The IRS de-coordinated its remaining Coordinated Issue Papers yesterday. This is the final step in the IRS ending its coordinated issue or tiered program. The IRS’s coordinated issue or tiered program was how the IRS was identifying and working challenging tax issues that presented compliance problems. Coordinated Issue Papers were instructions for IRS auditors on…
Tax Articles
Promissory Notes Distributed by Self-Directed IRA Were Not Worthless
Self-directed IRAs are usually profitable. But there are times when they lose money. In Berks v. Commissioner, Docket No. 26883-11S, the U.S. Tax Court addressed a situation where the IRAs held promissory notes that may have been worthless. Facts & Procedural History The Berks rolled over money from pre-existing IRAs to self-directed IRAs, with the…
Car and Truck Expenses Allowed Based on Mileage Not Actual Costs, Absent Records
In Aivatzidis v. Commissioner, T.C. Summary Opinion 2013-105, the U.S. Tax Court concluded that a professional driver could deduct expenses based on mileage, but not for actual expenses. This case provides an example of why drivers should compute car and truck expenses based on mileage if they do not have sufficient records. Facts & Procedural…
Insurance Agent Denied Depreciation Deduction For Airplane
In Brown v. Commissioner, T.C. Memo. 2013-275, the U.S. Tax Court denied an insurance salesman’s bonus depreciation deduction for his private jet as it was not placed in service in the tax year. The case highlights the highly factual nature of determining when an asset is deemed to have been placed in service for tax…
How the IRS Evaluates Offer in Compromise
In Zumo v. Commissioner, T.C. Summary Opinion 2013-66, the U.S. Tax Court examined a case involving the Internal Revenue Service’s (“IRS”) rejection of an offer in compromise based on doubt as to collectibility. An offer in compromise is a request by a taxpayer to settle their tax debt for an amount that is less than…
IRS Closing Agreement Valid If Not Reviewed by Joint Committee on Taxation?
In AM 20133301F, the IRS addressed the validity of a closing agreement that was not submitted to the Joint Committee on Taxation or JCT for review prior to signing the agreement. Facts & Procedural History The taxpayer was an insurance company whose tax returns were being audited by the IRS. The IRS and taxpayer asked…
About IRS Appeals AJAC Project
The IRS Office of Appeals just released a memo describing its changes pursuant to its Appeals Judicial Approach Culture (AJAC) project. These changes do not really break new ground, but they address a few key issues that are often in dispute in appeals cases. About the IRS Office of Appeals The IRS Office of Appeals is…
Fashion Retailers Business Expenses Disallowed as Routine Substantiation Case
In Heinbockel v. Commissioner, T.C. Memo. 2013-125, the U.S. Tax Court considered a routine substantiation case and disallowed business expense deductions for a fashion clothing retailer. This case presents an opportunity to consider how to present routine substantiation cases to the IRS and to the courts. Facts & Procedural History Mrs. Heinbockel was in the…
Personal Guarantees for Self-Directed IRAs Are Prohibited Transactions
If you have a self-directed IRA, the IRA invests in LLCs, can you personally guarantee a loan for the LLC? The court addressed this in Peek v. Commissioner, 140 T.C. 12. Facts & Procedural History Mr. Fleck identified a business opportunity that he intended to invest in. Mr. Peek, Mr. Fleck’s lawyer, approached Mr. Fleck about…
Parking Garages: Parking Lot Depreciation Life
In recent Chief Counsel Memo #20125201F, the IRS concludes that open-air parking garages are considered buildings rather than land improvements for tax purposes. The IRS attorneys go on to say that the taxpayer’s conclusion to the contrary warrants the assessment of a negligence penalty. That is a pretty harsh result given that the tax law…