Archive for January 30, 2014

Simplified Method for Estate Tax Portability Provided in Rev. Proc. 2014-18

The IRS has released a revenue procedure this week allowing taxpayers who fall below the threshold for having to file an estate tax return, but who want to claim the portability exclusion, a simplified method for getting an automatic extension of time to file.

Revenue Procedure 2014-18  provides an automatic extension of time for certain estates without a filing requirement to elect portability of the decedent’s unused exclusion amount for the benefit of the decedent’s surviving spouse. Those eligible must be decedents who were United States citizens, or residents who died after 2010 and before 2014, among other requirements.

The relief comes in response to many requests from taxpayers who may have been Read More

Written by | Posted in Estate Planning Tax • IRS

IRS Wins Tax Shelter Penalty Case And DOJ Going Back Into Cases Affected By The Decision

The United States Supreme Court agreed with the Internal Revenue Service and sustained the assessment of a 40% penalty against the taxpayer who invested in a 1990s tax shelter.

The decision, U.S. v. Woods, reversed a 5th Circuit opinion which held that the 40% penalty did not apply in sham partnership cases and declared the issue “well settled.”

The Woods’ case got to the Supreme Court to resolve a split between two circuits that found for the taxpayers in these type of case and other circuits that found for the IRS.  The issue involves the maximum income tax penalty that can be imposed on a tax shelter investor. More specifically, this decision resolved the issue concerning whether the penalty Read More

Written by | Posted in Partnership

Offshore Swiss Bank Account? This May Be Your Last Chance To File A Voluntary Disclosure!

The United States Justice Department has received 106 requests from Swiss entities to participate in a settlement program aimed at ending a long-running probe of tax-dodging by Americans using Swiss bank accounts according to a senior US official.

We first posted “Swiss Banks Agree to Plan to End Past US Tax Evasion Issues!” on August 29, 2013, where we discussed that Swiss banks were ready to pay hefty fines for sheltering United States tax fugitives under the terms of a new deal given the green light by the Swiss government.

Kathryn Keneally, a senior official of the United States DOJ’s tax division, said the department was ‘gratified’ by the response to the offer, although it does not expect that all Read More

Written by | Posted in OVDP

Israel/South Africa Expatriates Face Costly New Tax Rules

In terms of the Right of Aliyah doctrine (the right of every Jew to immigrate to Israel) every Jew going to or intending to go to Israel will be granted an Oleh’s visa. Oleh, for my colleagues not dealing with Israeli law (plural: olim) means a Jew immigrating into Israel. The Oleh Visa is granted by mere expression of the interest to “relocate” to Israel as a qualifying Jew (albeit born outside Israel after 1950).

A person shall not be registered as a Jew by ethnic affiliation or religion and will be denied Oleh Visa, despite being a Jew as defend, inter alia because of political status / activity (i.e. is engaged in an activity directed against the Jewish people or which is likely to endanger public health or the security of the state of Israel) or secondly, where a notification (issued under the Law of Return 5710-1950 as amended by Law of Return Read More

Written by | Posted in Africa • Europe, Middle East • Expatriate • Gift Tax • Individual • International • OECD • Specialty Tax Incentives • Tax Controversy • Tax Fraud/Evasion/Crimes • Tax Policy • Tax Provision/Tax Reporting

Basis and Depreciation: A Review for Tax Professionals – Part IV

Now that we have reviewed the items necessary to have in hand before you can start to calculate an asset’s depreciation, let’s review which of the uses of property would give rise to needing depreciation in the first place.

There can be some confusion between personal type property (real or personal) and personal-use property. Since, in most cases, personal-use property is not depreciated as it is used for personal and not business reasons, when we refer to “personal property” while talking about depreciation we are talking about personal type property that is business use.

For the most part, depreciation is taken on business use property. As mentioned above, Read More

Written by | Posted in Individual • Real Estate

Lifting The Veil On The Black Market Peso Exchange – Part I

The date is July 2, 1991. Piled upon rectangular tables are stacks of United States dollars. The stacks reach three feet high and completely cover the table’s surface. The tables extend from one side of the meeting room to the other, half the distance of a football field. The dollars make a level surface for most of the distance, except for the occasional hill, and a speaker’s podium in the center.

In front of the speaker’s podium on the ground, are bags stacked one upon another reaching higher than the tops of the tables. These bags bear the markings of the Federal Reserve and although nothing green can be observed, they leave no doubt that they are filled with United States currency. Read More

Written by | Posted in Federal • IRS • Treasury Regulations

Captive Cases Series – The IRS’ War on Captives; Humana, Part II

Below is an excerpt from my book on the Humana case. As an aside, if you get a bit confused by some of the terms used, you may want to go back and read some of the earlier posts on the captive cases.

Humana lost the trial case but filed a petition for reconsideration. The tax court withdrew its memorandum opinion and issued a full opinion after review by the 19-person court. The written opinion contains a 12-member majority opinion, an 8-person concurrence, a 2- member concurring and a 7-member dissent. The sole reason for Humana’s petition was to get a long opinion which the company could use for the basis of an appeal.

The court first notes the many captive cases heard before Humana that apply directly to Read More

Written by | Posted in Tax Risk Management

7 Habitual Mistakes Companies Make – Chapter 5 (13)

TaxConnections Blog Post
More Facts Resolve Tax Risks –
A Case of Skeletons in the Cupboard –

THERE ARE FREQUENTLY whispers in the corridors of power: “Can you believe we did that transaction eight years ago? If the authorities even join all the dots, many eyebrows will be raised and some heads may roll!”

This commentary, no matter how unfounded it might appear, cannot go unnoticed by the tax team and part of a Tax Risk Management strategy process. Nothing is more dangerous than unsubstantiated rumors which have a habit of metamorphosing into new convoluted versions as the years tick on. Confront these transactions. Read More

Written by | Posted in Tax Risk Management

Massachusetts Governor Announces Fiscal Year 2015 Budget Proposal

On January 22, 2014, Massachusetts Governor Deval Patrick announced his budget for fiscal year 2015. While much of the budget is focused on investments in infrastructure and education, those in the tax community will be particularly interested in the proposition to close tax loopholes the Governor has attempted to close in past years. Included among these loopholes, according to the summary, is a proposition to impose tax on the markup that online travel companies receive. Similarly, the budget proposes to apply the room occupancy tax on new forms of transient rental, such as apartments, condos, and homes. The budget seeks to close another loophole by applying the corporate tax rate to pass-through entities owned by insurance companies and security corporations.

The budget summary anticipates that closing these loopholes will raise $40 million but Read More

Written by | Posted in Tax Provision/Tax Reporting • United States

Swiss Continue To Cave In

Kathryn Keneally, assistant attorney general in the tax division at the US Department of Justice (DOJ) stated just a few days ago that 106 Swiss banks have already signed on to the Swiss-DOJ non-prosecution program (Program) announced at the end of August 2013. The Program is designed to encourage all Swiss banks to come forward and admit the role they played in assisting US persons to evade tax. Participating banks that meet all of the demands made by DOJ are eligible for non-prosecution agreements (employees and agents of the banks are not protected). Any Swiss bank that was already a target of US criminal investigation could not apply – 14 Swiss banks are ineligible under this provision.

The number of banks signing on to the Program (approximately one-third, as it was Read More

Written by | Posted in FATCA • FBAR

11 Questions To Ask When Hiring A Tax Preparer

The key, as with hiring any professional, is to ask questions. Lots of questions. And not just about pricing. Here’s a list of 11 questions that I recommend you ask a potential tax preparer:

1. Do you have a PTIN (preparer tax identification number)? This should be your first question. Anyone who prepares federal tax returns for compensation must have a valid 2014 PTIN before preparing returns. Without a PTIN, the preparer is not allowed to prepare your return – this isn’t something you want to find out at the end.

2. What is your tax background? A slew of letters following a name on a business card doesn’t necessarily mean more qualified. It can mean that the person has passed certain Read More

Written by | Posted in Individual

Voluntary Disclosure Program for Personal Income Tax Rolls through New Jersey

Effective December 3, 2013, New Jersey residents and non-residents may enter into a Voluntary Disclosure Agreement (“VDA”) with the New Jersey Division of Taxation (“Division”) for unfiled personal income tax. The VDA program is not available to anyone who is currently under criminal investigation, has been contacted by the Division for delinquencies or deficiencies, or is attempting to amend a previous individual return.

Requests to enter into a VDA must be in writing and contain the tax years at issue and the reason(s) for not filing. The Division reviews the VDA request and rejects or confirms the taxpayer’s request. When a taxpayer is granted a VDA, the Division waives the late filing and payment penalties for the years covered by the agreement. The taxpayer receives a 5% post amnesty penalty and must pay statutory interest. Upon completing all duties Read More

Written by | Posted in Income Tax • North America
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