Posts Tagged ‘Judge Posner’

Tax Roundup, 8/29/2013: Individual mandate regs go final. And: the office velociraptor!

Thursday, August 29th, 2013 by Joe Kristan

20121120-2Avik Roy,  White House Publishes Final Regulations For Obamacare’s Individual Mandate — Seven Things You Need To Know.  Key points:

You pay a fine if your spouse and kids are uninsured.

If you claim dependents on your tax return, you’re responsible for paying the mandate fines if your dependents don’t have health insurance.

This provision takes on special importance because of its interaction with Obamacare’s employer mandate. Under the health law, employers with more than 50 full-time-equivalent workers are required to offer health coverage to their employees and employees’ dependents under the age of 26. Employers are not required to offer coverage to employees’ spouses. Hence, a worker who gets coverage through his job will be forced, under the individual mandate, to purchase coverage on his own for his spouse, if he or she doesn’t have other sources of coverage. A worker who doesn’t get coverage through his job will need to purchase coverage not only for himself, but also his dependents.

But all is not lost:

The IRS can’t go after you if you don’t pay the fine.

Basically, the only thing the IRS can do to make you pay the mandate fine is to withhold it from your tax refund, if you’re due one. So if you carefully calibrate your withholdings, such that you aren’t due a refund at the end of the year, the IRS has no way to collect the mandate fine.

That is, until you overpay some year, or they change the rules.

Related: Health Care Act And The Road To Good Intentions  A guest post by Scott Lovingood at TaxGrrrl’s place.

Also: Ask The Taxgirl: Taxing Health Care Benefits   

 

TaxProf,  Seventh Circuit Joins Majority of Circuits in Upholding Valuation Misstatement Penalties in DAD Tax Shelter.  The “distressed asset debt” shelter would purportedly allow people who needed tax losses to get them by acquiring interests in partnerships with worthless South American consumer debt, using pretend basis from notes.  Judge Posner found it unconvincing:

The intention was simply to create the appearance that the investors’ interest in the partnership had a high enough basis to enable the entire built-in loss that the shelter investors had acquired to be offset against their taxable income. But all this means is that the investors should not have been permitted to deduct their entire built-in loss — yet in fact they shouldn’t have been permitted to deduct any part of it, because the partnership was a sham.

The DADs were among the least plausible of the mass-marketed shelters, and that’s saying something.

Cite: Superior Trading LLC, CA-7, No. 12-3367.

 

Phil Hodgen,  Green card received in 2007? Expatriate in 2013 or else.  Give us your huddled masses.  We’ll fix them!

20130607-2Sometimes the author and the story are made for one another.  Roche: Taxation of Medical Marijuana Businesses (TaxProf).  The story explains why the tax law isn’t kind to these folks:

Section 280E represents a departure from the longstanding practice of generally taxing illegal businesses in the same manner as legal businesses and effectively causes medical marijuana businesses to be taxed on their gross income rather than their net income. Medical marijuana businesses are, however, allowed to reduce their gross revenue by cost of goods sold in arriving at gross income. This puts medical marijuana businesses in the unusual position of wanting to capitalize as many of their otherwise deductible expenses to inventory as possible, unlike most businesses, which would prefer a current deduction.

It would be interesting to see an IRS exam where they want you to capitalize less to inventory.

 

Paul Neiffer, What’s my tax on selling equipment?  If it’s a gain, usually it’s ordinary income.

William Perez,  2012 Corporate Returns Due September 16.  Also, extended 1041s and 1065s.

 

Jack Townsend, Switzerland Reportedly Strikes Deal with U.S. for the “Other” Banks; Implications for U.S. Depositors.

Linda Beale, Swiss and US Apparently Reach Deal on Bank Disclosures related to Tax Evasion

 

Bounty hunting in Pennsylvania?  Philadelphia’s Use of Contingent Fee Auditors (Cara Griffith, Tax Analysts Blog)

 

I’m late to the new Cavalcade of Risk at My Personal Finance Journey.  Lots of good risk management items, including Hank Stern’s The Down Syndrome Conundrum.

What this country needs… What We Need Is a Godless Tax Code! (Christopher Bergin, Tax Analysts Blog)  Doesn’t Satanic count?

Kay Bell, State taxes, assorted fuel fees, drive up cost of a gallon of gas

 

Peter Reilly,   Tea Party Patriots Inc And IRS – Who Is Being Unreasonable ?  Peter seems to think that the IRS wasn’t clearly unreasonable in holding up Tea Party applications.  I think he misses the point — the whole process was one-sided.  Only right-side groups got the IRS slow-walk, while “progressive” applications skated through;

7-30-13-irs-targeting-statistics-of-files-produced-by-irs-through-july-29-2-Peter is right, though, when he says “We Really Should Not Have Accountants Trying To Figure This Stuff Out.”  John Kass explains how this stuff works in IRS scandal a reminder of how I learned about The Chicago Way

 

Career Advice: Would I Recommend the Tax Prep Industry to a Young Person? Probably Not  (Jason Dinesen:

Going Concern, Let’s Play Another Round of Accountant/Not an Accountant!  I found the first one too frightening to continue.

 

Finally - if you think you’ve had a bad day at the office, it could have been worse:

(via Lynnley Browning’s Twitter feed)

 

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Tax Roundup, 2/11/2013: Suing the driver of the getaway car for not going fast enough.

Monday, February 11th, 2013 by Joe Kristan

When a convicted criminal feels he has been ill-used by an accomplice, the normal recourse tends to involve unpleasant events in the prison gallery.  Lawyers are rarely consulted.  But when international tax cheating is involved, it apparently works differently.

A group of clients of Swiss bank UBS who claim that bad things happened to them as a result of their Swiss accounts sued UBS.  Seventh Circuit appeals judge Posner was distinctly unsympathetic (my emphasis):

The plaintiffs are tax cheats, and it is very odd, to say the least, for tax cheats to seek to recover their penalties (let alone interest, which might simply compensate the IRS for the time value of money rightfully belonging to it rather than to the taxpayers) from the source, in this case UBS, of the income concealed from the IRS. One might have expected the plaintiffs to try to show that they had forgotten they had accounts with UBS (though that would be preposterous, for these were significant investments for each of the plaintiffs). Or that UBS had told them that income earned in those accounts was somehow tax exempt and moreover that the accounts themselves were somehow not foreign bank accounts within the meaning of the tax code and so the plaintiffs didn’t have to acknowledge having accounts with UBS. They don’t make any of these feeble arguments. They do argue, as we’ll see, that UBS was obligated to give them accurate tax advice and failed to do so, but not that it gave them inaccurate, as distinct from no, advice.

While the IRS offshore compliance programs have abused many innocent Americans who have foot-fault violations, that doesn’t appear to be the case here.  A U.S. resident who set up a Swiss bank account probably didn’t do so to ensure tax compliance.

At worst, UBS, as we’re about to see, violated an agreement with the IRS designed to prevent the kind of evasion that the plaintiffs engaged in. That might conceivably make UBS an aider or abettor of the plaintiffs’s tax evasion and so make this case a distant relative to Everet v. Williams (Ex. 1725), better known as The Highwayman’s Case and eventually reported under that name in 9 L.Q. Rev. 197 (1893). A highwayman had sued his partner in crime for an accounting of the illegal profits of their criminal activity. The court refused to adjudicate the case, and both parties were hanged. Minus the hanging and with certain exceptions (such as contribution and indemnity) irrelevant to this case, the principle enunciated in The Highwayman’s Case applies to accomplices in civil wrongdoing, as noted in our recent decision in Schlueter v. Latek, 683 F.3d 350, 355-56 (7th Cir. 2012). In The Highwayman’s Case one accomplice was seeking a bigger share of the profit from the crime from the other one; here one accomplice is seeking a smaller share of the costs of the crime from the other one. The principle is the same; the law leaves the quarreling accomplices where it finds them.

The moral?  Your banker isn’t your tax advisor, and when you are cheating, you are on your own.  At least in Judge Posner’s court.

More coverage: TaxProf, Posner:  Tax Cheats Suing UBS for Not Stopping Them From Cheating Like Suing Parents for Not Raising Them to be Honest

 

Overwhelming?  A Tax Analysts story on the fallout from the Loving decision overturning the IRS preparer regulation program reports:

“There is overwhelming support for registration” among EAs, said Frank Degen, president of the National Association of Enrolled Agents. While preparers are watching to see what an appeals court will do — as the IRS said it would file an appeal soon — “most practitioners are just interested in cranking out those 1040s right now,” Degen said.

I’d want to see some polling showing that “overwhelming” support.  The preparer regulation program strikes me as potentially fatal for the Enrolled Agent brand.  EA’s, who have to pass a much stricter test and more stringent continuing education requirements than the registered preparers would have to, already have difficulty marketing their additional qualification.  The IRS blessing of a competing bargain brand could easily bury the EA designation.  At the very least, I see no overwhelming support for the preparer registration program from EA-bloggers Jason Dinesen and Russ Fox.

 

To your health!  Compliance with ObamaCare Estimated to Take 127.6 Million Hours (Kyle Pomerleau, Tax Policy Blog).

Martin Sullivan, State of the Union: Stasis or Progress on Taxes? (Tax.com).  My bet is on stasis.

Doom.  What You Should Know About the Budget Outlook (William Gale, TaxVox).:

Even if seemingly everything goes right – in economic terms and in political terms – we are still on the edge of dangerously high debt and deficit levels with little room to spare.

Nah, we’re over the edge:

20130211-1

 

Jana Luttenegger,  Social Media and Other Digital “Assets” After Death. (Davis Brown Tax Law Blog)  If I die, please take me out of my high school reunion Facebook group.

William Perez,  IRS Announces Start Dates For Processing Some Tax Returns.  Y0u can file a return with depreciation starting today, and one with education credits starting Thursday.

Claudia Hill, Can This Tax Filing Season Be Saved? (Via @janetnovack’s Twitter Feed).

Paul Neiffer, Crop Insurance Proceeds on Feed Consumed by Livestock

And then pay your bill timely.  4 ways to be a better tax client (Kay Bell)

Patrick Temple-West, Higher payroll tax pinches those with the least to spare, and more

Jack Townsend, A Tax Curmudgeon Offers Ideas on Tax Compliance

Tax Trials,  IRS Releases Schedule UTP Statistics for 2011.  1,783 taxpayers filed forms disclosing Uncertain Tax Positions for 2011.  Seems low.

Peter Reilly,  Is IRS Persecuting Kent Hovind For Creationism ?  His tax planning shows little evidence of intelligent design, anyway.

Proposed by a guy wearing wing-tips, no doubt.  Lawmaker Proposes Sneaker Tax, Retailers Opposed (TaxGrrrl)

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IRS gives up on S-corporation bank ‘TEFRA’ disallowance

Wednesday, December 15th, 2010 by Joe Kristan

The IRS has given up its argument in a closely-watched S corporation bank case. The IRS has published an “acquiescence in result only” (AOD 2010-06) in Vainisi.
The tax law provides two sets of interest expense disallowance rules for banks with tax-exempt income. The first rule, enacted in the 1982 “TEFRA” tax act as Code Sec. 291(a)(3), disallows 20% of interest expense attributable to “bank qualified” tax exempt obligations. The attribution is made using a ratio of tax-exempt investments to bank assets. Another Code section disallows 100% of interest expense attributable to “non-qualified” exempt bonds.
When Congress changed the law in 1996 to allow banks to become S corporations, banks quickly noticed that Subchapter S addresses Sec. 291. Sec. 1363(b) says:

The taxable income of an S corporation shall be computed in the same manner as in the case of an individual, except that

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Posner prose

Tuesday, November 9th, 2010 by Joe Kristan

The TaxProf has some of 7th Circuit appeals judge Richard Posner’s memorable tax quotes. Lots of good stuff, including these two sad observations:

“It is a long time since American government operated on the principle that government governs best which governs least. Much modern legislation involves targeting government largesse on politically influential groups and the burdens of government on politically impotent ones. Not infrequently the legislation benefits a tiny handful of individuals or firms or even a single firm

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S corporation banks score big win in Seventh Circuit

Thursday, March 18th, 2010 by Joe Kristan

Sometimes the tax code means just what it says.
So said the Seventh Circuit Court of Appeals yesterday in a decision that’s welcome news for hundreds of S corporation banks. They overturned a Tax Court decision that disallowed interest deductions to S corporation banks holding municipal bonds — primarily Midwestern community banks.
The tax law has two provisions that disallow deductions for banks holding municipal bonds. One rule, Section 265, disallows all interest deductions attributable to purchases of “non-qualified” municipal bonds purchased after August 7, 1986. Another rule, Sec. 291, disallows 20% of the interest expense attributable even to “bank-qualified” bonds not subject to the Sec. 265 disallowance. In both cases the amount of the interest expense disallowance is determined by the ratio of the bank’s investment in muni bonds to their total assets.
Another Section of the Code, Section 1363(b)(4), seems to exempt S corporations from the 20% disallowance on “bank-qualified” bonds — known among bankers as the “20% TEFRA” disallowance — after three years of S corporation status.

(b) Computation of corporation

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