indebtedness.  [...]

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