Posts Tagged ‘News from the Profession’

Tax Roundup, 10/1/15: Carried interests are good for you. State tax incentives aren’t.

Thursday, October 1st, 2015 by Joe Kristan

Public domain image via WikipediaSympathy for the Devil. The devil is “carried interest” taxation of partnerships interests. Megan McArdle discusses this devilry in Sure, Debate Carried-Interest Taxes. Or Something That Matters.:

It’s fundraising gold for Democrats, and a perennial talking point for liberal columnists: hedge funders pay taxes on some of their income at the lower rate for capital gains, rather than the higher rates assessed on “ordinary income” (read: money you earn by working).

If you only know about it from politicians, you get the idea that the only beneficiaries of the carried interest are hedge fund managers who light their cigars with $100 bills. If you see it in tax practice, though, it looks different.

The “carried interest” is really a profits interest, or a preferential allocation of profits, to an employee or manager of a partnership. A private equity manager might get no current equity in an investment, but a portion of the profits. The same rule lets a partnership give an interest in future earnings to the business’s managers or employees. It’s a partnership version of stock options (options are allowed for partnerships, but the differences between partnership and corporation taxation makes options less attractive in partnerships).

Carried interest opponents find this “abusive” when the business does well and gets sold. The result is a portion of the gain on the sale of the business goes to the managers and employees with carried interests, who may have not put cash into the business. But it’s the same total amount of gain taxed. It’s just that some of it gets allocated from the investors to the managers. The investors are presumably fine with it because they have gain to share — that’s why they cut the managers and employees into the deal in the first place.

But isn’t this abusive because it treats “compensation” as capital gain rather than ordinary? Not really — the investors are forgoing the same ordinary deduction, so the net effect is the same. There’s no conceptual reason why a profits interest — which by definition has no value when granted — can’t generate capital gain. (Of course, I think taxing capital gains in the first place is the real abuse). And in many cases the carry includes an allocation of ordinary business income in tax years prior to the sale, so for that part of the deal, there’s not even a conceptual abuse.

Ms. McArdle is puzzled about the attention the issue gets:

The carried interest issue is thus a convenient way for Democrats making stump speeches to claim that they’re really going to do something about inequality and cronyism, and maybe fund some important new spending on hard-working American families. With the entrance of Jeb Bush and Donald Trump into the arena, it is also a way for Republicans to seem tough on rich special interests while simultaneously proposing tax plans that will help affluent Americans hold on to a lot more of their income and wealth.

As with most Washington Issues, my actual level of concern about carried-interest taxation hovers somewhere between “neighbor’s bathroom grout drama” and “Menudo reunion tour.” Nonetheless, I’m beginning to wish that Congress would get rid of it without demanding anything in return, just to force politicians to talk about something that actually matters.

I’m less willing to just go along. Any “reform” of carried interest will complicate an already byzantine partnership tax law. It will inevitably create traps that will cause tax pain for people just trying to run their business and put beans on the table. At worst, it can become a potential nightmare like the Section 409A rules, which were enacted to punish long-defunct Enron, but which now menace any employees who have a deferred comp deal with their employer.

And of course any carried interest “reform” won’t shut up those who want to jack up taxes on “the rich” for more than a moment before they find another hate totem.

Related, but not agreeing: Peter Reilly, President Obama Could End Special Tax Treatment For Two Twenty Guys



Don Boudreaux, a blogging economics professor, makes a good case against the Export-Import Bank that works just as well against state “economic development” subsidies and tax credits (my emphasis):

Second, subsidies doled out by governments weaken, not strengthen, their economies.  To see why, suppose that other governments conscript all 22-35 year olds within their borders and force these conscripts to work at subsistence wages for the industries located within those countries.  Further suppose that the results are beneficial for corporate shareholders in those countries: their companies export more and rake in higher profits than they would without such conscription.  Should Uncle Sam therefore follow suit? 

Economically, the only difference between export subsidies as they exist today in reality and the above hypothetical is that real-world export subsidies are less extreme than is conscription.  Yet no essential economic difference separates real-world subsidies from such hypothetical conscription: each is a government policy of forcibly seizing resources from some people in order to bloat the purses and wallets of other people.

Substitute “economic development tax credits” for “subsidies” and “other states” for “other countries,” and you have the case against the tax credits paid for by Iowa taxpayers to lure and subsidize their competitors.


David Brunori, A Word of Advice for Legislators of All Stripes (Tax Analysts Blog). You should read the whole thing, but I especially like this: “That politicians can impose economic policy through tax incentives is more akin to a Soviet five-year plan than to anything Adam Smith ever said.”



Russ Fox, TIGTA: “IRS Can’t Track International Correspondence.” IRS: “So What.” “It turns out that the IRS doesn’t know what happens to much of the mail the agency sends overseas.” And it doesn’t much care.

TaxGrrrl, Government Shutdown Avoided For Now: Funding Bill Only Temporary.

Kay Bell, Federal government funded for 10 more weeks




TaxProf, The IRS Scandal, Day 875. Today’s installment features Robert Wood on newly-revealed bonuses to IRS employees:

As you read about bonuses, you might recall other reports saying that 61% of IRS employees caught willfully violating the tax law aren’t fired, but may get promoted.

And people wonder why anyone might not want this organization regulating tax preparers.


News from the Profession. Accounting Had a Toxic Culture Before It Was Cool (Leona May, Going Concern). “As ‘The Great Email Chain of 2013’ demonstrates, the public accounting workaholic culture has spawned a whole bunch of work-obsessed, white-collar monsters.”

Well, our little firm isn’t so monstrous. If you feel abused and would like to live in Central Iowa, drop me a line. We might be able to improve things for you.




Tax Roundup, 9/29/15: Iowa, worst of the worst in corporate taxes. And: Trump, CPA extinction events, more!

Tuesday, September 29th, 2015 by Joe Kristan

20120906-1The U.S. Corporation tax is the worst in the OECD. So that makes Iowa… The Tax Foundation yesterday released its 2015 International Tax Competitiveness Index, an international counterpart to their State Business Tax Climate Index. The news isn’t good for the U.S. (my emphasis):

The United States provides a good example of an uncompetitive tax code. The last major change to the U.S. tax code occurred 29 years ago as part of the Tax Reform Act of 1986, when Congress reduced the top marginal corporate income tax rate from 46 percent to 34 percent in an attempt to make U.S. corporations more competitive domestically and overseas. Since then, member countries of the Organisation for Economic Co-operation and Development (OECD) have followed suit, reducing the OECD average corporate tax rate from 47.5 percent in the early 1980s to around 25 percent today. In 1993, the U.S. government moved in the opposite direction, raising its top marginal corporate rate to 35 percent. The result: the United States now has the highest corporate income tax rate in the industrialized world.

Iowa’s 12% rate is the highest state corporate tax rate in the U.S. Iowa’s corporation tax ranks 49th out of 50 states in the 2015 State Business Tax Climate Index. That makes us extra-special.

The United States places 32nd out of the 34 OECD countries on the ITCI. There are three main drivers behind the U.S.’s low score. First, it has the highest corporate income tax rate in the OECD at 39 percent (combined marginal federal and state rates). Second, it is one of the few countries in the OECD that does not have a territorial tax system, which would exempt foreign profits earned by domestic corporations from domestic taxation. Finally, the United States loses points for having a relatively high, progressive individual income tax (combined top rate of 48.6 percent) that taxes both dividends and capital gains, albeit at a reduced rate.

Estonia gets the best scores:

Estonia currently has the most competitive tax code in the OECD. Its top score is driven by four positive features of its tax code. First, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income. Third, its property tax applies only to the value of land rather than taxing the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of the foreign profits earned by domestic corporations from domestic taxation, with few restrictions.

Unfortunately, for some of the current presidential candidates, the worst features of the U.S. system are their favorite parts.




Robert D. Flach’s Tuesday Buzz rounds up topics from Blue-to-Red migration, saving too much (hard to do), and the tax costs of stock sales.

Russ Fox, Cash & Carry Your Way to Tax Evasion:

Mr. Kobryn was determined to lower his tax burden. Instead of making sure all expenses were noted on his tax returns and perhaps contributing to a SEP IRA, he decided to not deposit all of the cash into his business bank account. He knew about the currency transaction reporting (CTR) rules, so he made his cash deposits just under $10,000 and deposited them into several branches of his local bank.

That’s a reliable way to attract IRS attention.

Robert Wood, Lance Armstrong Legal Settlement Makes Tax Problem On Steriods. He paid tax on his biking income, but deducting the lawsuit costs isn’t so straightforward.

Stephen Olsen, Summary Opinions for the week ending 8/28/15 (Procedurally Taxing). This roundup of recent tax procedure developments includes a baby picture, no extra charge.




Megan McArdle, Obamacare’s Nonprofit Insurers Are Failing, Predictably. Iowa’s CoOportunity was only the first.

TaxProf, The IRS Scandal, Day 873


Howard Gleckman, Trump Proposes a Huge Tax Cut. YUUUGE!

Peter Reilly, Trump’s Plan Inverts Traditional Tax Planning Makes Carried Interest Moot. “If you think that Trump will win and enact this program normal tax planning is the order of the day.”

Kay Bell, Trump’s ‘amazing’ tax plan zeroes out taxes for some.


News from the Profession. In Order Save the Accounting Profession, It Has to Be Destroyed First (Caleb Newquist, Going Concern). “I’ll even take it a step further and say a mass extinction is exactly what the accounting profession needs.”



Tax Roundup, 9/28/15. IRS logic: A and B are part of set X. A is part of Set X, so B isn’t. And: Blood Moon!

Monday, September 28th, 2015 by Joe Kristan


Flickr image by Sage under Creative Commons license

Flickr image by Sage under Creative Commons license

On further review, it’s silly. I’ve had a weekend to think about last weeks IRS “Action on Decision” to continue trying to collect self-employment tax on Conservation Reserve Program payments in the Eighth Circuit. It’s a poke in the eye of the court, and one that will probably not help the IRS when it inevitably has to defend itself before the Eighth Circuit Court of Appeals.

The gist of the IRS position is that because legislation was enacted in 2008 that specifically stated that CRP payments are payments for renting real estate, and therefore, not self-employment income, to taxpayers collecting Social Security, they suddenly become self-employment income to everyone else.

The Eighth Circuit majority ruled in Morehouse that CRP payments to non-farmers pre-2007 were real estate rentals. Logically, saying that a subset of those payments are real estate rentals shouldn’t by itself make other payments something else. But that’s what the IRS argues.

Unfortunately, the IRS has now made uncertain a seemingly-settled area of the tax law. They did so by taking a position that, if taken by a taxpayer, might trigger negligence penalties. It really is another example of the need for a “Sauce for the Gander” rule that would make the IRS liable to taxpayers for penalties for faulty IRS positions in the same way taxpayers have to pay penalties for bad positions to the IRS.

Prior Coverage at IRS: Post-2007 CRP payments remain self-employment income unless you collect Social Security.


Scott Sumner has posted an outstanding set of tax policy observations: Our bizarre system of taxing capital (Econlog). You really should read the whole thing, but I’ll give you a taste:

It’s difficult to think of a more bizarre and foolish policy than the practice of taxing capital. Consider:

1. If it were appropriate to pay taxes on capital gains, why wouldn’t it be appropriate to pay negative taxes on capital losses? Economic theories tend to be symmetrical. And yet capital losses do not result in negative taxes, except in certain limited cases. And why only those cases?

2. Economic theory suggests that two people with essentially identical economic outcomes should pay identical taxes. But consider two people who both bought 1000 shares of Apple stock for $50/share at the beginning of the year. One sold the shares on November 9th at $100 and bought them back 5 minutes later at the same price. Both held 1000 Apple shares at year-end. To an economist those two outcomes are essentially identical. But one person must pay a large tax on capital gains, while the other does not. Why?

A fan of capital gain taxes would say that just means we should tax unrealized capital gains. Mr. Sumner is not such a fan:

A simpler and fairer solution would be to abolish all taxes on capital, and start over.

But because that would help “the rich,” it isn’t happening. Nothing is too stupid or counterproductive to do to them.


"Blod moon" photos by Jose Guerrero, taken in Columbia. Used by permission.

“Blood moon” photos by Jose Guerrero, taken in Colombia. Used by permission.



A client should not take the finished returns from his/her tax professional and just sign and mail without actually looking at them. The client should carefully review all the forms and schedules that make up the returns before signing the return, and ask the preparer if there is something that he/she does not understand.

And that is the problem with clients who wait until the very last minute — I mean October 15, when no further extensions are available — to finish their tax information. They obviously aren’t going to give the return a good review when they have to immediately sign the e-file authorization or run it to the post office. But if there is something seriously wrong, the IRS isn’t going to take “I didn’t have time to review before filing” as an excuse.


Kay Bell, Electric vehicle tax credits favor the wealthy. You don’t see many Teslas, or for that matter Chevy Volts, in poor neighborhoods.

Paul Neiffer, Involuntary Conversion of Livestock. “If a farmer sells livestock because of consequences of a drought, the payment of income tax on the taxable gain from the sale may be postponed.”

Jason Dinesen, How to Calculate an RMD. If you don’t start withdrawing from your IRA when you hit 70 1/2, the penalties pile up.

Jim Maule, Taxation of Prizes, Question One. “So a person wins a prize, tells the company awarding it that the winner cannot accept it because it will be taxed, creating a liquidity problem, and the company spokesperson says, in effect, ‘Not a problem, it’s not in cash, we won’t send a Form 1099.'”

Peter Reilly, A Slick Estate Planning Trick And Intimations Of Mortality. “The Tax Court decision in the case of Jean Steinberg is a great example of planners taking a rule that is meant to prevent taxpayers from getting away with something and using it to, well, get away with something.”

Russ Fox, Neymar Tax Evasion Investigation Continues; Judge Freezes $48 Million of Assets. Considering how impossible Brazil’s tax system is, it would be surprising if somebody there weren’t guilty of a tax crime.


brazil chart 2


Tony Nitti, House Bill Would Give Tax Deduction, Credit In Exchange For Learning Science And Math. The tax law. Is there anything it can’t do?


Jack Townsend, GE Asks the Supreme Court to Screw Up Again to Bless a BS* Tax Shelter. *Expletive deleted.

Leslie Book, Fifth Circuit Tackles Intersection of TAO Rules and Statutes of Limitation (Procedurally Taxing). “Earlier this week in Rothkamm v US, the Fifth Circuit issued an opinion that considered whether a wife’s application for a Taxpayer Assistance Order (TAO) concerning a recovery of funds levied from her bank account to satisfy her husband’s tax debt tolled the nine-month wrongful levy statute of limitations.”




David Brunori on historic preservation credits ($link): “Nothing says boondoggle like giving rich folks tax dollars to fancy up old buildings.”

TaxProf, The IRS Scandal, Day 870Day 871Day 872. Including musings about how the IRS gagged on Tea Party gnats but swallows Clinton Foundation camels.

Scott Greenberg, Senate Democrats’ Bill Would Overhaul the Treatment of Energy in the Tax Code (Tax Policy Blog):

Currently, nearly every source of energy is subsidized to some extent by the federal government. This means that the U.S. economy is more energy-heavy than it would be under normal market conditions, leading to an inefficient allocation of resources. The Senate Democrats’ bill would continue to heavily subsidize energy production in the United States.

In general, tax expenditures, such as energy subsidies, leave the federal government with less revenue, requiring higher tax rates overall on individuals and businesses.

Anybody who thinks Congress will wisely allocate these subsidies to create our optimal energy use mix for the country hasn’t been paying attention in recent decades.

Renu Zaretsky, A Resignation, and… Resignation. Today’s TaxVox headline roundup covers the implications of Speaker Boehner’s resignation, a politician promising more tax credits! and the sublime awfulness of trying to pay business taxes in Brazil.


News from the Professon. Deloitte Dabbles in Orwellian Tracking Devices (Greg Kyte, Going Concern). “The gadget looks and works like what you would expect if an ID badge had sex with an iPhone.”



Tax Roundup, 9/22/15: A resounding call to document your mileage. And: preparer regulation, IRS service, lots more!

Tuesday, September 22nd, 2015 by Joe Kristan


No Walnut STYou know you’re having a bad day in Tax Court when:

After concessions, the remaining issue relating to deductions claimed on petitioner’s Schedule A is whether she is entitled to deduct an additional $1,616 of mileage expense that she claimed as part of her unreimbursed employee business expense deduction. The answer is a resounding no.

I’m pretty sure that the Tax Court judges never read their opinions out loud, so I don’t think it was literally resounding. Still, it’s fun to imagine Judge Marvel calling the court into session, calling out a booming “NO!” and then adjourning.

The “no” may hae been resounding because of a little error the Judge detected in the taxpayer’s evidence. The taxpayer claimed mileage deductions for going between work locations. Travel expenses have to meet the special substantiation requirements of Sec. 274(d), where the taxpayer maintains evidence, such as calendars or mileage logs, to prove the deduction. This taxpayer went through a lot of effort generating a log from her work history. However…

Petitioner testified at length regarding how she prepared the reconstructed log. She testified under oath that she had worked for both ATC and MSN throughout 2007 and carefully explained her work assignments for each employer, including her work assignments for ATC from January through September 2007. Unfortunately for petitioner, the document that ATC provided to her summarizing her work history with ATC shows that she did not start her employment at ATC until October 2007. That document demolished any credibility that petitioner’s reconstructed log and her sworn testimony might otherwise have had. [emphasis added]

The Moral? No matter how much effort goes into reconstructing your unreimbursed work mileage, it doesn’t help you if you didn’t actually have the job.

Cite: Spjute, T.C. Summ. Op. 2015-58




Bryan Camp has a long piece in Tax Notes today ($link) arguing that the IRS can and should “cut and paste” its way into a new preparer regulation regime. I won’t argue the legalisms, though I think if the IRS thought it plausible, it would have tried it already.

I will point out that in an article with 101 footnotes, there is no discussion of additional costs to the taxpayers, or whether the benefits exceed those costs. He discusses evidence that “unregulated” preparers make more errors, and he assumes that regulation will fix the problem. That’s not necessarily so. It’s hard to imagine the perfunctory examination and CPE requirements of the old RTRP program would improved preparation. You can make somebody take a test, but you can’t make them competent.

Mr. Camp also ignores the unintended but predictable effects of the inevitably-increased price of preparation on the quality of tax returns received by IRS. If prep price goes up, more taxpayers will do their own returns, almost certainly at a higher error rate than from paid-for preparation. Other taxpayers will drop out of the system rather than pay higher prep costs.

In short, regulation advocates assume regulation will solve the problems of inaccurate returns. That’s unproven but unlikely. It is likely, though, that it will increase taxpayer costs and push customers away from paid preparers, which creates a new set of problems.

Related: Leslie Book, AICPA Defends CPA Turf and Challenges IRS Efforts to Regulate Unenrolled Preparers (Procedurally Taxing)


buzz20140909Robert D. Flach has fresh Buzz today, with links ranging from silly tax proposals to silly home office deductions.

Paul Neiffer, What About Those AFRs? “Periodically I will get a question from a client asking me ‘How much interest they have to charge on a loan to their child or some other related party?’. ”

Kay Bell, Meet Obamacare deadlines or pay the higher tax price. “If you don’t file last year’s return, you won’t be able to claim an advance premium tax credit to help you pay for your 2016 Obamacare coverage.”

William Perez, What Tax Documents to Bring to Your Accountant?


Tony Nitti, Tax Geek Tuesday: Making Sense Of Partnership Book-Ups. A primer on adjusting capital accounts to reflect the price paid when partners enter or leave a partnership.

Russ Fox, We Don’t Need No Stinkin’ Phone Calls.

So let’s translate this into reality. In the 2013 fiscal year, 22,363,345 phone calls were attempted to various IRS toll-free lines; 15,609,615 were answered (69.8%). In the 2015 fiscal year, 22,013,468 phone calls were attempted to various IRS toll-free lines; 8,277,064 were answered (37.6%). As for the time on hold allegedly decreasing to 23.5 minutes, perhaps that’s after excluding all the time some of the 7 million people who called but whose calls were dropped or who hung up spent on the phone.

I think the IRS cuts in customer service are a sort of “Washington Monument Strategy” of cutting the most visible and useful aspects of taxpayer service to pressure Congress into providing more funds. I’ll believe the IRS is serious about its customer service issues when the IRS takes its 200 employees who spend all of their time doing Treasury Employee Union work and puts them on the phones.

Robert Wood, Let’s Tax Churches. I’m sure that won’t be controversial…

Peter Reilly, The Tax Code Explained & Why It Matters In This Presidential Race (No, It’s Not 70K Pages)

Jack Townsend, Wyly Brothers Seek Bankruptcy Relief from Disgorgement Order from Offshore Shenanigans




TaxProf, The IRS Scandal, Day 866

Martin Sullivan, Donald Buffett? (Tax Analysts Blog). Looking for tax wisdom in all the wrong places.

Renu Zaretsky, Inversions, Schools, and Supermarkets. Today’s TaxVox roundup covers the ground from tax increases in Chicago to tax favors for supermarkets in Baltimore.


Sebastian Johnson, Progressive Era Reform Can Be Anything But Progressive (Tax Justice Blog). “Supermajority requirements and tax and spending limits, two frequently proposed ballot measures, are not designed to promote the well-being of states.”

The point isn’t the well being of the state; it’s the well-being of the citizens.


News from the Profession. Accountant Hiding on the Appalachian Trail Has the Mugshot to Prove It (Caleb Newquist, Going Concern). “If you were an accountant accused of making off with about $9 million of your employer’s money, I can think of few places better to hide than the wilderness.”



Tax Roundup, 9/14/15: Hatch, Wyden sneak preparer regulation into ID theft bill. And more!

Monday, September 14th, 2015 by Joe Kristan

No Walnut ST“Bipartisanship” means they’re ganging up on you. UtahPolicy reports: Hatch, Wyden Announce Markup of Bipartisan Bill to Prevent Identity Theft and Tax Refund Fraud. In the 20-item summary of the “Chairman’s Mark,” this is buried as item 15 (my emphasis):

In June 2011, the IRS issued final regulations that established a new class of tax practitioners known as “registered tax return preparers” that it sought to regulate for the prepared by these now unregulated tax return preparers. There is substantial evidence indicating that incompetent and unethical tax return preparers are harming both their clients and the government. Most of the tax returns that involve refundable tax credits are prepared by unregulated tax return preparers.

Since 2011, the D.C. District Court (and the D.C. Circuit affirming on appeal) has prevented the IRS from enforcing these regulations on the grounds that the IRS’ authority to regulate practitioners is insufficient to permit regulation of tax return preparers who do not practice or represent taxpayers before an office of the Treasury Department.

The provision provides the Treasury Department and the IRS with the authority to regulate all aspects of Federal tax practice, including paid tax return preparers, and overrides the court decisions described above.

Preparer regulation wouldn't have bothered Rashia.

Preparer regulation wouldn’t have bothered Rashia.

Of course, increasing preparer regulation does absolutely nothing to fight identity theft.  People don’t go to unregulated preparers to arrange to have their identities stolen. Paid preparers aren’t the people who steal identities. That nasty work is done by others. It’s done by organized crime gangs in the old Soviet Union. It’s done by semi-literate street grifters in Florida. It’s done by street gangs. It’s even done by IRS agents.

Fighting ID theft by regulating preparers is like fighting pickpockets by regulating laundromats. Making tax preparers take a competency literacy test won’t touch the ID theft problem. Nor will crooks stop claiming bad refunds because the IRS wants them to take a test.

Fortunately, a powerful senator makes an impassioned argument against giving the IRS more power over preparers:

“Protecting the private information of taxpayers at the Internal Revenue Service should be of highest importance to the agency and Congress. Unfortunately, as we learned this year, highly valuable information housed at the agency is susceptible to cybercriminals.  Since this threat will not end, Congress should take appropriate bipartisan action to implement needed legislative policies that will better protect taxpayers and shield taxpayer dollars from thieves.”

Oh, I’m sorry, that’s Senator Hatch arguing that this incompetent agency should get more power over preparers. Does he even read his own stuff?

The IRS already has tools to deal with bad preparers, as the weekly parade of injunctions and indictments of preparers attests. What the IRS wants is more power and less of that annoying due-process stuff. It’s supported in this by the large tax prep franchise outfits, one of whose executives wrote the rules that the courts struck down. The big tax prep outfits want to increase barriers to entry to grow their own market share. Big companies can spread the cost of regulatory compliance over a large base of business; a sole practitioner has to absorb the cost alone. An IRS paperwork glitch that can ruin a single preparer does nothing to H&R Block. Regulation always favors the big.

The President’s recent report on excessive occupational licensing notes:

There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.

They certainly aren’t doing so here. They plan to mark up the bill Wednesday morning. Contact your senator and representative to oppose this IRS power grab on behalf of its friends Henry and Richard.


TaxProf, The IRS Scandal, Day 856Day 857Day 858. Yes, let’s give these people more power over preparers, they’ve shown we can trust them.




Kay Bell, Congress faces a crowded year-end legislative schedule. Not too crowded to find time to help out Henry and Richard.

William Perez, 5 Tips for the 3rd Estimated Tax Payment of 2015. It’s due tomorrow!

Robert D. Flach, MAKE YOUR LIFE EASIER AT TAX TIME BY SAVING ALL COLLEGE INFO NOW. “FYI – beginning with tax year 2016 (for returns to be prepared in 2017) you must have a Form 1098-T in order to claim an education credit or deduction on your Form 1040 (or 1040A).”

Russ Fox, Defalcations Send Randolph Scott to ClubFed. An estate tax attorney decides he needs the money more than the IRS does.

Jason Dinesen, Iowa Society of EAs to Host CPE Extravaganza. October 19 and 20, West Des Moines. “This seminar is open to any tax pro who needs CPE, so CPAs and attorneys are welcome to attend.”

Annette Nellen, Tell me – hot state tax issue of 2015?

Peter Reilly, Jeb Bush Tax Plan Could Disrupt Real Estate And Small Business. “Bush tax plan calls for elimination of business interest deductions.”

Robert Wood, Marijuana Taxes Go Up In Smoke For One Day In Colorado. Isn’t that the point?




Scott Greenberg, Yahoo Spinoff of Alibaba Sheds Light on Problems with the Corporate Tax System (Tax Policy Blog):

These three obstacles – double taxation, legal complexity, and regulatory uncertainty – are present in many areas of corporate tax law, not just Yahoo’s spinoff of Alibaba. And all three significantly hinder American business operations, slowing down economic growth. The ongoing saga of Yahoo is one more example of why fixing the corporate tax code must be a priority of the federal government.  

I would add that Yahoo also ran into a politicized IRS that was under pressure to kill the deal.

Elaine Maag, Tax Subsidies for Childcare Expenses Target Middle-Income Families, Missing Many Poor Parents. (TaxVox)


News from the Profession. This CPA’s Mugshot Will Haunt Your Dreams. (Caleb Newquist, Going Concern).




Tax Roundup, 9/3/15: How to cut the IRS in on your foreign inheritance. And more!

Thursday, September 3rd, 2015 by Joe Kristan

20150903-1Uncle Heinrich from the old country left you a bundle. Congratulations! Make sure to tell the IRS.

Why, you ask, should I tell them? Inheritances are tax-free, after all.

Well, yes. But the IRS still wants to know about them. And if you don’t tell them, you may be cutting the IRS in on 25% of the gift.

The tax law requires you to file Form 3520 to report gifts or bequests from a foreign source if they exceed $100,000 (or $13,258 if received from a foreign corporation or partnership). This return is due at the same time as your income tax return, including any extensions, but it is filed separately. The penalty for not reporting is 5% of the unreported amount per month, up to 25%.

What if Uncle Hans gives you $75,000, and his wife Aunt Anne-Sophie gives you another $75,000? Then the gifts are counted together and exceed the reporting threshold.

I will be talking about these and other easy-to-overlook  international reporting requirements that can arise in estate planning and administration at the ISU Center on Agricultural Law and Taxation September Seminars. They are September 17 (Agricultural Law Seminar) and September 18 (Farm Estate and Business Planning Seminar). My talk is on the 18th.  Register by September 10 for an early-bird discount!


20150903-2Robert D. Flach, AICPA CONTINUES TO PROMOTE THE URBAN TAX MYTH. “There is absolutely nothing about possessing the initials CPA that in any way, shape, or form guarantees that the possessor knows his or her arse from a hole in the ground when it comes to 1040 preparation.”

TaxGrrrl, Owner Of ITS, Formerly Fourth Largest Tax Prep Biz In Country, To Face Criminal Charges. “Readers sent me numerous emails advising that ITS was still in business for the 2014 tax season, despite the court order.”

Robert Wood, Report Cites Flawed IRS Asset Seizures, And Ironically, Sales Are Handled By ‘PALS’

Kay Bell, Tax moves to make in September 2015. Worth visiting for the accompanying autumn leaves picture alone, but lots of other sound advice too.

Stephen Olsen, Summary Opinions for August 1st to 14th And ABA Tax Section Fellowships (Procedurally Taxing). Recent happenings in the tax procedure world.

Jack Townsend, Ninth Circuit Affirms False Claim Convictions for Tax Preparer. “The false claims statutes involved, however, are not complex statutes.  All that is required is that the defendant know that the claims are false.”

Annette Nellen, 50th Anniversary of Willis Commission Report. “This is likely the most comprehensive study and report ever done on state and multistate issues covering income tax, sales and use tax, gross receipts tax, and capital stock tax.”




Scott Greenberg, Every Tax Policy Proposal from the 2016 Presidential Candidates, in One Chart (Tax Policy Blog). “While some presidential candidates have issued tax reform proposals that touch on almost all of these areas of the tax code, other presidential candidates are not listed as having offered any tax policy proposals at all.”

Renu Zaretsky, The Case of the Unreturned Call for Tax Code Simplicity (TaxVox)  “Are taxpayers clamoring for a simpler, faster, and cheaper filing experience? Well, they are, and they are not.”

Richard Phillips, Ben Carson’s 10 Percent Flat Tax is Utterly Implausible (Tax Justice Blog)

TaxProf, The IRS Scandal, Day 847. Today’s installment links to an update on the status of the scandal by James Taranto of the Wall Street Journal: “In any case, it’s unreasonable for government officials to expect us to trust their assurances when they take such pains to prevent their verification.


News from the Profession. Here’s a Guy Wearing a PwC T-Shirt Giving Weird Street Massages (Caleb Newquist, Going Concern)



Tax Roundup, 9/1/15: If the taxman takes your car, recode your garage door. And: jobs, $211,111 each.

Tuesday, September 1st, 2015 by Joe Kristan
1974 mercedes

A 1974 Mercedes scheduled for IRS auction 8/31/15 at Bama Jammer Storage, Huntsville, AL.

As if having your car seized by the taxman wasn’t bad enough. The Treasury Inspector General for Tax Administration, in a report on IRS handling of property seized for tax nonpayment, notes a potential problem if the IRS takes your car:

However, during our discussions with IRS employees involved in the seizure process, we determined that there was no guidance on what actions to take if seized vehicles are equipped with installed navigation or garage door opening systems. Additionally, except for one employee, everyone we spoke with had not considered what actions to take if they seized a vehicle with one of these systems. While we do not have any examples in our case reviews of this situation occurring, it is in the taxpayers’ and Government’s best interest that employees are prepared if seizures involve these types of systems. If these systems are not reset to the original factory settings, there is a risk that the third-party purchaser of the vehicle can gain access to the taxpayer’s personal information or property. For example, the purchaser could use the vehicle navigational equipment to locate a taxpayer’s residence and then use the garage door opener to gain access to the home.

I have to admit, it wouldn’t have occurred to me either. It’s easy to forget that cars are also more and more data systems. Still, computerized data probably wasn’t an issue with the 1974 Mercedes pictured above that was scheduled for auction by the IRS yesterday in Huntsville, Alabama.


O. Kay HendersonBranstad defends state tax incentives for new Kum & Go headquarters:

Governor Terry Branstad today called the “Kum & Go” convenience store chain a “great…family-owned”, Iowa-based business and he has no objection to the nearly $19 million in state tax incentives it will get for moving the company headquarters to downtown Des Moines.

The convenience store chain is moving its headquarters about 10 miles from West Des Moines to Downtown Des Moines. It is getting $6.33 for every Iowan for its trouble. I’m sure Kum & Go is a perfectly nice company, and I don’t blame them for taking money the state is giving away, but there are lots of nice employers who don’t get $211,111 in state tax breaks for each new job they create. The unfortunate ones have to pay some of the highest business tax rates in the country to help pay for those who do benefit from tax breaks.

For perspective, check out Jared Walczak, Location Matters: Effective Tax Rates on Corporate Headquarters by State (Tax Policy Blog). “Today we’ll take a look at states’ effective tax rates on new and mature corporate headquarters.”  Have a look:


For this ranking, Iowa is the fourth worst. Giving millions to one company doesn’t fix it for everyone else.


Robert D. Flach has fresh Buzz for us today. Robert buzzes about blog posts he’s found about higher taxes, due dates, and the “Cadillac tax” on high-cost health plans — which seems to be most of them nowadays.

Russ Fox, The Hospital’s Closing; Who Will Notice the Missing Charity Money? Apparently one of the doctors, with unfortunate tax results.

TaxGrrrl asks Which State Has The Highest Property Taxes In America?

Kay Bell, IRS gets so-so rating so far on Yelp. Well, I’d never eat there.

Leslie Book, Legislative Language Directs IRS To Make Self-Prepared EITC Claims More Burdensome (Procedurally Taxing).




TaxProf, The IRS Scandal, Day 845. Today the Prof links to Robert Wood’s Court Orders IRS To Reveal White House Requests About Taxpayers. The White House will surely appeal, waiting until the last minute to file for it, and drag the process out as long as possible. This is good news, though: “Finally, though, the court ruled that the IRS cannot hide behind a law used to shield the very misconduct it was enacted to prohibit.”

The stonewalling doesn’t mean there was misconduct. By stonewalling everything, the administration makes it hard to unearth misdeeds; as an added bonus, when a painful and drawn out process finally forces the administration to yeild innocent information, it makes the investigators look silly while sapping their resources.


Jeremy Scott, Trump’s Lack of Specifics on Tax Is Hardly Unique (Tax Analysts Blog). ” There are many reasons to dislike Trump and his ill-defined platform (which seems mostly based on nativism and reality-show-style demagoguery), but his lack of policy details at this stage of the game is hardly unique.”


News from the Profession. AICPA Lays the Smackdown on Dear Abby (Greg Kyte, Going Concern)



Tax Roundup, 8/28/15: Reverse Danegeld. And: stealing a Congressional tax refund!

Friday, August 28th, 2015 by Joe Kristan
Flickr image courtesy stu_spivack under Creative Commons license

Flickr image courtesy stu_spivack under Creative Commons license

May I have another Danish? It’s a lot less fun to be a Dane than it might have been 1,000 years ago. Back then, cowering kings paid a Danegeld, a payment to keep the fearsome Danish Vikings away. From Wikipedia:

The Danegeld (/ˈdn.ɡɛld/;[1] “Danish tax”, literally “Dane tribute”) was a tax raised to pay tribute to the Viking raiders to save a land from being ravaged. 

Now the money is going the other way, it appears, because the Danish tax agency is outdoing the IRS in sending money to thieves, no questions asked. reports Danes stunned by €800mn tax fraud:

Criminals have duped Denmark’s tax authority into incorrectly refunding €830 million in the past three years, by filling out an online form for tax refunds under double taxation agreements.

The fraud was alerted to police on Wednesday (26 August) and appears to be the country’s biggest tax scam ever, with little chance for the state to recover the money.

They apparently made it easy:

With most of Danish taxes administrated online, it was easy for the fraudsters to fill in the one-page, so-called 06.020 form on the tax authority’s homepage and then claim refunds for taxes paid on stock revenues from Danish companies held by foreign companies.

The fraud would have been easily revealed if the tax authority cross-checked the ownership of shares with Danish companies.

Denmark has about 5 million people, so it’s as though the scammers had taken $185 from every Dane. That would translate to about a $55 billion theft loss in the U.S. Actual annual losses from U.S. tax refund fraud are estimated to run in the neighborhood of $5-6 billion annually.

Being better than Denmark doesn’t seem to comfort one congressman very much. Deseret News reports Congressman Jason Chaffetz is victim of tax return scam:

Chaffetz, chairman of the House Oversight Committee, is using the incident to add fuel to his call for the firing of IRS Commissioner John Koskinen.

The congressman asked President Barack Obama last month to remove Koskinen, saying he has obstructed congressional investigations into the treatment of conservative groups. Chaffetz said not only has Koskinen ignored a congressional subpoena but has shown an inability to manage a large organization and protect sensitive data.

“There has to be a better, smarter way to authenticate who somebody is. Social Security numbers are floating out there everywhere,” the congressman said.

While the refund fraud debacle started before Koskinen became IRS Commissioner, he sure hasn’t gotten it under control.


A loss in the Iowa tax policy world: Co-founder of Iowans for Tax Relief dies.

buzz20150827Friday Buzz! from Robert D. Flach, rounding up stories from the tax uses of capital losses to catching up on retirement savings.

Russ Fox, Will the Last One Out Turn the Lights Off? “Nearly four years ago my business–and the one whole employee in the Bronze Golden State (me)–left for Nevada because sometimes silver is better than gold.” And their politicians are primed to make California taxes worse still.

Annette Nellen, Sales tax on short-term rentals? Maybe! “The ease of listing your home, vacation property or a room on Airbnb or similar web platform has turned a lot of individuals into landlords.”

Paul Neiffer, Midwest Cropland Values Continue to Drop

Kay Bell, Still waiting for tax extenders. Is money the holdup?

Jim Maule, Traffic Ticket Fines Based on Income? “So my bottom line is, yes, conceptually it is an interesting idea with some valid arguments in support, and with some valid arguments in opposition. But when I turn to practical reality, a benchmark too often overlooked, the answer for me is clearly, ‘No, it’s not worth it.'”

Keith Fogg, Quiet the Title before You Sell (Procedurally Taxing)

Robert Wood, Under Obamacare, Does Everyone Drive A Cadillac?. That’s nothing. Under President Vermin Supreme, everyone gets a pony.

Me, Who should own the bricks?. My latest at, the Des Moines Business Record’s business professionals’ blog, discusses the problems of structuring ownership of business real estate.




Scott Greenberg, Here’s How Much Taxes on the Rich Rose in 2013 (Tax Policy Blog):

So, in 2012, the wealthy had higher-than-usual levels of capital gains income. Therefore, because capital gains are taxed at a lower rate, overall tax rates on high-income Americans were lower than usual in 2012. In 2013, because high-income Americans had much less income from capital gains, their effective tax rates rose significantly.

But some people, including those in the White House now, never beleive the rates are high enough.


Howard Gleckman, CBO Sees a Big Increase in Individual Income Tax Revenues Over the Next Decade. They’ll always want more.

TaxProf, The IRS Scandal, Day 841


News from the Profession. CohnReznick’s Golf Event Won’t Solve Gender Inequality (Greg Kyte, Going Concern)



Tax Roundup, 8/24/15: School’s in! And: state taxes just might matter.

Monday, August 24th, 2015 by Joe Kristan


20150824-2School starts here today. In my mind, the day school starts will always mark the end of summer, regardless of where the sun is in the sky, and it always makes me a little sad.




Do state taxes matter? Some policymakers say that states can tax “the rich” as much as you want, and they’ll just sit still and take it. According to Clean Slate Tax blog, IRS migration data implies otherwise:


Florida and Texas were in the top ten for state business tax climates in 2013, while New Jersey, New York and California were in the bottom five. California had the highest state income tax rate, at 13.3%. New York and New Jersey are in the top ten. Texas and Florida have no state income tax.

We live in a complex world, and many factors affect migration patterns. But the weather in California is at least as nice as in Texas, yet people are fleeing California. It’s hard to believe taxes don’t have something to do with it.

Via the TaxProf.


20150819-2Robert D. Flach has a special Monday Buzz! roundup today, covering self-employment tax and saving for college.

Kay Bell, Tax fraud gangsters celebrate their crimes in song. IRS has made ID-theft fraud so easy, even a street gang can do it.

Russ Fox, Former Oklahoma State Senator Embezzled $1.2 Million & Committed Tax Fraud:

Over a ten-plus year period Mr. Brinkley had fraudulently obtained over $1.2 Million from the Better Business Bureau. Mr. Brinkley was President and CEO of the organization; he created phony invoices and used the money for personal expenses and to support his gambling habit. He also admitted to not reporting $148,390 in income on his 2013 tax return.

Elected officials don’t lose their human failings when they become elected officials. In fact, public office may attract people with certain kinds of failings.


TaxGrrrl, Debt, Equity and Startup Money. “Repayment of debt is tax-free but associated interest is taxed as ordinary income.”

Peter Reilly, Paul Hansen Receives Below Guideline Sentence – End Of L’affaire Kent Hovind?  The never ending saga of the tax trouble of the guy who things humans co-existed with dinosaurs.


20150824-3Jack Townsend, When a Prosecutor’s Questions Turns the Prosecutor Into a Witness

Keith Fogg, My Dad and the Tax Court are Almost the Same Age (Procedurally Taxing)

They’re, like, totally rad, too. Marijuana Taxes Swell, Not Up In Smoke After All (Robert Wood).



Scott Greenberg, Clean Energy Credits Mostly Benefit the Wealthy, New Study Shows (Tax Policy Blog). ” The credit for electric vehicles is most skewed towards high-income households, with the top 20% of taxpayers claiming 90% of all electric vehicle credits.”

Renu Zaretsky, Plans, Problems, and Production. This TaxVox headline roundup covers the Rubio tax plan, the Walker ACA replacement, and more.



TaxProf, The IRS Scandal, Day 835Day 836Day 837.

News from the Profession. Going Concern Is Now Part of AccountingflyCaleb Newquist takes the Boeing.



Tax Roundup, 8/21/15: Court says the IRS can’t cause a negative gift. And more Friday links!

Friday, August 21st, 2015 by Joe Kristan

20150821-1Gee, thanks. Few of us ever have to pay gift tax. Logically, more people should. Taxable gifts avoid tax when compared to passing an asset through a taxable estate because only the amount given to a donee is subject to gift tax, while the estate is taxable on its whole value — not just the amount that goes to the donee. Confusing? Let’s try a quick example, assuming a 40% estate and gift tax rate.

James has $14 million. He wants to give it all in a taxable gift, saving enough to pay his taxes. He makes a $10 million gift, and he pays 40%, or $4 million in taxes.  

His sister Janet dies with the $14 million, the tax is 40% of $14 million, or $5.6 million. The after-tax inheritance to her beneficiaries is $8.4 million, instead of the $10 million received by James’s heirs.

The giver is supposed to file a gift tax return and pay the gift tax on Form 709.

But what if he doesn’t? Then the IRS will come after the recipients. That happened to the recipients of gifts from James Howard Marshall II, best known as the short-term husband of Anna Nicole Smith. He died without paying the gift taxes, and the estate couldn’t cover them. The IRS then went after the gift recipients, in a big way — demanding more in gift tax payments and interest than the value of the gift actually received.

The Fifth Circuit Court of Appeals ruled on whether the government could do that:

However, the Government brought suit seeking to hold the Marshalls personally liable for almost $75 million beyond the value of the gifts consisting mostly of interest accrued on the unpaid tax liability from 1995. The Marshalls argued that § 6324(b) limits their personal liability to the value of the gifts they received.

It wouldn’t be much of a gift if it cost you money. The Fifth Circuit ruled against the IRS:

A donee is “personally liable” only for “such tax” — the gift tax and accrued interest — “to the extent of the value of such gift.” The statute’s text does not support the Government’s position.

That seems fair, though fairness isn’t required in the tax law. I’m not sure there’s much tax planning to be done around this, other than maybe making sure Grandpa files a gift tax return when he gives it all away.

Cite: Estate of Marshall, CA-5, No. 12-20804.

The TaxProf has more: 5th Circuit: Donee’s Liability For Billionaire’s Unpaid Gift Tax And Interest Cannot Exceed The Amount Of The Gift




TaxGrrrl, Lawyers, Accountants and Administrators, Oh My! Putting Together A Professional Team. “I know what you’re thinking. A professional team costs money. And startups and small businesses are often short on money”

Kay Bell, Taxes as a weapon of mass destruction in historical thriller

Jason Dinesen, Glossary: Asset. “For individuals, an asset is things such as stocks; houses, buildings and land; investments in partnerships; and personal possessions (TVs, electronics, jewelry).”

Jim Maule, Be Careful With Divorce Tax Planning, Part II:

A simple sentence in the agreement, which the parties drafted without assistance of counsel, would have specified whether or not the payment obligation terminated if the former wife died during the 8-year period. There is no way of knowing if they considered the question. There is no way of knowing, if they considered the question, what they wanted the answer to be. There is no way of knowing if they thought that the answer did not require a provision in the agreement. What can be known is that it is risky to draft a divorce agreement without understanding the tax implications.

Risky, and foolish.

Keith Fogg, Who Gets to Decide What is Frivolous (Procedurally Taxing). “After all, if the IRS has unbridled discretion to determine what is frivolous, it could deny even those with arguably non-frivolous arguments from moving forward in the CDP process of seeking collection relief.”

Robert Wood, Trump Bashes $4 Billion In IRS Refunds To Illegals

TaxProf, The IRS Scandal, Day 834

Howard Gleckman, Scott Walker’s Replacement for the ACA Would Leave Many Uninsured. (TaxVox). Of course, so does the ACA.




Scott Greenberg, John Oliver Set Up His Own “Church” to Make a Point about the Tax Code (Tax Policy Blog). “To demonstrate his point, Oliver announced that he had founded his own church, Our Lady of Perpetual Exemption, showing how “disturbingly easy” it was to obtain tax-exempt status for a sham religious organization (the main mission of Our Lady of Perpetual Exemption is to collect donations).”

News from the Profession. Deloitte Doesn’t Want You Wasting Billable Hours Searching for Adulterer Profiles (Caleb Newquist, Going Concern)



Tax Roundup, 8/19/15: Even if it faxes, it’s still a printer in Iowa. And: the rich guy still isn’t buying.

Wednesday, August 19th, 2015 by Joe Kristan

20150813-1All for one, one for all. Iowa has a sales tax exclusion for “Computers used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise.” But what is a computer anymore, now that everything has a computer in it?

Last week Iowa released a ruling (Document 15300028) holding that Principal Financial Group’s all-in-one devices count as computers and are exempt from sales tax. From the ruling:

The protest was filed due to the Department’s partial denial of a refund claim which involved, among other issues, several multi-function devices which provide copy, print, scan, and fax services.  Your position is that because the multi-function devices are connected to your company’s computers and used in the manner described that these devices qualify as exempt computer peripheral equipment under Iowa’s statutes and administrative code…

Rule IAC 701—18.58(1), which was written, in part, to implement that code section, defines computers as the following:

…stored program processing equipment and all devices fastened to it by means of signal cables or any communication medium that serves the function of a signal cable. Nonexclusive examples of devices fastened by a signal cable or other communication medium are terminals, printers, display units, card readers, tape readers, document sorters, optical readers, and card or tape punchers.

The Department of Revenue had argued that copiers and fax machines don’t qualify, and these functions disqualified the multi-function devices. Principal brought its considerable in-house tax expertise to bear:

However, since the filing date of the protest, you have provided the auditor with the “click count” information for each individual multi-function device included in the refund claim.  This documentation verifies that each unit individually qualifies for exemption because the majority of the usage for each of the devices is for exempt printing and scanning. 

Attached to the protest as Exhibit B was a summary schedule in which you determined that 96.67% of the usage of the devices was for exempt purposes.  This percentage was utilized by Principal to determine the amount of tax under protest ($145,134.80).  However, because each device qualified for exemption, the purchase prices of these units are fully exempt from Iowa sales tax.  Therefore, the Department will refund 100% of the sales tax paid on the purchases of these devices. 

So after a struggle, the Department settles on the right legal answer. The policy answer is only half-right, though. All business inputs should be exempt from sales tax, regardless of whether they are hooked up to a computer.

I rarely fax or copy anything anymore, and I think that this is true nowadays for most businesses. It could say something about how they do things at the Iowa Department of Revenue that they assumed otherwise. In any case, this ruling tells us that fax and copy capability doesn’t make an otherwise exempt scanner/printer subject to sales tax for an Iowa business.




Megan McArdle discusses presidential candidate Scott Walker’s Obamacare replacement (my emphasis):

In this debate, you can see the shape of where our politics may go over the next 20 years. Many Republicans would like a much smaller entitlement state; some Democrats would like a much bigger one, with Sweden-style universal coverage of virtually everything, crib to grave. Neither one is going to get what they want, because Americans are not prepared to give up their Social Security checks, or 60 percent of their paychecks either — and no, there is not enough money to fund these ambitions, or even our existing entitlements, by simply taxing “the rich.”

The discussion is becoming more urgent, as Obamacare as it stands is not working well; the big premium increases and the struggles of the “cooperatives” us that. It could be harder to fix the health insurance market than it was to wreck it in the first place.




Robert D. Flach brings the Tuesday Buzz on Wednesday, covering the tax blog ground from property taxes to the Get Transcript data breach.

Tony Nitti, Tax Court Reminds Us That You Should Never Toy Around With Your Retirement Account:

Section 72 clearly mandates that annuity income is ordinary income, rather than capital gains. Thus, it is immaterial whether, as the taxpayer asserted, the annuity generated most of its income in the form of capital gains. Because once the annuity distributed the cash generated from those capital gains on to the taxpayer, the tax law required it to be treated as ordinary income.



Jason Dinesen, Why is Self-Employment Tax Based on 92.35% of Self-Employment Income?

William Perez, These 6 states will waive penalties if you pay off your back taxes.

Paul Neiffer, Highway Use Tax Return Due August 31, 2015

Jim Maule, More Tax Fraud in the People’s Court. “It was an attempt to change a non-deductible cost of a boat into a business deduction.”

Kay Bell, A-list performers would get tax credit for New Jersey shows.

Republican Sen. Tom Kean, Jr. this week renewed a push for his bill that would provide a tax break for so-called A-list performers in the Garden State.

Not every problem is a tax problem. Especially this one.

TaxProf, The IRS Scandal, Day 832.




David Brunori, Retroactive Tax Laws Are Just Wrong (Tax Analysts Blog):

There are two fundamental problems with changing the rules retroactively. First, it is patently unfair. People who follow the rules should not be penalized later. We would never stand for it in the criminal context. Why should we accept it for taxes? Second, retroactively changing the rules undermines confidence in the tax system. Most people try to do the right thing. Often they spend a lot of money paying lawyers and accountants to guide them to the right result. The good taxpayers might not be diligent in following the rules if those rules might change.

It’s harder to justify spending money on tax compliance when it doesn’t do any good.


Howard Gleckman, New Rules Will Require States to Be More Transparent About Tax Subsidies (TaxVox): “While local governments have complained that the new rules will be complicated and burdensome, it is frankly a scandal that governments have been able to keep these subsidies under wraps for so long.”


News from the Profession. Only 20% of Companies Using Creative Accounting to Its Full Potential (Caleb Newquist, Going Concern). “…it’s not technically fraud”



Tax Roundup, 8/18/15: Oh, THOSE 200,000 hacks — the Get Transcript debacle worsens. Also: Crips, blog tax, and more!

Tuesday, August 18th, 2015 by Joe Kristan
This Koskinen isn't the IRS commissioner, but he'd probably do a better job than the one who is.

This Koskinen isn’t the IRS commissioner, but he’d probably do a better job than the one who is.

The Get Transcript debacle, revised and extended. IRS Commissioner Koskinen’s perfect record of getting things wrong the first time rolls on. The man who famously assured us that there were no more Tea Party emails, and they weren’t backed up, only to be proven repeatedly wrong, now tells us that the hack of the “Get Transcript” hack was much worse than they had let on. Ars Technica reports:

More than three months after the Internal Revenue Service shut down its online tax transcript service because of a massive identity theft effort, the IRS is now acknowledging that the number of affected taxpayers is more than three times the agency’s initial estimate. And the number of affected taxpayers may continue to grow as the agency digs into logs of hundreds of thousands of connections to its Get Transcript application over the past year. 

Commissioner Koskinen was billed as a “turnaround artist” for a struggling IRS. I guess I just don’t understand art. The IRS continues to send billions of dollars to identity thieves, most far less sophisticated than the (presumably Russian) outfit that hacked the transcript application. For example:

Fourteen reputed gangsters from Plainfield, Elizabeth and Newark have been indicted on charges ranging from tax fraud to murder following a seven-month investigation into alleged financial scams that helped sustain their criminal organization.

All 14 members and associates of the Elizabeth-based 111 Neighborhood Crips street gang were charged under the state’s Racketeer Influenced and Corrupt Organizations statute, or RICO.

If you can’t keep the 111 Neighborhood Crips from electronic tax theft, you don’t stand much chance against Russian organized crime.

The TaxProf has a roundup. More coverage:

Caleb Newquist, IRS Was Just Kidding When It Said Cyber Criminals Tried to Access Tax Return Information for 225,000 Households. “It was quite a few more than that, actually.”

Russ Fox, IRS Data Breach Impacted 334,000, Not 100,000 as IRS First Said. “Being a cynic, I wonder if the IRS’s announcement last week regarding free credit monitoring services has to do with today’s announcement.

TaxGrrrl, IRS Releases Additional Statement On Illegal Access To Taxpayer Accounts

Kay Bell, Uncle Sam, watch TV! You need these kind of tech-savvy staffers to fight growing tax & government website hacking. Actually, it appears the IRS already relies on fictional characters to protect its systems.




Annette Nellen, Highway Trust Fund and Tax Reform

Robert Wood, A $35 Million Wedding? Yes, Before Taxes:

But suppose you’re all about business? Is it possible to write off the cost if you’re inviting all your clients and customers?

Dream on.

Patrick Smith,D.C. Circuit Majority Opinion in Florida Bankers Not Consistent with Supreme Court’s Direct Marketing Decision (Part 2). On the bankers’ challenge to FATCA.

Peter Reilly, Travel Blogger Finds Sex, Drugs Even Some Museums But No Tax Deductions. Sex, drugs, but no tax rock ‘n roll.

Paul Neiffer travelblogs the First Day of the Midwest Crop Tour, looking at good corn in South Dakota and Nebraska. No word on how his deductions are doing.


Honey princesses at the Iowa State Fair.

Honey princesses hold court at the Iowa State Fair.


Jeremy Scott, Lessig Is Probably Wrong About Extenders (Tax Analysts Blog):

Maybe some would argue that all this is part of a grand conspiracy. The president, left-leaning think tanks, and Republicans conspire to create a debate over extenders that lets the GOP and its allies (many Democrats do in fact support permanent credits for research, state and local sales taxes, depreciation, and other items) constantly churn money from donors. But that doesn’t seem very plausible.

Maybe not, but it sure does get the lobbyists to show up for the summer golf fund-raisers.


TaxProf, The IRS Scandal, Day 831

News from the Profession. CPA Thought He Was Out, Gets Pulled Back In (Caleb Newquist, Going Concern).

If you were a CPA who testified in the trial of two NYPD officers dubbed the “Mafia Cops,” no one would doubt you if you said, “I could never ever, I will never ever, be a CPA again.”

But he did. It doesn’t appear to be going well.


Tax Roundup, 8/17/15: New directions in Iowa tax policy. And lots more!

Monday, August 17th, 2015 by Joe Kristan
If Iowa's income tax were a car, it would look like this.

If Iowa’s income tax were a car, it would look like this.

This week may see the start a discussion of the future of Iowa tax policy. The Iowa Association of Business and Industry Tax Committee meets Thursday to discuss proposals for the future of the Iowa income tax.

There’s a lot to talk about. The Tax Foundation puts Iowa among the bottom-ten states in its 2015 Business Tax Climate Index. Iowa has the second worst corporate tax ranking and the highest corporation tax rate of any state. We also have a subpar individual tax ranking. Along with the high rates — and made possible by them — the Iowa income tax is full of special favors for influential and sympathetic interests. This makes the taxes expensive and difficult to comply with and not so good at collecting revenue.

The state legislature has not seriously addressed income tax reform in recent years. There has been no movement against the awful corporation tax that I am aware of. The Republican caucus has pushed an individual “alternative maximum tax,” one with lower rates and a broader base — that would co-exist with the current system. That has an obvious flaw — everyone would compute their tax both ways and pay the lower tax. That makes the system more complex. But all tax reform has been bottled up by the Democrat-controlled Iowa Senate.

What are the ingredients for Iowa tax reform? A good tax reform discussion should consider:

Repeal of the Iowa corporation income tax. The Iowa corporation tax provided $438 million of the the state’s 2014 revenue, out of $7.545 billion. Corporation income taxes discourage in-state growth and are expensive to enforce. The state would be better off without it.

Repeal of all incentive tax credits. The state has many tax credits, some of which are refundable, including the R&D tax credit. Simply eliminating the tax credits would recoup some of the lost revenue from a corporation income tax repeal.

Move the individual income tax to an AGI-based system. Eliminate state itemized deductions and special state deductions and use the savings to lower the rates. Such as system would only retain a few itemized deductions to prevent abuse of taxpayers, principally the deduction for gambling losses.

Don’t be Kansas. That state enacted a poorly conceived tax reform effort a few years ago, and it has been a mess. Ambitions for tax reform have to be reconciled to revenue needs. While I think the state should spend less than it does, we can’t assume it will do so. Tax reformers need to present a plan that is revenue-neutral, or close to it.


Is Iowa’s business tax climate really that bad?

Baby steps towards fixing Iowa’s business tax climate

What an Iowa income tax might look like with a fresh start.

The Tax Update’s Quick and Dirty Iowa Tax Reform Plan


Jared Walczak, How High Are Property Taxes in Your State? (Tax Policy Blog). With this map:




Iowa still has relatively high property taxes, even after the recent property tax reforms. But we have high income and sales taxes too.


Russ Fox, Two Sets of Returns Aren’t Better than One:

Today I look at the idea of preparing one set of tax returns for clients but using a second set of returns when submitting the returns to the IRS. Of course, those second returns had higher refund amounts with the difference being pocketed by the preparers. After all, what’s a little tax fraud?

This is what Russ might call a Bozo tax offense. It’s not like this sort of thing will go very long without someone noticing.


Jason Dinesen, Glossary: Estimated Tax Payments

Annette Nellen, Innovation box tax reform proposal, A good explanation of a bad idea.

Kay Bell, IRS says free identity theft protection services are tax-free. “That’s very good news for me, since I was part of the huge OPM hack”

TaxGrrrl, IRS Offers Tax Guidance On Free Identity Theft Protection Services

Paul Neiffer is on the road on The ProFarmer Midwest Crop Tour.

Jim Maule, Rebutting Arguments Against Mileage-Based Road Fees. I think an expansion of tolling is more likely, but I don’t think that is very likely either.

Jack Townsend, Ninth Circuit Requires a Filing for Tax Perjury Charge. “Under the facts, Boitana had merely presented the false return to the agent, but that presentation was not a filing.”

Peter Reilly, Let Irwin Schiff Die With His Family Not In Prison:

You don’t have to agree with Irwin Schiff’s views on the federal income tax, to feel sympathy for Peter Schiff’s request that his father be released from prison. Irwin, now 87, has been diagnosed with lung cancer and it seems likely that he will not live to see his July 26, 2017 release date.

I think the government has made its point.


Patrick J. Smith, D.C. Circuit Majority Opinion in Florida Bankers Not Consistent with Supreme Court’s Direct Marketing Decision (Part 1) (Procedurally Taxing):

The weakness of the majority opinion in Florida Bankers, together with the strength of a dissenting opinion filed in the case, as well as the inconsistency of the majority opinion not only with the Supreme Court’s Direct Marketing decision but also with other D.C. Circuit opinions, all make the Florida Bankers case a strong candidate for en banc review. 

The suit challenges the FATCA rules on foreign reporting.


TaxProf, The IRS Scandal, Day 828Day 829Day 830

Matt Gardner, Latest Inversion Attempt Illustrates U.S. Can’t Compete with a 0 % Corporate Tax Rate (Tax Justice Blog). It could with a zer-percent rate of its own.

Renu Zaretsky, Tax plans and presidential candidates: The future [may or may not be] now. The TaxVox headline roundup talks about presidential candidate tax plans and the bleak outlook for the IRS budget under the current Commissioner.


If you think of government programs as technology, they are hopelessly behind. We regulate communications using the FCC, which is 1930s regulatory technology. We address health care for the elderly with Medicare, which is 50-year-old technology.

In the private sector, when an enterprise becomes technologically obsolete, it falls by the wayside. In government, it gets larger.

Arnold Kling


News from the Profession. Yep, Almost All Accounting Firm Partners Are Still White Guys (Caleb Newquist, Going Concern). Well, I still am, anyway, and I don’t see that changing.



Tax Roundup, 8/12/15: Bad news: blogging doesn’t make your vacation deductible. And more great stuff!

Wednesday, August 12th, 2015 by Joe Kristan


Accounting Today visitors: the due date post is here.

Road Trip! I had a great time on vacation last month, but it would have been sweeter if I could figure out a way to deduct it. Maybe if I mentioned it here at the Tax Update Blog? Alas, a Tax Court case this week thwarts my cunning scheme.

The Tax Court takes up the story:

In June 2008 petitioner’s adventure began. Over the next 5-1/2 months, petitioner made his way across the continents of Europe and Africa and even made a foray into the Middle East.

Throughout his journey petitioner updated his blog with anecdotes and pictures from his travels. While petitioner included details about some of the sites he saw, places he stayed, and food he ate, many of his explanations do not give enough details for a reader to find the specific site, lodgings, or restaurant described. For example in petitioner’s Paris blog entry he states: “[W]e hit up The [sic] BEST ice cream in Europe. * * * there are a couple of places that serve it and pricing is much higher at one (the ‘tourist’ one as Jeff put it) than at the other one. We walked past the tourist one, which had a huge crowd and walked down the street about half a block to the other one.” Petitioner does not give any more details about where in Paris the best ice cream in Europe can be found.

Petitioner did keep copies of all his receipts, flight confirmations, lodging confirmations, tour confirmations, rail passes, shuttle confirmations, bank statements, tour vouchers, credit card statements, and other miscellaneous receipts from the trip.

The problem wasn’t so much the recordkeeping, then, but the business plan:

Petitioner realized as he traveled, and even more so after he returned to the United States, that the market was already saturated with international backpacking blogs and that his plan for generating income through affiliate sales from his blog would not be profitable. Petitioner then shifted his focus to writing books about his travels and the insights he gained while traveling.

One way to ease the pain of a bad business plan is to deduct the losses:

Petitioner timely filed his 2008 Federal income tax return (return). He listed “world travel guide” as his principal business on the Schedule C, Profit or Loss From Business, attached to the return. On the Schedule C, petitioner did not report any business gross receipts or gross income. He claimed total expenses of and reported a net business loss of $39,138. As part of his net business loss, petitioner claimed deductions for travel expenses of $19,347, deductible meals and entertainment expenses of $6,314, and other expenses of $5,431.

The IRS threw a wrench in this part of the business plan by disallowing the loss under the Section 183 “hobby loss rules.” These rules disallow losses on business activities not really entered into for profit. The Tax Court reviewed nine factors that are used to distinguish a real business from a hobby, and found against the taxpayer (my emphasis::

Petitioner did not maintain any books or records for the activity. He had no written business plan and no estimate as to when his Web site would be operational, when his books would be published, or when he would begin to earn income from the activity. Although petitioner documented and retained receipts for his travel-related expenses, merely maintaining receipts is not enough to indicate a profit motive…

Furthermore, petitioner did not investigate the activity before embarking on his trip. Petitioner incurred over $39,000 in expenses before doing any research into the activity’s profitability. This is an indication that the activity was not engaged in for profit.

My favorite part of the opinion is this footnote, where the court tells us what a “blog” is:

“Blog” is a truncation of the expression “Web log”, which is a regularly updated Web site or Web page written in an informal or conversational style and typically run by an individual or small group.

So now we know.

The Moral? Travel may be broadening, and fun, but not necessarily deductible. Before spending $39,000 on it, you might want to figure out how to earn it back first.

Cite: Pingel, T.C. Summ. Op. 2015-48.




Tony Nitti, Teacher Fails To Qualify As Real Estate Professional: Who Can Pass The “More Than Half” Test?. Tony discusses the case we covered here yesterday.

Paul Neiffer, Don’t Use Your Product When Preparing a Tax Return. I think it depends a lot on the product, but Paul gets more specific in the text: “…it is apparent that you should not be using marijuana when preparing your income tax return.”

Jack Townsend, Two U.S. Return Preparer Enablers Sentenced for Offshore Account Conspiracy.

Russ Fox, There’s Innocent FBAR Violations, and There’s This. But jailing an occasional real tax violator doesn’t justify shooting jaywalkers.


Robert Nadler, Spousal Abuse Continues to Provide a Powerful Basis for Innocent Spouse Relief (Procedurally Taxing).

Robert Wood, Trump, Taxes, Tampons, And Snoop Dogg

TaxGrrrl, Defendants Sentenced For Stealing 9,000 Identities, Including Army Soldiers


David Brunori, Taxing Beer (Tax Analysts Blog):

The lowest excise tax rates are in Wyoming, Wisconsin, Pennsylvania, Missouri, and Oregon. To put it in context, Tennessee taxes beer at $1.29 a gallon. Wyoming’s tax is $0.02 a gallon. Buy your beer in Cheyenne.

I wonder if Jack Daniels has an effective lobby in the Tennessee statehouse.




Joseph Henchman, Ten Years of the North Carolina Lottery (and Why It’s In Part a Tax) (Tax Policy Blog):

The Lottery was set up ten years ago as a state enterprise to generate revenue for education programs. 50 percent of gross sales are paid out as prizes, 7 percent paid to retailers as a commission, 8 percent to pay for operations (including advertising, which cannot exceed 1 percent of total revenues), and 35 percent to the state for education funding. Additionally, winners pay income tax on their prizes. The odds are not great – table games in casinos have much better odds – but the Lottery has no real competition as it is state-sanctioned.

Think of it as a tax on people who are bad at math.


Howard Gleckman, Clinton Would Tinker With, Not Rewrite, the Tax Code. (TaxVox). And what the tax law really needs is more tinkering, right?

Kay Bell, Is Obamacare headed back to the Supreme Court yet again? I think Justice Roberts has made it clear that he will find a way to protect the mess from all challenges.

TaxProf, The IRS Scandal, Day 825. Today the Prof links to Peter Reilly’s concession that just maybe Lois Lerner ran a biased shop.


News from the Profession. New Study Validates Old Accountant Joke (Caleb Newquist, Going Concern).



Tax Roundup, 8/6/15: Tax Court sinks IRS passive loss attack on boat charter business.

Thursday, August 6th, 2015 by Joe Kristan


20150806-1It can be difficult to win a “passive loss” examination. That’s why taxpayer victories are worth studying. A couple who chartered boats and who incurred losses overcame an IRS passive loss challenge yesterday in Tax Court. Can we learn anything from them?

The taxpayer husband, a Mr. Kline, is an airline pilot who chartered boats and occasionally skippered charter excursions. They had a management agreement with a company called Horizon Charters, LTD. The Tax Court said “Pursuant to the terms of the management agreement Horizon was responsible for marketing the boats, setting charter prices, booking charters, keeping records of all charters, collecting money due from customers, and cleaning and maintaining the boats.”

The passive loss rules treat a loss as “passive” if the taxpayer fails to “materially participate” in the business generating the losses. Passive losses can only be deducted against passive income; net passive losses are deferred until either there is passive income or the business is sold.

The tax law determines losses are “passive” based on the amount of time spent on the activity by the taxpayers. For example, taxpayers who spend 500 hours on an activity are generally treated as non-passive. The taxpayers in the charter boat case argued that they met another test — (1) they spent at least 100 hours on the activity, and (2) they spent more time on the activity than anyone else.

While the taxpayers didn’t keep a daily time calendar or log, they were able to convince the court that they reached the 100-hour limit:

During the audit examination respondent’s agent asked petitioners to provide the number of hours they spent in connection with the charter activity. While they did not maintain a contemporaneous log of the time spent, Mr. Kline did maintain copies of email communications with Horizon. Using this correspondence and records of the length and destination of the Kline charters, petitioners were able to develop a log of the time they spent… Though petitioners did not contemporaneously record their time, we find the time entries they provided to be reasonable reconstructions of the hours that they spent in the charter business and consistent with the requirements of section 1.469-5T(f)(4), Temporary Income Tax Regs.

So emails showing regular involvement help. So does having a credible story to explain how you spent your time. But the IRS still had another challenge — they said that Horizon employees spent more time on the activity than the taxpayers, defeating the requirement that the taxpayers spend more time than anyone else. The Tax Court sided with the taxpayer:

However, on the basis of the invoices Horizon sent to petitioners regarding work done on the boats and the testimony of Horizon’s operations manager during the years at issue, we conclude petitioners spent more time in connection with the boats than any individual employed by Horizon.  

The Moral? The taxpayers won without keeping a daily calendar because they were able to reconstruct their time based on other records, and because the Tax Court found them believable. While it would have been easier if they kept a log, failure to keep one isn’t fatal if you have other good ways to show the time you spent.

Cite: Kline, T.C. Memo 2015-144.




Robert D. Flach, FORM 1098-T WILL BE REQUIRED FOR CLAIMING EDUCATION BENEFITS, “My initial response to this new matching requirement concerns the fact that most Form 1098-Ts that I see during the tax season are as useful as tits on a bull.”

Peter Reilly, IRS Says Charitable Trust Not Charitable Enough. “The NIMCRUT is still a fantastic tool in the right circumstances.  Just don’t be too aggressive on the payout.”

Kay Bell, GOP debate(s) and drinking games tonight!


TaxProf, The IRS Scandal, Day 819. The big item today is the Senate Finance Committee report (sorry, no free link yet).

Robert Wood, Gross Mismanagement At IRS, Says Senate Report. “IRS was just incompetent, not intentionally bad, says the latest report.” Well, OK, then.


Alan Cole, Of Loopholes and Tax Expenditures (Tax Policy Blog):

For a real-life example of a loophole, consider “mandatory donations” to popular college sports teams in order to get season tickets. This was a clever way of selling tickets (by all means, a “mandatory donation” in exchange for something is a sale) while giving them the appearance of a deductible charitable donation for the purposes of the IRS. This was clearly not an intended effect of the deduction for charitable contributions; therefore, it meets the true definition of a loophole. This loophole was partially rolled back through further legislation, and the President’s most recent budget would eliminate it entirely.

However, the word “loophole” is clearly misused when applied to deliberate, well-known policy provisions. For example, the mortgage interest deduction is no more a loophole in the tax code than Memorial Day sales are a loophole in mattress pricing.

The other issue is whether a so-called loophole was really snuck past clueless legislators by somebody who knew exactly what he was doing.




Renu Zaretsky, Information: Additions, Disclosures, and Theft. Today’s TaxVox roundup covers dynamic scoring of the “extender” bill and the rules requiring disclosure of the revenue effects of tax “incentives.”

David Brunori, Supermajority Requirements for Raising Taxes areTroublesome (Tax Analysts Blog). “Questioning whether a majority of legislators can raise taxes seems undemocratic in the greatest democracy that ever was. Moreover, supermajority requirements put a great deal of power in the hands of the minority.”


News from the Profession. In the Future, Accountants Count Everything (Chris Hooper, Going Concern).


Tax Roundup, 8/4/15: Cash-basis farmers score Tax Court win. Plus Buzz, and more!

Tuesday, August 4th, 2015 by Joe Kristan

binStrawberries. An old joke holds that the tax law has a provision that makes it illegal for farmers to pay taxes. Jokes usually express an underlying truth. The ability of most farm enterprises to deduct expenses on a cash basis is a big part of the joke. A fiscally-alert cash-basis farmer can ease the tax pain of a profitable year by buying up to a year’s worth of feed, seed and supplies on December 31, deducting the whole purchase.

The Tax Court last week upheld a broad use of cash-basis deductions by farmers in a case involving a California strawberry grower, Agro-Jal. This cash-basis deduction challenged case differs from what you might see in a typical Iowa crop or livestock operation. The taxpayer packs the strawberries it grows, and it purchased and deducted the packing materials on a cash basis. The IRS said that such supplies are not the sort of feed, seed and materials allowed to farmers as a cash basis deduction.

Judge Holmes looked at the rules and said the IRS got it wrong. The decision largely hinged on a Section that wasn’t directly in play here, Section 464. This section was enacted to fight an early tax shelter based on allowing cash basis farm deductions to off-the-farm investors by preventing “farm syndicates” from using the cash method. Judge Holmes considered the IRS arguments, and then noted (my emphasis, footnotes omitted):

But section 464 does bolster Agro-Jal’s argument indirectly, because the history of section 464 shows that before its enactment anyone in the farming business could immediately deduct prepaid expenses. Seen against this backdrop, section 464 looks like it was aimed at both especially abusive taxpayers — “farming syndicates” — and to certain especially abused expenses — “feed, seed, fertilizer, or other similar farm supplies.”

I understand this to mean that absent some other provision, farmers can, or could, deduct all prepaid expenses. Judge Holmes went on to consider the tax regulation on deductions of materials and supplies, and concluded that the IRS reading was not supported.

There is another wrinkle. The IRS has re-issued the “materials and supplies” regulation as part of its “repair regs” project, and it has changed the language relied on by the taxpayer. Tax Analysts discusses that change ($link):

Sharon Kay of Grant Thornton LLP said that the reference to the old version of the regs may not help other cash method farm taxpayers understand how to apply the new final tangible property regulations on materials and supplies. “That’s the big question,” she said. “What does this case mean, not just looking back, but actually looking forward under the new tangible property regulations?”

Kay noted that throughout the revisions to the tangible property regs, the IRS had made statements, primarily in the various preambles, that it did not intend for the revisions to substantially change the “determination of the treatment of materials and supplies as either non-incidental or incidental.” She said that the holding in Agro-Jal reflects farm taxpayers’ understanding of the law and general practices.

This may mean the IRS could continue to challenge deductions under the new regulations, hoping for a different result. But for Iowa livestock and crop farmers, whose big prepaid deductions are mostly for advance purchases of feed, seed and fertilizer, cash accounting does not seem to be under immediate threat. And it probably wouldn’t have been even if the IRS had won this case.

Paul Neiffer has more: Cash Basis Farmers Allowed to Deduct All Costs!

Cite: Agro-Jal Farming Enterprises, Inc., 145 T.C. No. 5.




It’s summer. The bees are buzzing, and so is Robert D. Flach with a fresh Buzz roundup, including coverage of the new due-date rules.

Robert Wood, Charging $476K For Strippers On Company Card? No Tax Deduction, Jail Instead. That’s a lot of $1 bills.

Peter Reilly, Review Of Julian Block’s Home Seller’s Tax Guide. “The book packs a lot of important information into less than 100 pages.  I think that if I had a real estate office, I would be negotiating with Julian to buy copies in bulk to hand to potential clients as a marketing tool.”

Jim Maule, Another Problem with Targeted Tax Credits. “Once tax credits are handed out, everyone wants in on the gravy train.”

Kay Bell, Cool tax moves to make during August’s hot Dog Days

Jack Townsend, New Legislation Affecting FBAR and Tax Matters (8/1/15).

Mike Feehan, Urban Legends, Insurance File No. XXIV (Insureblog). “My opinion?  Most claims submitted are valid claims.  And systematic denial of valid claims is an urban legend.”


Cara Griffith, New York Attempts to Tax Income From Nonresident Lawyer Based on Bar License (Tax Analysts Blog):

“Thankfully, an administrative law judge for the DTA set the division straight. The ALJ concluded that the division’s argument is meritless, inconsistent with the state tax regulations, and inconsistent with New York judiciary laws. “The Division cannot,” the ALJ said, “assert tax merely based on a New York license.”

This is a case where my “sauce for the gander” proposal would allow taxpayers to collect penalties from the state for making a frivolous argument.

Richard Auxier, Recovery cannot save state budgets from politics (TaxVox). “Since then the economy has improved, state tax revenue are growing, and legislatures have more room to maneuver during budget season. Yet havoc still reigns in many statehouses. In fact, it might be getting worse.”




TaxProf, The IRS Scandal, Day 817

Matt Gardner, Innovation Boxes and Patent Boxes: Congress Is Focusing on Corporate Tax Giveaways, Not Corporate Tax Reform. (Tax Justice Blog). The “patent box” would give preferential rates for intellectual property income, which would create a new industry of consultants devoted to making all income I.P. income. Far better to broaden the base and lower rates for everyone.

Kyle Pomerleau, Ways and Means Committee Introduces “Innovation Box” Discussion Draft (Tax Policy Blog). “Simply put, a patent box provides a lower tax rate on income related to intellectual property.”



Most economists, on the other hand, believe that targeted tax incentives may work, but only in the sense that companies get extra cash and say the right things at press conferences. However, the tax breaks often don’t work in the sense of actually boosting state and local economies in any appreciable way. One large high-tech warehouse on the edge of town with 40 workers won’t transform anything. Neither will a dozen.

Billy Hamilton, Tax Analysts ($link)


News from the Profession. Accountant Posts Big Game Hunting Photos, Internet Flips Out (Caleb Newquist, Going Concern). I hope my big game trophy shots never make the internet. Oh, wait…



Tax Roundup, 7/1/15: Trilobite deduction becomes extinct in Tax Court. And: Indiana throwback thrown out.

Wednesday, July 1st, 2015 by Joe Kristan


20150701-1The trilobites roamed the oceans for about 270 million yearsbut a charitable donation of fossils of these ancient arthropods failed to survive a single IRS exam. While scientists still ponder what may have caused these rulers of the seas to vanish, there is no doubt about what doomed the charitable deduction.

The fossils were donated by a California veterinarian, a Dr. Isaacs. He donated four fossilized trilobites to the California Academy of Sciences in 2006 and another 8 in 2007, claiming charitable deductions of $136,500 and $109,800.

When you donate appreciated long-term capital gain property to charity, you are allowed to deduct the fair market value of the property without ever including the appreciation in income — an excellent tax result. Because there is obvious abuse potential in this tax break, Congress has imposed strict valuation documentation rules on contributions of assets other than marketable securities if the claimed deduction exceeds $5,000. The Tax Court explains (citations omitted):

First, for all contributions of $250 or more, a taxpayer generally must obtain a contemporaneous written acknowledgment from the donee…

Second, for noncash contributions in excess of $500, a taxpayer must maintain reliable written records with respect to each donated item.

Third, for noncash contributions of property with a claimed value of $5,000 or more, a taxpayer must — in addition to satisfying both sets of requirements described above — obtain a “qualified appraisal” of the donated item(s) and attach to his tax return a fully completed appraisal summary on Form 8283.  Generally, an appraisal is “qualified” if it (1) is prepared no more than 60 days before the contribution date by a “qualified appraiser”, and (2) incorporates specified information, including a statement that the appraisal was prepared for income tax purposes, a description of the valuation method used to determine the contributed property’s fair market value, and a description of the specific basis for the valuation.

It’s not three strikes and you’re out; failing any of these requirement kills your deduction. Yet our veterinarian whiffed on all three requirements, according to the Tax Court. Regarding the appraisal, the court says:

Both of Dr. Isaacs’ Forms 8283 bear the signature “Jeffrey R. Marshall” in Part III, “Declaration of Appraiser”. Dr. Isaacs called Jeffrey Robert Marshall as a witness at trial. The Court accepted Mr. Marshall as an expert in the valuation of fossils over respondent’s objection.4

Mr. Marshall identified the signature on Dr. Isaacs’ 2006 Form 8283 as his own. He did not, however, recall signing it. He likewise identified his signature on Dr. Isaacs’ 2007 Form 8283 but could not recall signing the form.

Mr. Marshall similarly identified his signature on two letters, dated December 31, 2006 and 2007, that purported to be appraisals of the fossils Dr. Isaacs donated to CAS in 2006 and 2007. But Mr. Marshall did not write or even recognize the letters, and as Dr. Isaacs offered no testimony from any other expert as to the letters’ author, we did not admit them into evidence.

Courtesy the mad LOLscientist under Creative Commons license

Flickr image Courtesy the mad LOLscientist under Creative Commons license

It’s a bad sign when your appraiser denies doing an appraisal. I hope the appraisal fee wasn’t high.

Although he sought to introduce purported appraisals signed by Jeffrey Marshall, whom the Court accepted as an expert in fossil valuation, Mr. Marshall denied that he had written these purported appraisals, and we did not admit them into evidence. We need not decide whether Mr. Marshall was a “qualified appraiser” within the meaning of the regulations because, even if he was, Dr. Isaacs introduced no evidence that Mr. Marshall rendered any appraisals of the donated fossils for him. Dr. Isaacs offered no evidence of any other appraisals of the donated fossils that could satisfy the statutory requirement.

Even if the appraisals had been accepted, the Tax Court said the deduction failed for lack of a contemporaneous acknowledgement meeting tax law requirements (my emphasis):

Jean F. DeMouthe, on behalf of CAS, acknowledged Dr. Isaacs’ contributions in writing, and these letters, each dated for the date on which Dr. Isaacs made the contribution acknowledged therein, were contemporaneous as required by section 170(f)(8)(A) and (C). Under section 170(f)(8)(B)(ii), however, the letters could suffice as contemporaneous written acknowledgments only if they stated whether CAS had provided any goods or services in exchange. Neither letter includes such a statement.

Taxpayer loses.

The Moral? When deducting charitable donations, details matter a lot. If you give cash or property for which you will claim a deduction over $250, make sure the charity acknowledges the gift with the magic words saying no goods or services were received in exchange for the gift. And if you are donating property for a donation over $5,000, get your tax advisor involved early to make sure the paperwork and appraisals are done properly and your deductions don’t go the way of the trilobite.

Cite: IsaacsT.C. Memo 2015-121.




Ben Bristor, Scott Drenkard, Indiana Tackles Throwback Rule and Personal Property Tax (Tax Policy Blog):

While Indiana has one of the lowest corporate tax burdens in the country, the throwback rule very frequently complicates corporate income taxation. In the process of trying to capture nowhere income, multiple states can claim the right to tax the same income, creating more complexity for tax authorities and businesses. By eliminating the rule, Indiana lawmakers have made a major improvement in the state’s tax treatment of corporations.

Good news for taxpayers with Indiana manufacturing operations.


David Brunori, Lessons on How Not to Run Your Government (Tax Analysts Blog):

A very knowledgeable person told me that Brownback set efforts to reduce taxes back 10 years. No one wants to be like Kansas. Liberals might celebrate that outcome — but folks who genuinely believe in more limited government and lower tax burdens will rue the Kansas experiment.

Why would you want to give more power to government when it can even screw up a tax cut?


Paul Neiffer, It Pays to Follow the Rules. “The bottom line is that sophisticated estate plans require taxpayers to follow the rules and as indicated by the Webber case, most of them fail at this and sometimes it can cost a lot of money (in Mr. Webber’s case the cost was close to $1 million).”

Robert Wood, Offshore Accounts? Choose OVDP Or Streamlined Despite FATCA

Russ Fox, Mr. Hyatt Goes to Washington…Again. “As you may remember, the Nevada Supreme Court ruled last September that the FTB committed fraud against Mr. Hyatt (false representation and intentional infliction of emotional distress), but threw out most of the Mr. Hyatt’s other claims.”





Joseph Thorndike, Jeb Bush Takes a Page From Richard Nixon by Disclosing Personal Tax Returns (Tax Analysts Blog). “As Richard Nixon discovered 63 years ago, financial disclosure can be embarrassing but it’s also good politics.”

Richard Phillips, Chris Christie’s Long History of Opposition to Progressive Tax Policy. (Tax Justice Blog). Considering how high and awful taxes are in New Jersey, I would expect the Tax Justice people to like him more.

Tony Nitti, Expiration Of Bush Tax Cuts Cost Jeb Bush $500,000 In 2013

Kay Bell, Which candidate’s tax return do you most want to see?


Len Burman, The Uneasy Case for a Financial Transaction Tax (TaxVox). When finance markets are global, these taxes are a great way to run financial businesses out while collecting very little tax. Still, Mr. Burman musters faint praise: “An FTT is far from an ideal tax. But compared with other plausible ways of raising new revenue, it doesn’t look so bad.”

TaxProf, The IRS Scandal, Day 783


News from the Profession. Accounting Professor Who Specialized in Ethics Cheated on Lots of His Papers (Caleb Newquist, Going Concern). I wonder if this is the inventor of the take-home ethics exam.



Tax Roundup, 6/25/15: Time-traveling deductions fail fraud test. And: IRS ‘mistake’ defense won’t work for you!

Thursday, June 25th, 2015 by Joe Kristan

20120511-2Make up your mind! A Georgia investment broker finally got around to filing his 2001 in April 2003. He presented his preparer with an unusual deduction, according to a Tax Court case yesterday (my emphasis):

The return was prepared by a certified public accountant (C.P.A.). On Schedule E, Supplemental Income and Loss, petitioner claimed a flowthrough loss of $516,609 from MCM. Although MCM did not report a loss on its Form 1120S, U.S. Income Tax Return for an S Corporation, petitioner claimed a loss deduction of $554,622 on his own tax return and applied it against the $38,013 of passthrough income he reported from MCM. The deduction was characterized in a statement attached to petitioner’s 2001 return as “General Partner Expenses paid to reimburse”.

Petitioner claimed the deduction for payments he allegedly made to his clients to reimburse them for their losses in the hedge funds. Petitioner did not provide any detailed information or documentation about these payments to the C.P.A. who prepared his return. He simply told the C.P.A. to use the $554,622 expense on his 2001 income tax return.

There’s already a lot wrong here. You can’t pay deductions on behalf of an S corporation you own and deduct them on Schedule E. At best, such payments are miscellaneous itemized deductions, which must exceed 2% of AGI and do no good in computing alternative minimum tax. Only the actual K-1 amounts hit your Schedule E.

The mismatch between the K-1 and the Schedule E would attract IRS attention, even if filing almost a year late didn’t. But the facts made things worse:

Ten days after petitioner filed his 2001 return, he submitted a different version of the return to a bank while applying for a loan. This version omitted the $554,622 deduction petitioner claimed on his filed tax return.

That sort of things is bad for making friends at both the IRS and the bank.

The taxpayer told the Tax Court that the deductions weren’t fraudulent; they were just claimed in the wrong year:

Petitioner concedes that the deduction should not have been claimed for 2001. Instead, on his amended return petitioner claims his income for 2001 was fully offset by a net operating loss carryback from 2002 and 2003.

Unfortunately, the taxpayer failed to convince the tax court that there really were NOLs: “Petitioner has not provided any evidence of a net operating loss for 2002 or 2003, and we have no way of determining from the record whether a net operating loss was available for these years.”  The Tax Court was reluctant to take the broker at his word. This might explain the reluctance:

On November 3, 2006, as litigation with these clients was pending, petitioner voluntarily filed a petition with the U.S. Bankruptcy Court for the Northern District of Florida under 11 U.S.C. chapter 7, No. 06-50298-KKS. During the bankruptcy proceedings petitioner failed to report numerous assets on his bankruptcy schedules, including two boats, a Harley Davidson motorcycle, investment accounts, and $40,000 of artwork.

On October 21, 2008, petitioner was indicted in the U.S. District Court for the Northern District of Florida on 23 counts of criminal misconduct. United States v. Reinhard, No. 4:08-Cr-00049-RH-CAS (N.D. Fla. filed Oct. 21, 2008). On May 13, 2009, petitioner pleaded guilty to seven counts of the indictment, including: (1) making false statements on his 2001 and 2002 income tax returns, in violation of section 7206(1); (2) making false statements on a loan application, [*5] in violation of 18 U.S.C. sec. 1014; and (3) transferring assets and concealing them from the bankruptcy trustee, in violation of 18 U.S.C. sec. 152(7).

lizard20140826The Tax Court upheld the IRS. Worse for the taxpayer, the Tax Court upheld the 75% fraud penalty asserted by the IRS:

Petitioner admitted as part of his plea agreement that he “included as part of his return a fraudulent Schedule E expense of $554,622”. Therefore, petitioner had admitted to fraud and is liable for the civil fraud penalty under section 6663(a) for the 2001 tax year.

When he filed his original 2001 tax return in 2003, petitioner was aware that the payments he reported would have been made in 2002 or 2003, not in 2001. Yet he directed his C.P.A. to claim a deduction for the payments for 2001 without any explanation. Petitioner is an intelligent and well-educated businessman, and we find that he knew that a cash method taxpayer can claim a deduction for an expense only for the year in which it is paid.

The Moral? Aside from the obvious “don’t commit fraud” lesson, we can learn from some simple but egregious mistakes:

– Timing matters. You can only deduct cash-basis deductions in the year of payment.

– If you want to deduct an S corporation expense, have the S corporation make the payment. You can’t pay corporate expenses personally and expect to deduct them as Schedule E expenses.

– If you want to deduct an expense, keep the documentation. The Tax Court never mentioned any settlement or other document showing that the broker had agreed to reimburse losses. If such an agreement existed, showing it to the Tax Court might have helped a great deal.

Cite: Reinhard, T.C. Memo 2015-116.


2008 flood 2


Jeffrey R. Gottleib, IRS Issues Final Regulations for Estate Tax Portability Elections. “When in doubt — file it!”

TaxGrrrl, Tax Authorities Want Atlanta’s SkyView Ferris Wheel Seized To Pay Taxes.

Kay Bell, Ohio bill to make feminine hygiene products sales tax-free.

Jack Townsend, Julius Baer Reserves $350 Million for U.S. Tax Investigation. Swiss bank secrecy isn’t working out too well.

TaxProf, TIGTA: IRS Violated Federal Law By Awarding Millions In Contracts To Businesses With Unpaid Federal Taxes. Anybody expect that the lawbreakers will face any penalty at all?

Scott Greenberg, Investment Donations and the Charitable Deduction (Tax Policy Blog). “Out of the $42.91 billion of noncash donations reported on Form 8283, $22.07 billion were contributions of corporate stocks, mutual funds, and other investments.”

Gene Steurle, How to Pay Zero Taxes on Income of Millions of Dollars (TaxVox). Roth IRAs are involved.


2008 flood 3


News from the Profession. KPMG Gives Employees Enough Ice Cream to Last Them a Week (Caleb Newquist, Going Concern)


TaxProf, The IRS Scandal, Day 777:

IRS employees erased computer backup tapes a month after officials discovered that thousands of emails related to the tax agency’s tea party scandal had been lost, according to government investigators.

The investigators, however, concluded that employees erased the tapes by mistake, not as part of an attempt to destroy evidence.

Kids, don’t count on the “innocent mistake” excuse if you are thinking of destroying evidence they want.



Tax Roundup, 6/24/15: New obscure dumb forms we choose to do together. And: Wine and Taxes!

Wednesday, June 24th, 2015 by Joe Kristan

20150528-1There’s a new stupid form in town. The Commerce Department this year springs a new form on people with interests in foreign businesses. Form BE-10 was originally due May 31, but the system for filing it crashed, leading to a new June 30 deadline.

BE-10 is a survey, not a tax form. The survey is done every five years, and formerly was required only when you were contacted by the Commerce Department. Now everyone with a 10% or more “direct or indirect” interest in a foreign business is supposed to file it. From Accounting Today:

The form is mainly intended for businesses with foreign investments. Originally individuals only had a filing requirement if they were directly contacted by the bureau, but last November, the government amended its regulations to require any U.S. person who had at least a 10 percent direct or indirect interest in a foreign business enterprise at any time during the U.S. person’s fiscal year to file the Form BE-10. A U.S. person includes individuals, trusts, estates, corporations and partnerships.

“With many of our clients fighting the IRS over FBAR penalties, we err on the side of filing whenever the government requests a U.S. person to file an international information report,” said Carolyn Turnbull, international tax services director at Vestal & Wiler CPAs in Orlando, Fla.

Penalties for failure to file the form range from $2,500 to $25,000. Even worse, individuals who willfully fail to file the form can face fines of up to $10,000 or imprisonment for a maximum of one year, or both.

$2,500 to $25,000 for not filling out a stupid survey. Remember, government is simply a word for the things we decide to do together, like clobber each other with big fines for obscure paperwork violations.

Robert Wood has more.




Kay Bell, Uncle Sam demands foreign bank account filing by June 30. The $10,000 threshold — and the whole FBAR regime, in fact — is absurd. Like so many regulations, it ensnares otherwise innocent people for paperwork violations while doing next to nothing to affect criminals, who don’t much care about getting the paperwork right.

Robert Wood, Offshore Banks Reveal Account Data, As IRS Amnesty For Many Involves 50% Penalty. Some amnesty.

Russ Fox, FBAR Due in One Week:

Because of the Hom decision of last year, we now must again report foreign online gambling accounts. That’s basically all online gambling sites except the legal sites in Delaware, Nevada, and New Jersey. I maintain a list of online gambling sites and their mailing addresses here.

Russ performs a valuable public service with this address list.



Samantha Jordan, Scott Drenkard, How High are Wine Taxes in Your State? (Tax Policy Blog). In Iowa, pretty dang high:


Considering it’s burgeoning wine industry, it’s surprising that there hasn’t been more effort to bring Iowa’s wine tax down. And some of the new Iowa wine isn’t half bad.


Jason Dinesen, Marriage in the Tax Code, Part 11: Meet the “Single Penalty”

Peter Reilly, Chief Counsel Gives Narrow Scope To Partnership Liability Regulations. “Note, here, that the taxpayers were insolvent and the field is being told to look harder for a possibly larger assessment.”

Tony Nitti, Tax Geek Tuesday: Navigating The Multiple Definitions Of Nonrecourse And Recourse Liabilities


Carl Smith, Does Rev. Proc. 99-21 Validly Restrict Proof of Financial Disability, for Purposes of Extending the Refund Claim SOL, to Letters From Doctors of Medicine or Osteopathy? Part 1.

TaxGrrrl, Nevada Pops New Tax On Burning Man, iHeartRadio, Other Music Festivals


David Brunori, Rand Paul’s Tax Ideas Are Worth Serious Consideration (Tax Analysts Blog). 

Sen. Rand Paul, R-Ky., a GOP presidential candidate, released his tax plan last week. As expected, some commentators piled on criticism. Howard Gleckman of the Urban Institute said Paul was trying to use the tax proposal to “fundamentally restructure the federal government as we know it.” Bob McIntyre, the director of Citizens for Tax Justice, said Paul’s plan would cost $15 trillion over 10 years. Other, less informed folks resorted to calling Paul names.

This criticism from liberals is neither unexpected nor irrational. These are folks who like to see more government spending and revenue raising. Paul is a small government Republican. Of course he wants to see less government and taxes. So it’s not surprising that his tax plan would, in a vacuum, lose the government money. The Tax Foundation says the cost would be $3 trillion over 10 years on a static basis. But that assumes Paul will keep spending at current levels. I suspect that if he became president, he’d support spending cuts equal to or greater than the cost of his tax plan.

I certainly would.




Howard Gleckman, CBO Has No Idea What Repeal of the ACA Means for the Economy or the Deficit (TaxVox). No more idea than when they said the ACA wouldn’t increase the deficit back when it was enacted.


Ethan Greene, Alaska Ends Film Tax Credit Program (Tax Policy Blog). States are beginning to realize that they are being had by the film industry.

TaxProf, The IRS Scandal, Day 776:

In the continuing saga of the IRS, the Department of Justice, and their efforts to hide evidence and obstruct justice to protect Lois Lerner and the administration’s targeting of its political opposition, the IRS now claims that thousands of emails found on backup tapes Commissioner Koskinen told Congress did not exist are not IRS records, the IRS has no control over them, and they can’t produce them. 

The IRS has done nothing but obstruct and stonewall. If a taxpayer treated an IRS exam the way the IRS has treated this investigation, they’d be inviting the criminal agents in.


News from the Profession. Life at Deloitte Includes Slow Days (Caleb Newquist, Going Concern).



Tax Roundup, 6/23/15: A foolproof tax prep scam! And more.

Tuesday, June 23rd, 2015 by Joe Kristan

One week left! To file your FBAR Form 114 reports of foreign financial accounts.


ice truckDid a Davenport preparer e-file different returns than he showed his clients? That’s what federal prosecutors allege. They have accused a Davenport man of preparing accurate tax returns for clients, but then e-filing different returns claiming larger refunds, diverting the extra refunds to his own account.

If true, the case is interesting in two ways.

First,It appears to have been based on fraudulent Schedule C sole proprietorship filings. These can be used to create sham losses to create extra refunds, or to create sham earned income to generate earned income tax credit. It was most likely an EITC scam, as fake schedule A deductions work as well for deductions, but not at all for generating refundable EITC.

Second, it was a horrible idea. It’s hard to imagine how he thought he would ever get away with filing returns different from what the client approved. Inevitably there would be a notice or other problem that would bring the scam to light. But the cops don’t spend their days chasing geniuses.


Robert Wood, Record 27 Years Prison For Tax Fraud, Beating Tax Fraud Queen’s 21 Years. The guy allegedly collected 7,000 Social Security numbers and scammed $1.8 in stolen refunds. Considering the hassle he created for the rightful holders of those numbers, that sounds about right.

buzz20141017Robert D. Flach has Tuesday Buzz for you, covering the ground from Trump to Kansas.

William Perez, Tax Advice for Cannabis Entrepreneurs. Speaking of buzz.

Hank Stern, CO-OPs: That flushing sound you hear…  It appears that other Obamacare health co-ops may go the way of Iowa’s CoOportunity.

Keith Fogg, Contrasting the Compromise Standards between the Chief Counsel, IRS and the Department of Justice in Litigated Cases (Procedurally Taxing)

Jack Townsend, Two More Swiss Banks Enter DPAs under US DOJ Swiss Bank Program. Swiss bank privacy is over. Taxpayers who have been counting on it need to check in with their attorneys.


Jeremy Scott, Supreme Court Could Create $353 Billion Deficit Problem (Tax Analysits Blog):

The wait continues for the Supreme Court’s decision in King v. Burwell — the Court did not release the opinion on June 22. If the Court decides in favor of King — basically making residents of 34 states ineligible for healthcare credits — that will gut President Obama’s healthcare reform effort, essentially leaving lawmakers with the choice to either fix or repeal the Affordable Care Act. Republicans are eager to do the latter, but the Congressional Budget Office may have made that more difficult. The CBO says that outright repeal would cost $353 billion over 10 years based on a static scoring model.

It’s a bit strange to think that it’s the Republicans’ responsibility to fix a law that was incompetently drafted by a Democratic Congress. And the House and Senate don’t seem inclined to follow that path anyway. 

It’s not the Supreme Court that would create the problem. It would be the administration and its Congressional allies that passed an unworkable and incoherent lawwith no support at all from the other party.

Kay Bell, No Supreme Court word yet on Obamacare subsidies,
but another part of the health care law is closer to repeal
. “The House voted on June 18 to get rid of the medical device tax.”




Dita Aisyah, Tax Extenders: Take Them or Leave Them, Part 2 (Tax Policy Blog):

Currently, all 50 or so tax extenders are expired for 2015, but Congress will likely pass them retroactively as they have in the past.

Some tax extenders are genuinely good policy, while some are bad. However, the concept of an extender is silly. They create unnecessary uncertainty for individuals and businesses who need to make important long term financial plans.

This very uncertainty creates the need for lobbyists to make annual pilgrimages to Congress to beg for another year of tax breaks. I suspect that Congress likes it that way.


Kyle Pomerleau, Senator Rand Paul’s Payroll Tax Swap. “One striking feature of the tax plan is that it eliminates payroll taxes.”

Bob McIntyre, Detractor Dangles Shiny Objects to Obscure Facts about Rand Paul’s Deficit-Inflating Flat Tax Proposal. (Tax Justice Blog). A left-wing tax site calls the Tax Foundation right-wing.

Steven Rosenthal, The Rich get Richer, with a Little Tax Help (TaxVox).

TaxProf, The IRS Scandal, Day 775. Today’s entry covers a non Tea Party organization whose exemption was stalled because it held views disapproved by the Administration.


News from the Profession. There’s a Lack of Talent to Succeed Accounting Firms Because the Talent Doesn’t Exist (Caleb Newquist, Going Concern). “A recent survey of accounting firm partners from the CPA Consultants’ Alliance found that over half of respondents (51.7%) said procrastination or denial was a primary cause for firms’ succession troubles.”