Personal Income Tax Planning

This Podcast is about extentions of time to file.  This will be of special interest to practitioners (and their clients) who bulk filed paper extensions with the Fresno Service Center.  The IRS recently admitted to a mistake in processing extensions received in Fresno.Materials for the podcast, including two IRS releases on this issue, can be downloaded from http://edzollars.com/2006-06-04_Fresno_4868.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast is about the tax implications of divorce and alimony.  Divorce settlements at times are frustrating for tax preparers to work with, since they often leave dangling the issue of whether payments were or were not intended to be alimony and, not surprisingly, the former spouses may have very different views on that issue.  The Tax Court was forced to settle the issue after lecturing the warring spouses in his opinion about how the issue should have been taken care of well before this point.The case in question is the case of Johanson and Melzig v. Commissioner, TC Memo 2006-105.  You can download the materials from http://edzollars.com/2006-06-02_Alimony.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast considers technical security issues that arise when you are traveling and take your laptop with you to "stay connected" with your office and clients.  There are a number of risks that have been discussed in recent weeks on Steve Gibson and Leo Laporte's Security Now podcast that I wanted to discuss in the context of a tax professional.We look at how your system may be compromised and your data exposed rather easily by any other machine on a network you are connected to (incluidng a hotel high speed network or a wifi hotspot at your local coffee shop).  And by this I mean a machine of any other guest or patron of the shop, or just someone in distance of the hotspot.   As well, we discuss why wifi encryption does not address this problem, and why additional steps are necessary.  We also discuss the steps you can take to make your transmissions truly secure.The materials for this podcast can be downloaded from http://edzollars.com/2006-05-20_Secure_Data.pdf. This P

This Podcast covers TIPRA , the Tax Increase Prevention Act of 2005.  We finally have a 2005 extender bill, albiet missing a few extenders and with a few surprises (some good, some not so great).  The President signed the bill into law this week, so it's time to look at the details that were in the bill.The materials for this podcast can be found at http://edzollars.com/2006-05-20_TIPRA.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast deals with the 'premature distributions' penalty tax and its exceptions. Taxpayers who take distributions from retirement plans prior to attaining age 59 1/2 have to deal with a confusing set of rules that makes some distributions subject to and some distributions exempt from the 10 percent addition to tax under 72(t).  Two recent cases illustrate both the traps that exist for the unwary and how a taxpayer managed to convince the Tax Court he qualified for an exception from the penalty despite IRS arguments to the contrary.The materials for the podcast can be downloaded from http://edzollars.com/2006-05-13_Premature.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast concerns the $3,000 Capital Loss Cap and the AMT.   The Tax Court looked at the interaction of the $3,000 capital loss limitation and the alternative minimum tax basis adjustment on the sale of shares originally obtained via the exercise of incentive stock options in a prior year.  The case in question is Merlo v. Commissioner, 126 TC No. 10.In the case at hand, a taxpayer had exercised stock options at the end of $2,000 and obtained his stock at a price that was more than $1,000,000 less than the market price at the time.  Under the rules for ISOs, that fair market value spread was not taxable for regular income tax purposes, but was taxable for AMT purposes, generating a substantial AMT liability.However, things did not go well for the stock in 2001 and, by year end, Mr. Merlo's stock was worthless.  The Tax Court considered whether, when Mr. Merlo disposed of his stock, he could take the full basis differential against alternative minimum taxable income in 2001 and gen

This Podcast is about loans, S Corporations, and reality engineering. Shareholder debt to S corporations has proven to be a minefield for shareholders and their advisers, and the taxpayer and their adviser in the case of Ruckriegel v. Commissioner managed to step on a shareholder debt/basis mine twice in two consecutive IRS exams.  In this case, the shareholders attempted to argue that loans from a partnership they controlled were actually loans to them from the partnership, followed by loans to the corporation.Or, to put it more correctly, their CPA attempted to argue that.  One of the problems in this case, beyond the simple fact that the form of the transaction (which the taxpayers had control over) did not agree with what they were arguing was the true substance, was the fact that neither the taxpayers nor their inside accountant were treating these loans as if they had traveled that indirect route.  The case points up the dangers of attempting to "after the fact" correct client missteps--a

This PodCast is a Response to Dr. Bill Frist's Request to his Colleagues to "KILL THE DEATH TAX FOREVER".  Frist stated that, "Because of Katrina, we could not act on repealing the death tax last fall".  But he then added, "NOW IS THE TIME!  HERE IS OUR MOMENT!"The first week in May, the estate tax repeal adventure will continue.  In this OPEN LETTER, we ask Dr. Frisk what's changed that made the first week in May so different than the week after Katrina.We'd like to live in a world with no estate tax - but the world we live in  -  right now  -  as we discuss in the PodCast - has many more pressing needs!  It's a question of priorities. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This PodCast covers tax issues relating to mail the IRS sends to the wrong address, mail that never makes it to the taxpayer, or mail that arrives late.  Much of the information that taxpayers need to deal with their tax obligation arrives via the U.S. mail.   While we've previously considered what happens when the taxpayer attempts to send documents to the IRS that the IRS claims never arrived, this PodCast considers a case and a letter ruling involving mail that was sent to an address the taxpayer did not currently live at when the mail arrived.Since those of us who do compliance work now have a real need to relax, the podcast also has a brief off-topic discussion of an additional internet audio option--internet radio with discussions about four different stations.The materials for this podcast can be found athttp://edzollars.com/2006-04-22_Lost_in_Transit.pdf This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, b

This PodCast deals with the "Unforseen Circumstance" exception that qualifies a taxpayer for early use of Section 121's gain exclusion at a reduced level.  Can adopting a child, an apparently voluntary endeavor, qualify as an unforseen circumstance for purposes of obtaining an early exclusion of gain from the sale of a home under Section 121?  A taxpayer asked that question of the IRS and received a favorable response.  The letter ruling, which of course applies only to this taxpayer, is useful in helping us determine where the IRS may see the boundaries of an "unforseen" circumstance. We look at Letter Ruling 200613009 's specific facts, noting that many factors were considered than just the fact the taxpayers decided to adopt a child. So the ruling does not support the conclusion that all adoptions will trigger the ability to make early use of a reduced 121 exclusion.The materials for the podcast can be found at http://edzollars.com/2006-04-15_Adoption.pdf.  This Podcast is sponsore

This PodCast uses the case of Benson v. Commissioner, TC Memorandum 2006-55, to examine the issue of what constitutes adequate disclosure under Section 6501(e)(1)(A)(ii) for purposes of avoiding the otherwise mechanical application of an extended six year statute on substantial underpayments.  In this case, which the taxpayer ends up losing, the Court considers to what extent disclosures on other returns can "make up" for items not disclosed directly on the individual return.The text file for this podcast can be downloaded from http://www.edzollars.com/2006-04-08_Adequate_Disclosure.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This PodCast focues on the exclusion for personal injuries under Section 104 , as well as the nature of a reasonable cause for purposes of escaping the imposition of a penalty.  We use the case of Goode v. Commissioner, TC Memo 2006-48, to illustrate these issues.  As well, we look at another attempt at getting reasonable cause to take a position--ask the President (as in George W. Bush), or at least have someone else do it and then claim to rely on the answer received when the question is delegated to an individual at the IRS.  This was the attempt of the taxpayer in Smith v. Commissioner, TC Memo 2006-51.The materials can be downloaded from http://edzollars.com/2006-04-01_Injury.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast focuses on the issues and limitations involving the Cohan rule and its use in tax compliance and representation work. The materials can be downloaded from http://edzollars.com/2006-03-25_Cohan.pdf. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This week's podcast pertains to the potential overuse of Circular 230 disclaimers.  It arose from a discussion that began on the California Society of CPAs TaxTalk group on Yahoo about the widespread use of Circular 230 disclaimers. There seems to be an unfortunately false belief among many in the professions involved that a standard disclaimer eliminates any and all issues related to the revisions last summer to Circular 230. The podcast discusses both the issues outside of Circular 230 that can arise from the indiscriminate use of this disclaimer, as well as those cases under the covered opinion rules when the disclaimer does not absolve the professional from having to issue a covered opinion. The materials can be found at this link: http://edzollars.com/2006-03-03_Disclaimers.pdf We also discuss briefly some technology matters, including a quick discussion of why it may be useful to listen to Steve Gibson's Security Now podcast. To check out what's available go to: http://grc.com/securityno

This PodCast concerns issues surrounding what are medical expenses for various tax purposes, as well as a case where the taxpayer successfully defended hiring her spouse as employee, and then covered him under a medical reimbursement plan. The materials for this week's podcast are at this link. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast considers issues and methods of tax research. Ed Zollars deals with research issues that arise in a tax practice. The materials are found at this link. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This Podcast covers charitable remainder trusts in light of the IRS granting relief from an issue they first seemed to have discovered last year regarding the potential state law granted right of a surviving spouse to claim a share of a CRT upon the death of the creator of the trust. The program discusses CRTs in general, including a discussion of which clients a CRT might or might not be appropriate for. We then look at the problem that a spouse's right to elect a share of the trust created, the IRS's initial response and then their recent reconsideration of that response. The materials can be downloaded here.  Be sure to log into LISI's Charitable Planning Newsletter for more detail on this most important topic.   This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

Bernard A. Krooks, LISI's ElderCare Law Newsletter Editor and founding member of Littman Krooks, LLP with offices in New York City and White Plains, N.Y., discusses the significant changes to Medicaid rules in the Deficit Reduction Act of 2005 (DRA) that was signed into law on Wednesday, February 8th, 2006. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com

This week our Podcast considers the Tax Court's application of the charitable documentation regulations to two real world cases. In the case of Kendrix v. Commissioner a former IRS CID employee and Revenue Officer is found to be lacking in the documentation for her many charitable contributions. While there appears to be reason for the court to believe the contributions to be overstated or not made at all, the court actually keeps returning to technical inadequacies in her documentation to actually deny the deductions. The judge even muses that the court may have erred in the past in allowing the use of the Cohan rule to be used when documentation didn't meet the requirements, but ultimately concludes that the issue doesn't have to be dealt with in this case case. That makes this case potentially troubling since that same logic would apply even if there was no question the donation was made. The second case is a Tax Court Summary opinion of Haas v. Commissioner where the court, among other things, get

Congress hates employees--that's a fact of life that a worker learns the hard way in the case of Alley v. Commissioner, (TC Summary Opinion 2006-4) that we discuss this week. Mr. Alley had a "creative" way of getting around the fact that Section 62 does not allow employee business deductions to be taken in computing adjusted gross income. Unfortunately for Mr. Alley, the Tax Court did not appreciate his creativity. The case offers an option to look at the overall structure of where deductions are taken and the controlling provisions, so it useful beyond just the employee business expense context. The supporting materials can be downloaded here. This Podcast is sponsored by Leimberg Information Services, Inc. at http://www.leimbergservices.com Please visit our software, books, and PowerPoint Presentations site at http://www.leimberg.com