Source: http://www.carnahanlaw.com/news-and-miscellaneous-legal-topics-2005/
Timestamp: 2019-04-21 16:47:09+00:00

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The Internal Revenue Service on Friday, December 2, 2005 set the 2006 standard mileage rate that workers can claim next year for using personal cars on business at 44.5 cents a mile, decreased from a temporary 48.5 cents a mile rate put in place for the last 4 months of 2005, reflecting higher prices at gas pumps nationwide.
Compliance with the requirements would result in undue financial burden on the taxpayer.
For tax year 2005 returns due in 2006, affected corporations are those with assets of $50 million or more that file 250 or more returns a year, including income tax, excise tax, information and employment tax returns. For tax year 2005 returns due in 2006, affected tax-exempt organizations are those with $100 million or more in assets that file 250 or more returns a year.
and businesses can now register online under the SST system to collect taxes in return for a limited amnesty. Sellers wishing to volunteer to collect under the Agreement and receive an amnesty for uncollected or unpaid sales or use tax must register at https://www.sstregister.org/. They also can update previously submitted registration information at this web site. The information provided will be sent to all of the full member states and to associate members for which the seller chooses to collect. Sellers receive a single, unique identification number for all member states.
A registering seller is required to collect tax for full member states. Full member states are Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota, and West Virginia. A registering seller may collect tax on sales into an associate member state, but is not required to do so (unless the seller is otherwise legally required to collect in that state). Associate member states are Arkansas, Ohio, Tennessee, Utah, and Wyoming. Nevada will become an associate member state on January 1, 2006. Only one return per seller per state is required under the Agreement, and a seller may choose to use a state’s existing return or a simplified electronic return. A state may require a seller to file a return within one year of registering and annually thereafter, or in the month following the accumulation of $1,000 or more in tax for any state. Registration is “suspended” until a “commercially reasonable period” (or, alternatively, a time certain) after the certification of CSPs; and the seller’s collection obligation begins to run from the end of that period.
for reporting but there are currently no approved certified technology models in place. A delay was implemented allowing sellers to register and take advantage of amnesty even though it can not begin collecting until a certified technology model is implemented.
In Earnshaw v. Comm., 2005-2 USTC ¶50,566 (10th Cir, September 22, 2005), affirming the Tax Court, 84 TCM 146, Dec. 54,830(M), T.C. Memo. 2002-191, the 10th Circuit affirmed the Tax Court holding that settlement of credit card debt for less than the amount due resulted in discharge of indebtedness income. Taxpayer did not submit credible evidence that he disputed any of the charges.
to $141 for low-cost facilities and $226 for high cost facilities. The rates are optional for the 4th quarter of 2005. Additional high cost localities have been identified.
the first round $6.11 billion of tax relief for Hurricane Katrina victims, was signed by President Bush on September 23. Lawmakers are working on a second round of tax relief for businesses and individuals in the disaster area. Included is an extension to February 28, 2006 to file and pay taxes, tax credits for hiring “Hurricane Katrina employees”, the employee retention credit (40% of the first $6,000 wages for small employers only), waiver of the 10% corporate charitable donation limit, eliminates individuals 10% threshold and $100 floor casualty loss limits and extends principal residence replacement period to 5 years, disaster victims can tap IRAs and 401(k)s to help rebuild up to $100,000 with 3 years to repay the distribution or spreading the income evenly over 3 years, $500 deduction per evacuee capped at $2,000 for providing shelter to evacuees (itemization not required), removes 50% charitable limit for charitable contributions to organizations engaged in Hurricane Katrina relief, raises charitable auto mileage allowance to $.34/mile (9/1-12/31/05) if related to Hurricane Katrina.
In A&F Trademark, Inc. v. Tolson, Dkt. 04-1625, petition for certiorari filed June 6, 2005, Delaware intangible holding companies licensing their trademarks to retail operating affiliates in North Carolina and having no physical presence in the state asked the US Supreme Court to resolve a conflict among state courts as to whether the Quill physical presence standard applies to all state taxes or only to sales and use taxes. The North Carolina Court of Appeals held that the physical presence requirement for substantial nexus, applied in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), only limits sales and use tax collection obligations. Therefore, North Carolina could impose corporate income and franchise taxes on the intangible holding companies, which did not have a physical presence in the state but had licensed their trademarks to retail operating affiliates in North Carolina. (see also, Lanco, Inc., a Delaware corporation v. Director, Division of Taxation (New Jersey Superior Court, Appellate Division. Case No. A-3285-03T1, Filed August 24, 2005 NOT FOR PUBLICATION), citing A&F Trademark).
In Huckaby v. New York State Division of Tax Appeals, Dkt. 04-1734, petition for certiorari filed June 22, 2005, a Tennessee resident has asked the US Supreme Court to decide whether 100% of the income he received from a New York employer could be allocated to New York, even though he performed only 25% of his services in New York. The New York Court of Appeals held that the individual’s entire income was properly sourced to New York under the state’s convenience of the employer test.
The regulations describe specific circumstances in which Appeals will not hold a face-to-face conference with the taxpayer or the taxpayer’s representative because a conference will serve no useful purpose: only frivolous arguments are raised (www.irs.gov/pub/irs-utl/friv_tax.pdf for examples of frivolous arguments); collection alternatives that would not be available to other taxpayers in similar circumstances are proposed; taxpayer does not provide the required information in the written request for a CDP hearing. A face-to-face conference will not be held at the location closest to the taxpayer’s residence or principal place of business if all Appeals officers or employees at that location are considered to have prior involvement, and the taxpayer will be offered a hearing by telephone or correspondence, or some combination.
The regulations clarify that in order to obtain judicial review, a taxpayer must not only bring the issue to the attention of Appeals but must also submit evidence with respect to that issue if requested.
Missing the 30 day deadline to request a CDP hearing does not automatically turn a late written request into an request for an equivalent hearing. The taxpayer will receive a mandatory notification of the untimely request and of the right to an equivalent hearing, and the request for an equivalency hearing must be made within 1 year.
The IRS released the 2005 annual guidance on the maximum allowable values for employer-provided vehicles under the cents-per-mile method and the fleet average valuation rule for computing the fringe benefit of personal use of a company vehicle in Rev. Proc. 2005-48, I.R.B. 2005-32, 271, August 8, 2005, including (1) a separate maximum value for trucks and vans under the cents-per-mile method and (2) “official” amounts for the fleet average valuation rule, for employer-provided passenger automobiles, trucks and vans first made available to employees for personal use in calendar year 2005. For 2005, the standard mileage rate is 40.5 cents per mile. For 2005, the cents-per-mile method can only be used for passenger automobiles with a fair market value (FMV) of $14,800 or less, and trucks and vans with a FMV of $16,300 or less, on the day they were first made available to employees. Employers that have 20 or more qualifying vehicles may use the fleet average valuation rule to calculate the annual lease values of the vehicles (only for passenger automobiles with a FMV of up to $19,600 and trucks and vans with a FMV of up to $21,300).
to encourage conservation, development of alternative energy sources, a more robust energy transmission infrastructure, and greater domestic energy production. Most tax breaks take effect until January 1, 2006. More than $3 billion in revenue raisers include increased fuel taxes and greater amortization recapture of intangibles.
$500 for each 0.5 kilowatt of fuel cell property capacity (principal residence only).
$300 for any item of energy-efficient building property, including electric and geothermal heat pumps, open loop, direct expansion, central AC, and natural gas, propane or oil water heaters.
10 percent of the cost of “qualified energy efficiency improvements” (including insulation materials; exterior windows (maximum $2,000 expenditure, $200 credit for windows), skylights; exterior doors; and metal roofs with special pigmented coatings).
qualified alternative fuel motor vehicle credit.
installed pursuant to a plan to reduce total annual energy and power costs by 50 percent or more when referenced against a building meeting certain minimum requirements (IRS to issue regulations to allow a reduced deduction if specific energy efficiency targets are met).
Eligible contractors may claim a tax credit of $1,000 or $2,000 for a qualified new energy-efficient home located in the US and acquired from the contractors for use as a residence during 2006 and 2007.
equipment which uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Solar energy to heat swimming pools is not eligible. The energy credit for any qualified fuel cell property cannot exceed $500 for each 0.5 kilowatt of capacity.
The Energy Tax Incentives Act of 2005 adds a new credit for the manufacture of energy-efficient appliances, such as dishwashers, clothes washers and refrigerators. The credit is a part of the general business credit.
The IRS may be starting to take the position that employee personal use of employer-provided cell phones and other portable electronic devices (Blackberrys™, PDAs and laptops) are “working condition fringe benefits” that should be taxed to the employee as compensation with the employer responsible for federal withholding. Company cars are a common example of working condition fringe benefits. Employers must include the value of personal use of a company car provided to an employee in the employee’s compensation. Technically, the same treatment could apply to employer-provided cell phones and other electronic devices if the employer permits personal use.
Employees must substantiate the business purpose of each expense, generally in writing. It is difficult if not impossible to claim 100% for business of a cell phone if the evidence shows calls to the employee’s spouse, friends, etc. Cell phone usage is easy to track because cellular companies generate a monthly bill every which usually lists all calls. Even if the bill doesn’t break calls down individually the information is readily available.
The issue is magnified for non-profits because the IRS can assess hefty penalties to a non-profit for excess benefit provided to a key employee. The IRS can also assess a 25% penalty on the individual improperly benefiting from excess benefit transactions, plus an additional 200% penalty if the excess benefit is not corrected.
If the IRS is really committed to going after personal use of cell phones, laptops and other devices, employers will have to make changes. Businesses and non-profits should review their policy about personal use of employer-provided devices, and if they don’t have a policy it may be time to implement one. Permitting employees personal use of cell phones and other portable electronic devices for use is probably the most common policy, either officially or unofficially. A blanket prohibition on all personal use of employer-provided cell phones and other portable electronic devices is not easy to police. It may not seem that one or two personal calls or emails a day violates company policy, but they can add-up over time and phone records make demonstrating the violation easy.
Once in effect, the agreement remains a voluntary collection system for sellers without a physical presence in a given state (remote sellers). Collection by remote sellers becomes mandatory only if: 1) a court of competent jurisdiction rules that the complexity concerns underpinning Quill Corp. v. North Dakota, 504 U.S. 298 (1992), have been resolved, or 2) federal legislation is enacted granting states collection authority over remote sellers.
Full members (all necessary provisions to be substantially compliant with each of the Agreement’s requirements enacted and in effect on July 1, 2005): Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, North Carolina, Oklahoma, South Dakota, and West Virginia.
Associate members (necessary provisions enacted but not in effect on July 1, 2005): New Jersey, North Dakota (October 1, 2005), Utah (July 1, 2006), Tennessee (July 1, 2007), and Ohio (January 1, 2008). These states automatically become full members on the effective date absent intervening law changes. Arkansas and Wyoming were also voted in as associate members as having achieved substantial compliance with the Agreement as a whole but not each provision, and must re-petition for full membership prior to January 1, 2008 or forfeit their associate membership.
The following states not voted in to membership continue to be members of the Implementing States: Alabama, Arizona, California, District of Columbia, Florida, Georgia, Hawaii, Illinois, Louisiana, Maine, Maryland, Massachusetts, Mississippi, Missouri, Nevada, New Mexico, New York, Rhode Island, South Carolina, Texas, Vermont, Virginia, Washington, and Wisconsin.
Among the first tasks of the Governing Board will be the approval of and contracting with certified service providers (CSPs) to offer taxpayers new technology models for the collection and remittance of tax. Approval of any certified automated systems (CASs) on October 1 is not likely as review of software is not as far advanced as the CSP review.
Once the Agreement is in effect sellers will be able to use a centralized online registration system, thereby agreeing to collect and remit tax for sales to all full member states. Associate members will not have access to the seller registration information. A seller may volunteer to collect tax on sales into associate member states on a state by state basis. Member states must provide an amnesty for uncollected or unpaid sales and use tax (together with penalty or interest) to sellers that registers under the Agreement if the seller was not registered in that state in the preceding 12-month period, provided the seller registers within 12 months of the state’s participation. Amnesty does not apply to matters for which the seller has received notice of the commencement of an audit. Associate members must provide an amnesty from the date they become an associate member until 12 months after they have become full members.
The SSTP must still address remaining issues including allocation of delivery charges between taxable and non-taxable items, definitions of “digital good” and “digital equivalent of tangible personal property,” purchaser use tax issues, guidance on the interpretation of previously approved concepts, entity- and use-based exemptions, “food” definitions; audit procedures; the amount of compensation for the cost of collection; and the procedures for requesting and issuing interpretations.
The new rules affect how tax professionals communicate with clients with written advice, including e-mails, faxes, and letters, on tax issues. The rules grew out of the government’s decision to attack the mechanisms used by tax shelter promoters to sell abusive tax shelters, but apply to advice given on many common and accepted transactions. Clients cannot rely on a tax opinion for protection from penalties unless the practitioner provides a comprehensive opinion that considers and discusses: relevant facts and applicable law, relationship between the facts and the law, conclusion as to the legal consequences of each tax issue, and likelihood that the taxpayer will prevail if the IRS challenges the transaction.
A little more than a month after Taxpayer lost a Tax Court case, husband conveyed a commercial building to his son and released him from any obligation to pay the balance of the $50,000 property purchase price the son was to have paid for the property. While the timing of that conveyance appeared suspicious, the Court accepted the son’s explanation that his father’s motive was to relieve him of some of the financial burden that the son faced in paying the balance due on a separate business loan, and to make up for the fact that the family corporation had ceased making payments to the son on a $250,000 debt for redemption of the son’s stock in the corporation. The son’s explanation was supported by evidence that at the time the conveyance was made taxpayers owned other property having an apparent value much greater than the $82,000 tax liability asserted in the Notice of Deficiency plus any interest that might have accrued.
Four years later the 9th Circuit affirmed the Tax Court’s decision, and a little over 1 year later Taxpayers conveyed another property to their son for no consideration, and Taxpayers continued to live in the home and pay at least a portion of the utility bills and the real estate taxes on the property. The reason offered for that conveyance was that it was also intended to make up for the fact that the son had never been paid for the redemption of his stock in the family corporation. The court found that even even if the transfer was not made with actual intent to defraud, it was made when the Taxpayers were insolvent. Under 11 U.S.C. § 523, a discharge does not exempt a debtor from liability for any tax obligations debtor sought to avoid by fraudulently conveying property that otherwise would have been available to satisfy those obligations, declared the transfer void and held that the government could foreclose its lien on the second property with all amounts in excess of the mortgage being applied toward satisfying the Taxpayers’ unpaid tax obligations. US v. Verduchi, 2005-1 03-139-T, USTC ¶50,414 (D.C. R.I., May 3, 2005).
Debtors originally filed a Chapter 13 bankruptcy petition and reached an agreement with the IRS to the value the IRS’s secured claim at $62,869.95, but the agreement was not entered. Debtors converted their case to Chapter 7, a discharge was entered, and debtors filed a motion to value their exempt assets not administered by the Chapter 7 trustee for $49,621.61, less than the original agreement with the IRS, and to pay that amount to the IRS in full satisfaction of the IRS lien. The bankruptcy court denied the motion after determining that (1) debtors could not “strip down” an allowed secured claim in a Chapter 7 case; and (2) the terms of the original agreement could not be enforced because debtors had converted their case to Chapter 7 prior to the entry of the order. That the unpaid taxes had been discharged was irrelevant because the lien survived the discharge. In re Stephen L. Phillips and Cathy M. Phillips, 02-851-3F7, 2005-1 USTC ¶50,417, (U.S. Bankruptcy Court, Mid. Dist. Fla., Jacksonville Div., March 11, 2005).
introduced April 28, 2005 would prohibit states from imposing a net income tax or other business activity tax (BAT) on an entity without a physical presence in the state, including a tax imposed on or measured by gross receipts, gross income, or gross profits; a business license tax; a business and occupation tax; a franchise tax; a single business tax or a capital stock tax; and any other tax imposed on a business for the right to do business in a state or measured by the amount or results of business activity conducted in the state. It would not apply to a transaction tax.
(2) leasing or owning tangible personal property or real property in a state for more than 21 days during the taxable year.
used ancillary to an otherwise protected activity.
a live sporting event in the state before more than 100 live spectators.
Under the doctrine of equitable conversion on execution of a contract of sale the purchaser becomes the equitable owner of the property and the seller’s property interests are limited to the sales proceeds. Ruggerio v. U.S., U.S. District Court, CIV. WDQ-04-639 (DC Md., 1/31/05).
Old National Bank v. RCH Electronics Systems, Inc. et al , 2:03-cv-0288-LJM-WTL (DC SD IS, 1/11/05) confirms the Supreme Court holding in McDermott that a properly filed IRS lien takes priority over a simultaneously attaching state lien. the bank security interest was filed first but the liens came into existence prior to the receipt of the receivables and the bank’s interest did not attach until receipt.
At an April 16, 2005 meeting in Washington, the October 1, 2005 effective date for the Streamlined Sales and Use Tax (SST) Agreement was kept on track with adoption of a 2-tiered membership structure, including 2 categories of associate members: 1) any state found to have enacted all necessary conforming provisions, not yet in effect but taking effect on or before January 1, 2008 (automatically becoming a full member state on the effective date); 2) any state found to have achieved substantial compliance with the terms of the Agreement taken as a whole, but not necessarily with each provision as required, measured qualitatively, and there is a reasonable expectation that the state will achieve compliance by January 1, 2008 (required to re-petition for full membership). No associate members will be permitted after 2007. Associate members will be counted for meeting the thresholds that bring the Agreement into effect.
Absent congressional (or U.S. Supreme Court) action, sellers without a physical presence in a state do not have to collect that state’s sales tax. The SST effort encourages remote sellers to register and volunteer to collect tax in full member states in return for various advantages, including an amnesty for past uncollected taxes. To receive these benefits, a voluntary seller must agree to collect and remit sales and use taxes for all taxable sales. A remote seller may, but will not be required to, collect tax on sales into an associate member state (a remote seller that volunteers to collect tax in one associate member state is not required to collect tax in any other associate member state).
providing a member state must allow the third-party supplier ( i.e. the drop shipper) to claim a resale exemption, regardless of whether the seller is registered to collect and remit sales and use tax in the state where the sale is sourced.
States must file their petitions for membership and certificates of compliance by the May 1, 2005 deadline to have them considered during the July 1 vote. So far, eight states have filed petitions.
who fails to certify under penalty of perjury that all of his or her federal tax obligations for the 5 preceding taxable years have been met.
provides a statement to the IRS in accordance with the revised requirements of section 6039G (“initial expatriation information statement”).
IRS News Release IR-2005-49, April 22, 2005. Notice 2005-36, I.R.B. 2005-19, April 22, 2005.
The motion was upheld to the extent the motion sought to reduce the tax liabilities reflected in the Certificates of Assessment to judgment.
the relative character and value of the non liable and liable interests in the property.
The court found a partial sale was not feasible, noting there was no evidence the property was susceptible to physical partition, and the Court doubted there was a market for a partial interest in a residence where the co-tenant is in possession. Mrs. Frein stated she had a legitimate expectation the property would not be subject to forced sale, but the court found the legitimacy of that expectation to be in doubt in view of a pending mortgage foreclosure suit. The last 2 factors were undeveloped on this record, so the Court held the motion to order a foreclosure sale should be deferred until further development of the record with respect to Mrs. Frein’s interest and that of all other claimants or lien holders.
revising prior regulations under IRC § 6334, and reflects changes made by the IRS Restructuring and Reform Act of 1998 (the RRA 98). If the levy is less than $5,000 ($6,020 for 2005, as adjusted for inflation) taxpayer’s residence is exempt, otherwise the IRS will seek judicial approval. The taxpayer can not challenge the merits of the assessment, but only whether the liability has been satisfied or that taxpayer has other assets available to satisfy the liability (reasonable collection alternatives) or that procedures were not followed. Family members will be notified but can not intervene. Business property is NOT exempt from levy if the Area Director approves the levy.
including a delay in implementing sourcing rules. A sufficient number of states must be in substantial compliance with the Agreement’s requirements, effective July 1, 2005, including its destination sourcing rules, for the Agreement to come into effect by its current October 1, 2005 target date. Tennessee proposed amending the SST so that a state could be deemed to be in substantial compliance with it and the Agreement could come into effect even though the state has a future effective date no later than December 31, 2006 for the required sourcing changes. the Governing Board will enter into contracts for certified service providers (CSPs) and certify software to assist collection of tax under the new rules after the Agreement becomes effective so these systems would not be immediately available to the initial member states’ in-state businesses in order to apply the new rules no later than July 1, 2005.
giving states the option of providing “small businesses” a 3 year transition period to change from origin-based sourcing to the destination-based sourcing rules that the SST Agreement requires.
Additional states are expected to file shortly. The public has 30 days to file written comments as each state makes its official filing, then the states will have 15 days to respond in writing. States filing petitions and certificates by the May 1 deadline will meet on July 1, 2005 to to decide by a 3/4 vote on whether each of the states is in compliance (not including the state voted on). At least 10 states comprising at least 20% of the total population of all states imposing a state sales tax must be found in compliance for the Agreement to come into effect. If sufficient petitions are approved July 1 the Agreement becomes effective October 1, 2005. The Governing Board, made up of representatives of each of the states found to be in compliance will come into existence at the same time. Copies of the petitions and certificates, and information about submitting public comments, is posted at the following web sites.
will have on the competitiveness of the state’s businesses and on local governments, and may propose alterations to the legislation or a delay in the July 1, 2005 implementation. Delay by Tennessee could jeopardize the October 1, 2005, target date for the Agreement to come into effect.
In Medicine Shoppe International, Inc. v. Director of Revenue, No. SC85781 (MO Sup Ct, January 25, 2005.) Investment interest income received by a Missouri-based subsidiary (taxpayer) from its out-of-state corporate parent was correctly classified and reported by the taxpayer as non-Missouri source income not subject to Missouri corporate income tax and, therefore, not included in the single-factor apportionment formula.
had been introduced and is similar to previous reform bills. The bill will make it tougher for individuals to seek repeat bankruptcy protection, and emphasizes the priority of tax claims.
Private Letter Rulings 200504037, 200504041, 200504042 address the IRS’s position on waiver of the 60-day deadline for IRA rollovers. Waivers will not be permitted when the distribution is a short-term loan or for payment of personal expenses, but will be granted if failure to complete a rollover is not the fault of the taxpayer.
The IRS revised Rev. Proc. 2005-14 (see below) for the American Jobs Creation Act of 2004 (2004 Jobs Act) amendment to Code Sec. 121 denying the exclusion to business property that is acquired in a like-kind exchange, converted to a personal residence, and disposed of within five years after the like-kind exchange. The provision applies to the sale or exchange of a residence after October 22, 2004. Gain is deferred and not excluded under Code Sec. 1031. The amendment prevents the homeowner exclusion being used to shelter the gain realized on the like-kind exchange, if the residence was sold shortly after the like-kind exchange occurred.
In CCA 200504027, IRS Chief Counsel specifically examined New York City’s real property tax rebate and found taxpayers generally must include real property taxes rebates in their gross incomes if deducted on a prior years return. However, exceptions to the rule do exist in several situations, including instances involving interplay of the standard deduction and reduction of the itemized deduction for taxes.
until fully administered and the court closes the case. Under Chapter 7, entry of the discharge order is not the controlling action. If objection is raised within 30 days after trustee files a final report and account and certifies the estate has been fully administered, the case may be closed by the court. A Chapter 11 is not closed on plan confirmation. After debtor begins making payments under the plan (even though the debtor must make them in the future as well), and if no objections are raised within 30 days after payments under the plan have commenced, the court may then close the case. If taxpayer begins payments, but the court does not close the case, default does not terminate the case or end the court’s involvement in the administration of the estate. The IRS may move to dismiss and the court may enter a dismissal order which terminates the administration of the estate. The ruling notes the new guidance applies to Chapter 12 and Chapter 13 cases as well.
In Nelson, T.C. Memo. 2005-9, the Tax Court held that the IRS abused its discretion in denying a taxpayer’s request for innocent spouse relief solely because the request was not made within two years of the IRS’s first collection activity. Taxpayer’s request was made nearly three years after her tax overpayments were applied to a joint liability arising from her previous marriage. The Tax Court found that the IRS failed to inform the taxpayer of her rights under Code Sec. 6015, requiring the IRS to include a notice of a taxpayer’s right to relief in collection-related notices. The Tax Court found that withholding the taxpayer’s refund and using it to partially offset her unpaid liability constituted a collection action. The IRS sent the taxpayer a letter informing taxpayer of the application of the overpayment to the prior liability, but not of her right to innocent spouse relief, and taxpayer was not informed of this right until after the statute of limitations had already run. Thus, it was an abuse of discretion for the IRS to deny the taxpayer’s request for relief by applying the two year limitation period of Rev. Proc 2000-15.
In Rev. Proc. 2005-14 the IRS describes how a homeowner who may exclude gain on a sale or exchange of a home may also benefit from a deferral of gain for a like-kind exchange with respect to the same property where the property has been used consecutively or concurrently as a home and a business.
In Garber Industries Holding Co., Inc. v. Comm., Dkt. No. 10871-01, 124 TC 1, No. 1, January 25, 2005, the Tax Court held that sale of stock from one brother to another increased the purchaser-brother’s percentage ownership from 19 percent to 84 percent and was an ownership change under § 382(a) that reduced net operating losses (NOLs). Family attribution rules did not alter the result.
In C.I.R. v. Banks, — S.Ct. —, 2005 WL 123825 (S.Ct. Jan 24, 2005) the Supreme Court resolved a split among the circuits and reversed two pro-taxpayer appellate decisions, holding that contingent fees paid to attorneys as part of settlements of employment-related lawsuits must be included in gross income.
Announcement 2005-6. Taxpayers filing an offer-in-compromise (OIC) can now designate a third party to discuss their OIC and related return information with the IRS during the initial stages of processing an offer by checking a box located in Item 14 on Form 656, Offer in Compromise. The check-the-box authorization enables the IRS to discuss the offer with any designated third party and obtain information needed to complete the processing of the taxpayer’s offer.
but, before physical delivery or possession had been retransferred to the manufacturer, who used it as a demonstration model and loaner. LTR 200502004.In a letter ruling, the IRS indicated that certain de minim is use and even a prior incomplete sale would not prevent the taxpayer from being regarded as the original user of the plane. Characterizing the manufacturer’s use for less than two percent of useful life as merely temporary, the IRS held that the airplane remained in inventory. Under IRC § 168(k)(4), property must have a recovery period of less than 20 years and been both purchased and put to original use by the taxpayer between May 5, 2003 and Jan. 1, 2005 to be eligible for bonus depreciation.
In Chief Counsel Notice 2005-003 IRS Chief Counsel reaffirmed its long-standing position that it can collect a partnership’s employment taxes from general partners through administrative channels based on assessments against a partnership, and that a tax lien attaches to the property of both the partnership and the general partners after a notice and demand to the partnership.

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