For purposes of determining whether there had been a substantial understatement of gross income on a taxpayer’s return, the IRS determined that amounts on a Form 1120S filed after the three-year statute of limitation expired, were not considered to be disclosed on a taxpayer’s Form 1040.
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TOPICS / INDIVIDUALS
Income
IRS Releases Draft Net Investment Income Tax Form
The IRS released a draft of Form 8960, a new dual-purpose form that will be used by individuals and trusts and estates to compute the new 3.8% net investment income tax.
Planning for the “Parallel Universe” of the Net Investment Income Tax
This article examines how to determine the new surtax on net investment income that, like alternative minimum taxable income, effectively creates another tax base in addition to taxable income.
AICPA Recommends Changes to Net Investment Income Tax
The AICPA submitted comments to the IRS recommending many changes to the proposed regulations on the new net investment income tax.
Sec. 108(e)(2) and Debt That Would Give Rise to Basis
A taxpayer is not required to recognize taxable income for the discharge of a liability when payment of the liability would have given rise to a tax deduction.
When Net Means Gross, and Other Things Hedge Funds Should Know for 2013
Investors in hedge funds may be subject to higher federal tax rates and the new 3.8% net investment income tax (also known as the unearned income Medicare contribution tax) in 2013.
Interest on Residential Property Debt Not Deductible as Investment Interest
The Tax Court held that taxpayers who purchased a residence with the intention to treat part of the tract as investment property could not deduct any of the interest on indebtedness as investment interest.
New Sec. 1411 Brings Difficulty Defining Real Estate “Trade or Business”
The proposed regulations under Sec. 1411 do not provide a definition of “trade or business” for taxpayers engaged in rental real estate activities and thus potentially subject to the tax on net investment income on income from these activities.
Sec. 1202: Small Business Stock Capital Gains Exclusion
Sec. 1202 provides an opportunity for investors to make investments that could qualify for a full federal income tax exemption on a subsequent sale.
Basis Reporting for Debt Instruments and Options Is Phased-In
Final regulations implementing the basis reporting requirements under Sec. 6045(g) phase in the reporting requirements for debt instruments and transfer reporting.
3.8% of What? An Overview of the Net Investment Income Tax
Thee IRS issued proposed regulations for the net investment income tax under Sec. 1411 that went into effect on Jan. 1, 2013. At the same time, the IRS released a list of frequently asked questions concerning the net investment income tax.
The 3.8% Medicare Tax Proposed Regulations: Guidance or More Questions?
This item discusses provisions addressed in the 3.8% Medicare tax proposed regulations pertaining to the definition of business income as net investment income, grouping of activities, and treatment of the sale of S corporation stock and partnership interests.
Flight Attendant Cannot Claim Foreign Earned Income Exclusion for Wages Earned in International Airspace and U.S.
The Tax Court held that a flight attendant who was a resident of Hong Kong and a U.S. citizen could not claim 100% of her wages were excludable under the foreign earned income exclusion.
Developments in Individual Taxation
This article covers recent developments in individual taxation. The items are arranged in Code section order.
2013 Automobile Depreciation Limits Released
The IRS on Monday issued the 2013 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F.
Prop. Regs. Govern 3.8% Net Investment Income Tax
The IRS released proposed regulations governing the 3.8% net investment income tax imposed under Sec. 1411.
Payments to Taxpayer Held to Be Compensation, Not Distributions
The Eleventh Circuit held that payments made to a taxpayer by limited partnerships that he controlled but did not own an interest in were compensation reportable on Schedule C, not partnership distributions.
Activity Grouping: The Impact of Recent Developments
Activity grouping is an often overlooked or misused component of tax strategy and compliance, and with the issuance of Rev. Proc. 2010-13, the importance of getting it right has increased.
IRS Not Allowed to Reclassify Passive Activity Income
The Tax Court held the IRS could not reclassify the taxpayer’s income from the rental of cellphone towers and the land they were situated on to his wholly owned S corporation as nonpassive income under the self-rental rule.
Tax Treatment When Employees Surrender Paid Time Off to Benefit Others
There are various types of PTO donation and leave-sharing programs, not all of which are disaster-related. The tax treatment to the donating employee differs based on the type of program.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
