Many people who lost money in Ponzi schemes are later told by a bankruptcy trustee that they were “net winners” and are required to pay back past withdrawals to be redistributed to the larger pool of victims.
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TOPICS / INDIVIDUALS
Income
Taxpayers Not Insolvent for Purposes of Sec. 108 Exclusion
The Tax Court held that a married couple had failed to prove the FMV of their two homes and the husband’s pension and thus could not prove they were insolvent.
Guidance Issued on Employee Expense Reimbursement Arrangements
The IRS issued guidance on situations in which employers recharacterize wages as nontaxable reimbursements and whether they met the requirements to be treated as paid under an accountable plan.
Deducting Losses on Worthless Investment Securities
Understanding the rules for deducting losses on worthless securities is necessary to determine the correct timing of the loss deduction.
Determining Tax Consequences of Corporate Liquidation to the Shareholders
Under Sec. 331, a liquidating distribution is considered to be full payment in exchange for the shareholder’s stock, rather than a dividend distribution, to the extent of the corporation’s earnings and profits.
IRS Issues Sample Text for Sec. 83(b) Election
The IRS released sample language for making a Sec. 83(b) election to include property received in connection with the performance of services in income in the year the property is received even if there is a substantial risk that the property will later be forfeited.
Taxability of Employer-Provided Educational Assistance
There are four distinct circumstances in which employer-provided educational assistance is nontaxable.
Taxation of Frequent Flyer Miles
A benefit has only lately received attention after flying under the radar for many years: tax-free receipt of frequent flyer miles.
Sec. 83 Substantial Risk of Forfeiture Clarified
The IRS issued proposed regulations that would clarify when a substantial risk of forfeiture exists on the transfer of stock to an employee that is treated as compensation under Sec. 83.
Proposed Regs. Would Clarify Who Is Subject to Sec. 274(n) Limit on Meal Expenses
The IRS released proposed regulations clarifying which party is subject to the rule that limits the deduction for meals to 50% of the expenses incurred.
Taxpayers Who Did Not Establish Insolvency Must Recognize COD Income
Taxpayers who settled a credit card debt for $4,412 less than they owed in 2008 had to include that amount in income because they did not prove they were insolvent under Sec. 108(a)(1)(B) at the time of the debt discharge (Shepherd, T.C. Memo. 2012-212). Sec. 108(a)(1)(B) excludes cancellation of debt
Federal Income Tax Treatment of Certain Transferable State Tax Credits
The emergence of online marketplaces and auction houses has provided a single point of contact for both sellers and buyers, making sales and purchases of transferable state tax credits more common.
Taxing the Transfer of Debts Between Debtors and Creditors
Assumptions and other transfers of debt between corporations and shareholders or between partnerships and partners can often be tax free as part of a contribution, distribution, reorganization, or liquidation. This article analyzes several types of debt transfers and their potential for recognition of gain or loss and income from cancellation of debt.
Sample Text for Sec. 83(b) Election Released by IRS
The IRS released sample language for making the Sec. 83(b) election and examples of the amount of income taxpayers would recognize if they made the election.
A Road Map of Tax Consequences of Modifying Debt
As a result of the recession, many borrowers are “underwater” on their loans (the property is worth less than the loan balance). This has led to a substantial increase in debt restructuring activity.
Prop. Regs. Clarify Meaning of “Substantial Risk of Forfeiture” Under Sec. 83
The IRS issued proposed regulations that would clarify when a substantial risk of forfeiture exists on the transfer of stock to an employee that is treated as compensation under Sec. 83.
Farm Debtors Must Pay Capital Gain Tax in Full, the Supreme Court Holds
The U.S. Supreme Court ruled that farmers who sold farm assets during a bankruptcy reorganization under Chapter 12 of the Bankruptcy Code were liable for the full amount of the capital gains tax that resulted from the sale
Cost-Basis Reporting, the New Schedule D, and Form 8949
The 2011 tax filing season ushered in the first phase of new basis reporting rules requiring a three-phase process for submitting cost-basis information to the IRS.
IRS Issues Foreign-Targeted Bond Guidance
The IRS issued interim guidance on registration of foreign-targeted bonds and provided transitional relief for withholding agents on the related portfolio interest exception.
Individual Taxation Developments
This article covers recent developments affecting individual taxation. The items are arranged in Code section order
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
