Tax Roundup, 11/20/2012: Obamacare guidance high on IRS to-do list. Plus: Grover takes hostages!

November 20th, 2012 by Joe Kristan

Obamacare rules prominent in IRS plans for new guidance.  The Treasury and IRS have released their “Priority Guidance Plan” for the current fiscal year.  Tax Analysts reports ($link)

The plan contains 18 healthcare-reform-related projects that will likely take up a considerable portion of Treasury and the IRS’s time. Some time-consuming, tax-related portions of that law, such as the net investment income tax, the excise tax on some medical devices, and the indoor tanning tax, become effective on January 1.

Actually, the tanning tax has been in effect since 2009.  The Section 1411 tax on investment income is a huge tax planning issue.  Three years after the enactment of Obamacare, many basic questions about the tax remain unanswered, including:

  • Will “self-charged” rental income that is non-passive under the passive loss rules be subject to the 3.8% tax?
  • Will rental income earned by “materially participating real estate professionals” be subject to the tax as rent, or exempted as business income?
  • Will pass-through interest earned by S corproation banks be interest, subject to the tax, or business income exempt from the tax for materially-participating shareholders?
  • Will farmers be taxed at the 3.8% on CRP and crop share income?

We should expect at least a set of temporary regulations next month.

 

Norquist: some Democratic senators will rebel against letting high-income tax cuts expire.  From The Hill:

Conservative anti-tax advocate Grover Norquist says the 20 Senate Democrats facing re-election in 2014 will be the “hostages” who will ensure that President Obama does not raise the Bush-era tax rates.

That isn’t the party line, as Democrats have said they would go over the fiscal cliff before letting “the rich” keep current tax rates.  Grover thinks not:

But Norquist thinks vulnerable senators up for re-election in two years will force Democrats to back down, as they did in 2010 by extending virtually all of the Bush tax cuts for two years.

 “Last time Republicans won the House and [were] a little strengthened in the Senate and Obama folded completely. We’re going to be stronger this time than after last time; our hostages are the 20 Democrats up in ’14.

Grover is an astute observer, but President Obama may play the role of Russian special forces in this hostage drama, ensuring destruction all around.

 

Patrick Temple-West,   Investors rush to beat threat of higher taxes, and more (Tax Break)

Paul Neiffer,   Talk Brewing of Extending the Payroll Tax Cut.  That would be news, as this had not been part of the year-end tax legislation discussion.  It seems unwise to accelerate the demise of social security by reducing funding, but wisdom isn’t found much in our political class.

William Perez,   Possible Delay to Filing Season Due to Late-Passing Legislation, IRS Warns.  Nice way of saying “we’re doomed.”

 

Nick Kasprak,  Monday Map: Dividend Income by State:

Iowa ranks a lowly 43rd in percentage of gross income made up of dividends.

 

Peter Reilly,   IRS Position On Wandry Decision Makes 2012 Gifting More Difficult.  With free Dr. Who references!

Seems unwise.   Paying more in taxes to burnish EPS  (Nanette Byrnes, Tax Break)

That might explain why we’re still working.  Most of us who plan to retire aren’t yet financially ready for it (Kay Bell)

 

Ex-lineman suspended from life for 28 months.  While everyone who goes through big-time college football programs can claim some level of higher education, it doesn’t always do a lot of good.  A case in point:

Former Syracuse University lineman Louis Gachelin has been sentenced to 28 months in federal prison in an undercover FBI tax fraud investigation.

The U.S. Attorney’s Office reports that the 31-year-old Gachelin was sentenced Monday. He pleaded guilty in July to theft of government money and identity theft.

It apparently doesn’t go better for players in “skill” positions.  The same report says two former NFL players, including a running back,  have pleaded guilty in related cases out of an FBI sting using an “undercover check cashing store in North Miami” to catch identity thieves.

 

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