The Subpart F rules can result in foreign profits being subject to tax in the U.S. In the recent Crestek v. Commissioner, 49 T.C. 5 (2017), the court addresses unpaid advances a controlled foreign corporation made to its U.S. parent. The case shows how easy it is for a U.S. corporation that has an outbound transactions to…
Tax Articles
Tax Court Says Royalties Paid to Roth IRA Were Excess Contributions to IRA
The U.S. Tax Court recently issued another opinion involving a LLC owned by a self-directed IRA. The case is Block Developers, LLC v. Commissioner, T.C. Memo. 2017-142. The case invovles an IRA LLC that purchased a patent and then licensed the patent back to the prior owner, with the intent of the IRA LLC collecting…
Cash-Basis Taxpayers Can Deduct Reclamation Costs Under Sec. 468
Section 468 allows a current deduction for mining and solid waste reclmation costs even though the expenses may not be incurred for several years–if not decades–in the future. It has traditionally been thought that only accrual-method taxpayers can benefit from Sec. 468. The court recently dispelled this notion in Gregory v. Commissioner, 149 T.C. 2…
The Form 1045 Dispute & Possible Solution: Include a Detailed Cover Letter
The Form 1045, Application for Tentative Refund, is used to carryback losses, credits, etc. from the current year to prior years. In many cases it is used when a taxpayer was previously profitable and then incurrs a loss. The now unprofitable business can go back and recoup taxes paid in prior years and get a…
No Tax Due on Foreign Corporation’s Redemption of U.S. Partnership Interest
Many businesses that operate outside of the U.S. want to do business in the U.S. and they want to limit their exposure to U.S. income taxes. To do this, many in-bound investments are structured as U.S. partnerships with the parntership being formed in the U.S. to carry on the business activities in the U.S. This…
Double Trouble: Taxability of Repeated Injury Lawsuits
As human beings, we strive to understand the laws of nature and our place in the world. Despite the advancements in technology, research, and science, there still remains much that is unknown. However, we do observe patterns and repetitions in both the natural world and human behavior. With each passing experience and as we age,…
Serial IRS Whistleblower Cannot Remain Anonymous
You would think that an IRS whistleblower could always remain anonymous. That is a fundamental feature of the whistleblower program. In Whistleblower 14377-16W v. Commissioner, 148 T.C. 25, the U.S. Tax Court concluded that a whistleblower claimant could not remain anonymous when litigating his claim in court. This case is one all whistleblowers should read…
Tax Law is Not Determined by Common Industry Term
Just because businesses in a particular industry commonly use a term to describe a particular transaction or event, the industry term does not necessarily have any bearing on the Federal income tax consequences of the transaction or event. The court addresses this in Greenteam Materials Recovery Facility PN v. Commissioner, T.C. Memo. 2017-122, in the…
Issue for the New Partnership Audit Procedures Raised in TEFRA Case
The Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”) procedures were intended to make it easier for the IRS to audit partnership tax returns. TEFRA failed to deliver. The rules are nuanced and hard to apply. The new partnership audit procedures are intended to remedy this. With the new partnership IRS audit procedures coming…
Penalty Abatement for Reliance on Tax Advisor Who Made Obvious Errors
The IRS often willing to abate or remove tax penalties. To do so, taxpayers usually have to show that they acted with reasonable cause and in good faith. Relying on a competent tax professional can be one way taxpayers can make this showing. But what exactly is a competent tax professional? The court addressed this…