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Tag Archive for Taxpayer

Year End Tax Points And Recent Developments

TaxConnections Member Harold Goedde
Timing of year-end contributions:

Contributions made by check are deductible in 2015 if the check is mailed by year-end. If payment is made by bank credit card, it is deductible in 2015 if the charge is made by year-end.  It doesn’t matter when the credit card payment is made. If the donation is made with a retail store credit card, the deduction cannot be taken until the card is paid, even though it was charged in 2015.

Donations of securities and other property:

This is an excellent way to make a contribution without paying cash. Taxpayers can deduct the fair value of the securities on the date of the gift.  Donating appreciated securities is a good move because if you sold the securities Read more

Transfer of Cross-Border Pensions To Your RRSP

Larry Stolberg - 11-19-15

Below is a CRA confirmation of this.

Numerous immigrants to Canada or those residing in Canada but have worked for say U.S. employers have entitlements to U.S. pensions such as 401K plans and in some circumstances they have U.S. IRAs. The Income Tax Act has provisions to allow transfers including a claim for any U.S. withholding tax or for applicable early withdrawal penalties.

Examination of both the U.S. and Canadian tax provisions should be dealt with before any transfer takes place to ensure the rollover is available in Canada.


TRANSFER OF SWISS PENSION TO AN RRSP Read more

§ 165(e) Loss Claimed On Theft of Money/Investment

Daniel Erasmus3

I am pleased to announce another successful settlement for a client.

IRS denied a big deduction based on a Ponzi type investment stating the taxpayer had claimed the deduction in the wrong year. It must be the year it came to his attention and only up to the amount lost especially if there is a chance to recover some in the future.

The matter was set to go to trial in Miami, but I reached agreement he would deduct 80% in the year the loss was claimed and 20% in the year in which there was certainty he had lost everything. That year is still open to claim the 20%. Protective filings were made by his accountant.

The turning point was making clear the evidence we would present to back-up the client’s claim. This convinced the Read more

TaxConnections Internet Tax Summit – Free Ticket

6-10-2015 11-17-29 AM
Go To This Link To Register For A Free Ticket To TaxConnections Internet Tax Summit>>>

https://www.taxconnections.com/internet_tax_summit

 

We have received many calls regarding TaxConnections Internet Tax Summit September 21-23rd 2015. For the very first time in history, we are inviting Tax Experts to educate taxpayers and businesses on very important tax issues most people have no knowledge of these days. The information we are receiving from leading tax experts is Read more

Application of Foreign Earned Income Exclusion to Civilian Contractors Working In Combat Zones – Part II

Safety helmet

This is Part II of a two-part blog series. After establishing that they have a tax home in a foreign country, taxpayers must still establish that they satisfy the 330 day physical presence test or the bona fide residence test. See IRC section 911(d)(1).

I. 330 Day Physical Presence Test

The 330 day physical presence test is the epitome of a “hard and fast rule.” To satisfy the test, the taxpayer must establish the following (there are “no ifs, ands, or buts about it”):

(1) That he is a U.S. citizen or resident of the United States, and

(2) That he was physically present in a foreign country or countries for at least 330 full days Read more

Application of Foreign Earned Income Exclusion to Civilian Contractors Working In Combat Zones – Part I

Safety helmet

This blog addresses the foreign earned income exclusion rules as they apply to civilian contractors, and other civilian employees, who work in foreign country combat zones. By “civilian,” I am specifically referring to individuals who are not employees of the United States or any agency of the United States.

I. IRC Section 911 Foreign Earned Income Exclusion

Let’s start with some basics. IRC section 911(a)(1) allows a “qualified individual” to exclude his foreign earned income and housing costs from gross income. In the same way that the foreign tax credit limitation limits the foreign tax credit to the amount of U.S. tax attributable to foreign-source income, IRC section 911(b)(2)(D) limits the amount of foreign earned income that may be excluded to an amount adjusted annually for inflation. Read more

Beware Of The Dark Side – Protecting Yourself From The IRS

TaxConnections Picture - Agent 1 - square

A Gallup Poll released in April 2014 found that two-thirds of Americans believe that the Internal Revenue Service abuses its power. Yet few people realize exactly how much arbitrary power the IRS has through the Courts and the Laws of the United States.

Remember that the IRS like any government agency has a purpose to enforce the laws and like other government agencies the IRS will use all means available to achieve this purpose. For one thing the IRS will conduct undercover operations sometimes even masquerade as professionals to entice other citizens to violate tax laws.

The most common and for many people most cartographic use of power by the IRS is levying bank accounts, paychecks and other sources of income. Unlike a typical creditor, Read more

Taxpayer Awarded Attorneys’ Fees Where IRS Refuses to Reverse Math Error

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A taxpayer was entitled to attorneys’ fees because the IRS wasn’t substantially justified in refusing to abate an assessment attributable to an invalid change in filing status.

U.S. Tax Court Judge Buch says the IRS was required to abate an assessment that it made under Section 6213 as resulting from a mathematical or clerical error but was based on its changing taxpayer Michael Swiggart’s filing status from head of household.

The IRS wasn’t substantially justified in requiring Swiggart to prove head of household status when he had timely requested an abatement under Section 6213, Buch says.

Background

On May 19, 2011, Mr. Swiggart filed a 2010 Form 1040, U.S. Individual Income Tax Return. Read more

Captive Cases Series – Case Law Conclusions: The Harper Test and Corporate Substance

risk-umbrella

The third prong of the Harper Test is “whether the arrangement was for “insurance” in its commonly accepted sense.” The case provides further guidance in this paragraph:

Rampart was both organized and operated as an insurance company. It was regulated by the Insurance Registry of Hong Kong. The adequacy of Rampart’s capitalization is not in dispute. The premiums charged by Rampart to its affiliates, as well as to its shippers, were the result of arm’s-length transactions. The policies issued by Rampart were valid and binding. In sum, such policies were insurance policies, and the arrangements between the Harper domestic subsidiaries and Rampart constituted insurance, in the commonly accepted sense. Read more

Captive Cases Series – Case Law Conclusion: The Need For A Valid Business Purpose

risk-umbrella

In looking at the cases, a few points immediately become apparent.

First, all the captives that were challenged by the Internal Revenue Service4 were formed because of business necessity. They are all great examples of the business purpose test outlined in the Frank Lyon case, where has the following factors:

1. there is a genuine multiple-party transaction

2. with economic substance that is

3. compelled or encouraged by business or regulatory realities,

4. that is imbued with tax-independent considerations, and Read more

Captive Cases Series – Case Law Conclusion: The Harper Test, Part I: What Is Insurance?

risk-umbrella

Today, I want to turn to the Harper Test, which states that a captive must comply with the following three factors:

(1) whether the arrangement involves the existence of an “insurance risk”;

(2) whether there was both risk shifting and risk distribution; and

(3) whether the arrangement was for “insurance” in its commonly accepted sense.

I’ve already discussed the idea of risk shifting and risk distribution. For the next few posts, I want to focus on factors 1 and 3, starting with one, that the arrangement involves the existence of an “insurance risk.” Read more

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

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Analyzing UPS’ situation before and after it established the captive, the tax court noted that UPS performed all the work related to the EVCs before and after the transaction:

Before January 1, 1984, petitioner performed all the functions and activities related to the EVC’s and was liable for the damage or loss of packages up to their declared value. After January 1, 1984, petitioner continued to perform all the functions and activities related to EVC’s, including billing for and receiving EVC’s, and remained liable to shippers whose shipments were damaged or lost while in petitioner’s possession. Petitioner continued to receive shippers’ claims for lost or damaged goods, investigate and adjust such claims, and pay such claims out of the EVC revenue that it had collected from shippers. The difference between petitioner’s EVC activity before and after January 1, 1984 was that after Read more

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