A few weeks ago (back in April) we looked at the case of Ruckreigel where a taxpayer lost an IRS challenge on whether a debt was truly from the shareholders to the corporation due to a failure to follow the necessary formalities.  This week, the taxpayers strike back with a taxpayer victory in the case of Miller v. Commissioner (TC Memo 2006-125) where the IRS fails in its attempt to reclassify debt that followed the proper form but which the IRS attempted to claim was really debt from the bank to the corporation.

The taxpayer achieved victory on this point and the issue of whether the taxpayer was truly at risk as defined in Section 465, even though when all was said and done the taxpayer got out of all liability as the debt was actually paid by other investors who had guaranteed the entire loan structure.  This is an interesting case in showing the extreme importance of following proper form because, from an economic standpoint, the taxpayers in Ruckreigel seem to have much real exposure to potential loss than Mr. Miller actually ended up having, but he got his deduction.

The materials can be downloaded from http://edzollars.com/2006-06-23_S_Debt.pdf.

This podcast is sponsored by Leimberg Information Services, Inc., on the web at http://www.leimbergservices.com.

Another Circuit chimes in on the issue of the FICA taxation of payments made in exchange for tenure rights as part of an early retirement package offered to teachers.  In a combined appeal of two contradictory opinions of lower courts under their jurisdiction, the Sixth Circuit upheld the lower court's finding in favor of FICA taxation in Appolini and reversed the opposite lower court holding in Klender, both cases that involved early retirement payments to teachers subject to Michigan's tenure law.

The Sixth Circuit, in a 2-1 split decision, specifically called into question the Eigth Circuit's holding in North Dakota State University where payments for professor's tenure rights were held not to be subject to FICA.  We look at why the majority believes the North Dakota holding was in error, as well the reasoning behind the dissenting opinion.  As well, we consider the IRS changes to Revenue Rulings in this area, as well as how the courts dealt with the prior rulings that were applicable to these cases.

The materials can be downloaded at http://edzollars.com/2006-06-17_FICA.pdf.

The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com.

The IRS on May 15 issued a "Headliner" on their website directed at tax professionals that attempted to explain the treatment of policies purchased by a single employee shareholder of an S corporation in the shareholder's own name.

In this podcast we look at the headliner, and consider whether Revenue Ruling 61-146 offers an option that solves the problem this ruling points out.

The materials can be downloaded at http://edzollars.com/2006-06-10_Medical_S_Corporation.pdf.

The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com.

A special podcast this week of interest to practitioners (and their clients) who bulk filed paper extensions with the Fresno Service Center.  The IRS recently admitted to a mistake in processing extensions received in Fresno.

Materials for the podcast, including two IRS releases on this issue, can be downloaded from http://edzollars.com/2006-06-04_Fresno_4868.pdf.

The podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com.

Divorce settlements at times are frustrating for tax preparers to work with, since they often leave dangling the issue of whether payments were or were not intended to be alimony and, not surprisingly, the former spouses may have very different views on that issue.  In this week's case, the Tax Court was forced to settle the issue after lecturing the warring spouses in his opinion about how the issue should have been taken care of well before this point.

The case in question is the case of Johanson and Melzig v. Commissioner, TC Memo 2006-105.  You can download the materials from http://edzollars.com/2006-06-02_Alimony.pdf.

This podcast is sponsored by Leimberg Information Services, on the web at http://www.leimbergservices.com.