Two days, two revisions:  the IRS on September 25 issued proposed regulations to revise Circular 230 §10.34, and the next day finalized regulations that also made changes to the same provision (among others).  We take a look at both sets of changes, and their impact on tax practice.

The materials can be downloaded from http://www.edzollars.com/2007-09-26_Circular_230.pdf .

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

The IRS released a Chief Counsel Advice (CCA 200734021) that dealt with how to interpret the language found in Section 121(d)(5) that, in certain cases, will allow a taxpayer to treat a residence that is destroyed as if it were sold for purposes of ignoring up to $250,000/$500,000 of gain under Section 121(a).

The materials for this week's podcast are found at http://www.edzollars.com/2007-09-01_Residence.pdf .

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

The Second Circuit Court of Appeals decided that the Tax Court had been too quick to dismiss a penalty under §6662 in the Estate of Thompson, decided last week, but that the Court was not forced to accept the taxpayer's valuation when it rejected the IRS's own expert's valuation even if the Court had decided the burden had been shifted under §7491.

The materials for the podcast are available at http://www.edzollars.com/2007-08-26_Estate_Tax_Value.pdf .

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

We once again revisit the Cohan rule, but this time in the context of a much larger taxpayer than we normally look at, in the case of Tyson Foods, Inc and Subsidiaries vs. Commissioner, TC Memo 2007-188.  The taxpayer's was attempting to argue, based on Cohan rationalization, that they should be able to depreciate a $2,000,000+ debit remaining on their books after making an agreed upon adjustment under IRS exam.  The IRS (and eventually the Tax Court) did not agree that such a treatment should be allowed.

The materials for the case are at http://www.edzollars.com/2007-07-21.pdf .

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

Equitable ownership of a home can grant a taxpayer a deduction for mortgage interest and taxes even when the taxpayer is not the legal owner.  While the taxpayer in the case of Nair v. Commissioner, TC Summary Opinion 2007-116, did not have such ownership, the opinion does outline the requirements a taxpayer would need to demonstrate to have such equitable ownership.

As well, Mr. Nair's failed attempt to obtain a casualty loss deduction also offers some insights into the issue of establishing basis for items that are involved in a casualty loss deduction.

The materials for the podcast can be downloaded from http://www.edzollars.com/2007-07-15.pdf.

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

We finish up the look at §6662, this time looking at the substantial understatement penalty, as well as the exceptions to this penalty.

The material for this week's podcast can be downloaded from http://www.edzollars.com/2007-07-09_Substantial_Understatements.pdf.

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

For Independence Day we take a look at a new set of standards released by the American Institute of CPAs' Consulting Services Executive Committee that will take effect for engagements entered into after January 1, 2008.  The Statement on Standards for Valuation Services No. 1, Valuation of a
Business, Business Ownership Interest, Security, or Intangible
Asset can have an impact on tax practice where the value of an asset covered by this standard has an impact on a tax issue. 

CPAs will need to be aware of when this standard may become applicable and the options when that might take place.  Those that work with CPAs in tax practice, include tax attorneys who are working with the client's CPA, need to be aware of this change and the impact of this standard on both what the CPA can do and the cost of having the CPA perform certain functions.

The materials for this podcast can be downloaded from http://www.edzollars.com/2007-07-04_SSVS.pdf .

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

Given that in both the changes to Circular 230 paragraph 10.35 back in 2005 and the recent revisions to Section 6694, it seems appropriate to review the penalties that can be imposed on a taxpayer under this section, a section whose outlines of level of comfort in a position have borrowed in revising both of those provisions. 

This week we look at §6662(b)(1)'s negligence and disregard of rules and regulations penalty, planning to look next at the substantial understatement provisions of §6662(b)(2). 

The materials for this podcast can be found at http://www.edzollars.com/2007-06-29_Client_Side_Penalties.pdf .

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

This week we look at recent cases where the IRS lost a statute of limations case.  In the case of Bakersfield Energy Partners, LP, 128 TC No. 17, the question was whether an overstatement of basis used in computing a Section 1231 gain could result in omission from gross income that triggers the six year statute of limitations under §6629 and §6501.   The Tax Court decided the answer was no.

The materials can be downloaded at http://www.edzollars.com/2007-06-22_Limits.pdf .

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

The IRS this past week issued Notice 2007-54 which grants partial relief from some of the changes made to the preparer penalties under Section 6694(a), delaying full implementation of the provisions until next year.  We discuss the extent of the relief granted, as well as some of the reactions to this change that I've noticed in online discussion groups.

The materials for this podcast, including the above notice, can be found at www.edzollars.com/2007-06-15_Delay_of_Game.pdf .

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

We further analyze the new law, this time looking in detail at the preparer penalty provisions and the change in the trigger for where the preparer penalty under Section 6694(a).

The materials are available at www.edzollars.com/2007-06-02_Preparer_Penalty.pdf .

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

Kaye Thomas emailed me with an observation regarding one issue in the new law.  It turns out that though prior drafts of the bill and the Joint Committee's report on the bill indicated expanding the general rule on the Kiddie Tax one more year, that provision is not included in the final bill.  Rather, only the "student" provision is added to the bill.

The materials have now been updated, and can be downloaded from the original link at http://edzollars.com/2007-05-25_New_Law.pdf .

The new Congress has passed its first major tax bill with changes that are meant to grant relief to small businesses, but which also have revenue raisers that will impact a number of clients.  The President has indicated he will sign the bill, so over the Memorial Day weekend we can all read up on the new law to start our summer.

The materials are available for download at http://edzollars.com/2007-05-25_New_Law.pdf .

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

We look at the recent case of Pediatric Affililates, P.A., (2007-1 USTC ¶50,477) where the Third Circuit Court of Appeals upheld the U.S. District Court of New Jersey's determination that the taxpayers were liable for unpaid payroll taxes that their payroll service had walked off with.  The case is instructive for the types of responsibilities under the tax law a taxpayer is unable to delegate to a third party.

The materials can be downloaded at www.edzollars.com/2007-05-18_Payroll_taxes.pdf .

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

This week we look at Proposed Regulations under Section 152 to clarify the treatment of divorced parents, regulations that would both serve to document what has developed under the current temporary regulations and case law and add some new quirks-including the ability to revoke a waiver that was to apply to a future year by the custodial parent.

The materials for the podcast can be found at http://www.edzollars.com/2007-05-08_Dependent.pdf . 

And that noise you hear jingling in the beginning of the podcast is my cat deciding to walk in the room at the beginning of the podcast and the tags on his collar.

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

A taxpayer without a regular place of business can still obtain a deduction for travel away from home if the taxpayer can establish that he/she has a home.  In two cases (Jason Ayala v. Commissioner and Manuel Ayala, Jr. v. Commissioner) the taxpayers failed to show they had a home and lost the deduction.  But the IRS also failed in its attempt to assess a negligence penalty on these taxpayers.

The materials for the podcast can be downloaded from http://www.edzollars.com/2007-04-27_Home.pdf .

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

The IRS on April 23 released guidance on the application of monetary penalties to practitioners, their employers, firms and related entities for violations of Circular 230 as authorized by the American Jobs Creation Act of 2004.  This guidance gives some insight into the IRS’s views on how they will make use of this new enforcement tool, as well as some indication of what the IRS might view as an appropriate quality control system for a tax practice.  If, as expected, SSTS No. 9 goes from an exposure draft to a final standard for CPAs, this document may be one to consider when a CPA firm sets out its tax quality control standards.  And given the existence of the “aspirationalâ€? standard for best practices in Circular 230 Section 10.33, the importance of SSTS No. 9 may not be limited to CPAs.

The materials for this podcast can be found at

http://www.edzollars.com/2007-04-24_Monetary_Penalties.pdf

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

When Section 6501(c) refers to a false and fraudulent return, does the IRS need to show that the taxpayer was involved in the fraud to get the benefit of the unlimited statute of limitations to assess tax?  Or is it enough to show only that the preparer was involved in preparing a false return with the intent to evade tax on behalf of the taxpayer?  That's the issue the Tax Court considered in the case of Allen v. Commissioner, 128 TC No. 4.

The supporting materials for this podcast can be downloaded from http://edzollars.com/2007-03-10_Preparer_Fraud.pdf .

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

The IRS has again issued guidance indicating their displeasure with a marketed shelter that promises benefits via the literal application of partnership provisions in the IRC.  In CCA 200704028 the IRS outlines both the shelter that was marketed that claimed the magic of returning most of the investment via a credit against state taxes and then a capital loss deduction for the investment for federal tax purposes as well.  The IRS outlines three separate rationales for disallowing the claimed treatment.

The materials for the podcast can be downloaded from http://edzollars.com/2007-02-24_Credit_Denied.pdf .

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

Congress doesn't necessarily make the law work as consistently as practitioners want it to work.  This week we look at four different provisions in the Internal Revenue Code and their somewhat different view on whether "enough" is being done to get a tax benefit--for Sections 469, 179, 1362/1375 and 1402.

The materials for the podcast can be found at http://edzollars.com/2007-02-17_Passive.pdf .

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

Back in February of 2006, I did a podcast on medical reimbursement plans and went over the Speltz case where the taxpayer prevailed in a medical reimbursement plan provided for her husband who worked for the taxpayer’s daycare business as an employee.  That was a case where the taxpayer kept excellent records and truly kept track of all the necessary details.  This week the Tax Court gave opinions in two cases where taxpayers were not as meticulous with such plans—and the results were not nearly as good.

We look at the cases of Snorek v. Commissioner, TC Memo 2007-34 and Francis v. Commissioner, TC Memo 2007-33 for taxpayers who adopted medical reimbursement plans but found that there was more to sustaining the deduction than just doing that.

The materials for this week’s presentation can be downloaded from

http://edzollars.com/2007-02-17_Medical.pdf

I also discuss my early experiences with Microsoft Vista, Word 2007 and Excel 2007.  I also reference a tipcard for Excel 2007 you can get from the following site:

http://www.mrexcel.com/excel2007tipcard.html

You’ll the author of the above site also has a daily video podcast filled with Excel tips.  Information about the podcast can be found at:

http://www.mrexcel.com/podcast.shtml

And, as you might expect, information about his offerings in general can be found at http://www.mrexcel.com .

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

Congress passed a number of incentives in the Tax Relief and Health Care Act of 2006 meant to make Health Savings Accounts (or HSAs) more attractive to taxpayers.  We'll take a look at the provisions this week and consider their impact on our clients.

The materials for the podcast can be downloaded from http://edzollars.com/2007-02-03_HSAs.pdf .

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

We look at the case of a traveler who got bitten when she attempted to make use of the hotel to get a package picked up by a private delivery service-a package that happened to contain her petition to the Tax Court which she was filing on the last day available.  When the delivery service reported picking up the package the following day, the IRS argued that she had blown her chance to file in Tax Court--and the Tax Court agreed.

The case is Austin v. Commissioner, TC Memo 2007-11 and the materials can be downloaded at http://edzollars.com/2007-01-27_Late_Filing.pdf.

We also discuss the IRS announcement this week that 2006 returns won't be due until April 17 due to April 16 being a city holiday in the District of Columbia and its impact at the state level, and this week's release by Microsoft of the consumer version of Windows Vista and Office 2007.

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

This week we look at an IRS memorandum that argues against the position taken by a taxpayer arguing that his transaction literally complies with Section 731 and 732.  The IRS argued that the transaction, which involved the partnership acquiring a residence for the partner to redeem his interest, actually represented the equivalent of a distribution of cash followed by the purchase of the house--a transaction that would have triggered a significant taxable gain.

The materials for this podcast can be downloaded from http://edzollars.com/2007-01-20_Literally_Too_Good.pdf .

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

The IRS has issued Notice 2007-7 that explains the distribution provisions in the Pension Protection Act of 2006.  In the podcast, we look at some of he provisions contained in this notice that would be of special interest to advisers of closely held businesses and their owners.

The materials for the podcast can be downloaded from http://edzollars.com/2007-01-12_IRS_PPA_Notice.pdf .

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

Sometimes life just doesn't seem fair.  Like when you exercise stock options from your former employer, and the stock price drops 20% from the date you told your employer to exercise the options until just a few days later.  And, even worse, at the last minute you revoked instructions to your former employer to immediately sell the shares upon exercise and instead decided to hold the shares.  In this case, the taxpayer attempted to salvage something from this by arguing that the later date was the measuring date for the compensation value since that was the date that the employer actually received the funds for the shares.

This is the story we look at in the case of Walter v. Commissioner, TC Memo 2007-2, a story that doesn't have a happy ending for the taxpayer.

The printed materials are found at http://edzollars.com/2007-01-06_Options.pdf .

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

The mark to market election under Section 475(f) can have a major impact for individuals that were unsuccessful in their attempt to become a day trader-which turns out to be the majority of those who try.  However, the election has rather strict requirements on when the election must be filed, and as the taxpayer in Knish v. Commissioner, TC Memo 2006-268, learned as he tried to unsuccessfully argue for the validity of his election filed 18 months after the date that Revenue Procedure 99-17 required it have been filed.

The materials for this podcast can be downloaded at http://edzollars.com/2006-12-31_Mark_to_Market.pdf .

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

This week the IRS decided to send a warning to accrual basis taxpayers that the IRS has some very specific ideas on the proper application of the recurring item exception.  We look at Revenue Ruling 2007-3 and the issues it raises for deductions on contracts entered into near year end.

The materials for this podcast can be downloaded from http://edzollars.com/2006-12-23_Accrued_Expenses.pdf .

The podcast is sponsored by Leimberg Information Services .

Congress got around to passing the extenders in the Tax Relief and Health Care Act of 2006 early on Saturday morning, which picked up a number of the items that expired at the end of 2005 and had not yet been extended.  One provision added in the bill gives relief to individuals who have old, unused minimum tax credit which is discussed in this podcast.

The materials can be downloaded at http://edzollars.com/2006-12-09_Giving_Credit.pdf .

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

The issue of whether an individual is or isn't considered an active participant in a retirement plan can be complex, as the taxpayer found out in the case of Colombell v. Commissioner, TC Summary 2006-184.  As the taxpayer discovered, the mere fact she was not earning any benefit under the plan (nor was she likely ever to do so) did not mean she was not an active participant, as the regulations define that term.

The materials can be downloaded from http://edzollars.com/2006-12-02_Participant.pdf .

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