IRS Administrative Summons to a Taxpayer: The Taxpayer's Duties and Rights... [ read ]
In most IRS examinations, the taxpayer and the IRS prefer an informal information-gathering process with the IRS issuing Information Document Requests (IDRs) and the taxpayer providing responses. However, there are circumstances where the issuance of an IRS administrative summons to the taxpayer for documents and/or testimony becomes necessary. When the IRS issues an administrative summons, it is very important that the taxpayer and the taxpayers' representative understand the taxpayer's duties and rights in responding.
IRS Announces Procedure for Seeking a Return of Property Seized in Legally Sourced Structuring Cases... [ read ]
On June 16, 2016, the IRS announced a new procedure for taxpayers who have had their property seized to file a petition for remission or mitigation. The IRS has identified more than 700 taxpayers that it believes may qualify, and the IRS has been notifying these taxpayers by mail over the past month.
Explosions Continue in the Minefield that is IRA-Owned Businesses... [ read ]
So far in 2016 we have seen two Tax Court decisions dealing with IRA-owned businesses. In Polowniak v. Comm'r, decided on February 25th, the Tax Court dealt with a purported run-around of contributions limits. Mr. Polowniak owned and operated through an S corporation a successful consulting business. In an effort to siphon some of those consulting fees to a tax-advantaged vehicle, Mr. Polowniak set up a new company and Roth IRA and immediately directed the Roth IRA to acquire virtually all of the new company stock.
Abracadabra! The IRS Proposes Rules that Bring into Plain View U.S. Disregarded Entities with Foreign Owners... [ read ]
The IRS is seeking to shine the light on domestic disregarded entities with foreign owners. Under regulations proposed last month, a U.S. disregarded entity that is wholly owned by a foreign person would be treated as a domestic corporation separate from its owner for reporting and record maintenance requirements under IRC Section 6038A.
Moving Beyond Profits Interests: Ways to Compensate and Retain Key Employees Without Making Them a Partner or Owner... [ read ]
A common way to reward and incentivize key employees in a partnership is to issue them a profits interest. If properly structured, the profits interest is not taxable as income to the employee upon issuance and provides the opportunity for potential capital gains treatment in the event of a future sale. Based on my experiences, however, principals often struggle with the decision to put another seat at the table; to give a mic to another voice; and in some instances, to share the smallest element of control of the business.
Executives with Schedule C Businesses Beware: Increased IRS Enforcement is Coming... [ read ]
It would appear that the IRS has been allowing executives and other high-wage earners to offset their taxes by losses from their hobby activities. At least, that was the conclusion of a recent report by the Treasury Inspector General, which has oversight responsibility over the IRS.
Recent Texas Supreme Court Decision Addressing Treatment of Capital Losses for Texas Franchise Tax Apportionment Purposes Carries Significant Implications... [ read ]
In a recent decision with potentially broad implications, the Texas Supreme Court held in favor of a taxpayer on a question involving the treatment of capital losses for purposes of the Texas franchise tax.
Another Cautionary Tale for Executors, Trustees, and Beneficiaries: Liability for Unpaid Estate Taxes... [ read ]
The United States District Court for the Eastern District of California has issued an opinion finding that the executors of the estate, the trustees of the family trust, and the beneficiaries of the estate who received distributions from the estate are liable for unpaid estate taxes. United States v. Estate of Espinor, 2016 WL 2880191 (ED Cal. May 17, 2016)
Taxpayers Beware! Partnerships Should Consider Amending Their Agreements Now to Address Significant Issues Resulting From the New Partnership Audit Rules... [ read ]
As discussed in a recent blog post, a new partnership audit regime that was enacted as part of the Bipartisan Budget Act of 2015 (the "Partnership Audit Rules") will have significant, wide ranging effects on the taxation of income from partnerships. Under the Partnership Audit Rules, the general result (the "General Method") is that the tax liability resulting from an Internal Revenue Service ("IRS") audit adjustment to a partnership's income will generally be assessed and collected directly from the partnership. See I.R.C. § 6221 (2018). This is obviously a significant departure from the result under the partnership audit rules that are currently in place through year-end 2017 (the "TEFRA Rules"), under which an adjustment is made at the partnership level, but the resulting tax liability is assessed and collected from the partners of the partnership.
Master Limited Partnerships and Cancellation of Indebtedness Income... [ read ]
A Master Limited Partnership ("MLP") is an investment vehicle used in oil and gas, and several other industries. MLPs are designed to avoid corporate level taxation; however, this comes at a price that many investors have not anticipated.
