Posts Tagged ‘Steven Miller’

Tax Roundup, 10/7/14: Sweet pursuit of Tax Fairy turns sour. And: shut up and get used to FATCA!

Tuesday, October 7th, 2014 by Joe Kristan

tax fairy

Isaac Brock visitors: here is a direct link to what you are looking for.

Not so sweet.  A business owner who turned to a man associated with the JoY Foundation “pure trust” scam in pursuit of the Tax Fairy may be regretting his choice of tax advisors after a bad day in Tax Court yesterday.

The taxpayer had an apparently successful S corporation, Specific Enterprises, specializing in cabinet doors.  In 2002, Mr. Joseph Sweet came up with a cunning plan, starting with a liquidation of Specific Enterprises.  Tax Court Judge Nega takes up the story (footnotes and citations omitted, emphasis added):

On December 3, 2002, an entity called RCC Capital Group (RCC) was formed that purported to be a “PRIVATE, NON-STATUTORY, NON-ASSOCIATED, CONTRACTUAL PURE TRUST (CPT)”…

On January 2, 2003, petitioner and RCC entered into an “Asset Purchase Option Contract” (drafted by petitioner) where petitioner purported to grant RCC options to purchase petitioner’s factory building, the land upon which it was located, and equipment. The exercise price for the contract was $1,650,000, and petitioner accepted $21 (presumably the same $21 conveyed to RCC by Brad R. Scott) plus two promissory notes valued at $700,000 and $950,000 in full consideration of the deal. The contract was also contingent upon a separate rental contract, the “Facility Production Contract”, between RCC and Cabinet Door Shop for Cabinet Door Shop’s use of the factory building, land, and equipment… At the behest of petitioner, RCC did not file income tax returns.

Pursuant to the “Facility Production Contract”, dated January 3, 2003, Cabinet Door Shop made total rental payments of $273,000 and $126,000 to RCC for 2003 and 2004, respectively, although RCC did not exercise the option to purchase the factory building, land, and equipment from petitioner until some time around March 10, 2004. After receiving these rental payments RCC made total payments to petitioner in the exact same amounts: $273,000 in 2003 and $126,000 in 2004.

In 2003 as part of a separate transaction Cabinet Door Shop made monthly installment payments to petitioner totaling $80,798 for the sale of inventory.

“Pure trusts” are a hackneyed and worthless tax scheme that retains a following among tax deniers. The IRS naturally didn’t like the way this stuff was reported, assessing tax on the sale of inventory and sticking the taxpayer with the income earned in the “pure trust.”  First, the inventory:

Petitioner has not provided any facts or details that permit a reasonable estimate of his basis in the inventory. Although petitioner provided respondent with his personal tax returns and tax returns for Specific Enterprises one day before trial, these returns are mere admissions; and we are unwilling to attach significance to them in the absence of corroborating evidence as to petitioner’s basis in his assets. The record does not establish the cost basis of the inventory. The record indicates only that Cabinet Door Shop paid $80,798 to petitioner for the inventory…  Because petitioner has not provided any pertinent information that would help us estimate his basis in the inventory, the Cohan rule does not apply. Consequently, the entire amount paid by Cabinet Door Shop for petitioner’s inventory is includable in petitioner’s gross income for the 2003 taxable year.

A self-inflicted wound. Surely the taxpayer had basis in the inventory, but apparently he didn’t take the Tax Court proceeding seriously enough to document it.

The “pure trust” fared no better, with all of the “rental payments” received by the trust taxed to the taxpayer instead.  The IRS also won 25% penalties for non-filing of returns for 2003 and 2004.

It’s interesting that no tax is assessed for 2002, the year the corporation was liquidated — a corporate liquidation would normally have triggered a lot of tax. I assume the omission of 2002 from the case implies that a return was filed, starting the statute of limitations, though the Tax Court decision doesn’t confirm this. Considering the whole thing was done to start a tax avoidance scheme, it would seem strange for the gain to be properly reported.

The Moral: Beware of trust schemes that say they make your taxes go away. They are just Sweet nothings. If the Tax Court wants you to document something, don’t give them the information the day before trial. And there is no Tax Fairy.

Cite: Wheeler, T.C. Memo. 2014-204

 

No-longer-Acting IRS Commissioner Steven Miller

No-longer-Acting IRS Commissioner Steven Miller

Worst Acting Commissioner Ever says FATCA may not be worth it, but it’s here to stayTax Analysts reports ($link) on a speech by Steve Miller, who was Acting IRS Commissioner when the Lois Lerner scandal broke. He says that while the FATCA offshore disclosure bill may not be worth its cost, it shouldn’t go away:

“I can’t even say with conviction that I’m sure, looking strictly on a cost-benefit basis, that FATCA’s . . . benefits are going to outweigh the cost,” Miller told a lunch crowd at the Securities Industry and Financial Markets Association FATCA Policy Symposium in Washington. “It’s not clear to me that when you look solely at the burden placed on financial institutions and others, versus the amount of revenue that may come into the treasury, that this is going to be a revenue-positive event for the United States.”

And despite the fervent wishes of some in the finance industry, FATCA is here to stay, said Miller, now national director of tax for Alliantgroup. “I don’t see a repeal in the cards,” he said. “FATCA . . . is tied inextricably to offshore evasion work, and that has to be kept in mind as you talk about repeal, as you talk about changes.”

In case you’re wondering, Alliantgroup is a tax consulting company that specializes in tax code complexity exploitation via services like research credit studies.

Miller said he recognized “that the folks in this room are sort of on the wrong end of FATCA implementation and that you’re bearing the cost and not necessarily the benefit of FATCA.”

But Miller added, “The future is an improved global set of rules, [and] I have high hopes that it will create a level playing field that will make it much more expensive and risky to hide assets offshore. And that should be some help at least to compliant financial institutions as people consider where to invest their money into the future.”

FATCA has made ordinary personal finance difficult to impossible for Americans abroad. Americans are losing opportunities to work offshore because foreign employers fear FATCA hassles. U.S. citizens who do find work offshore face hassles and headaches just trying to open a bank account. But that’s a small price to pay for “an improved set of global rules,” right?

Of course, a defense of burdensome tax provisions is no surprise coming from an IRS official going out the revolving door to a company whose business depends on helping taxpayers deal with “the burden placed on financial institutions and others.” It makes Glenn Reynold’s Revolving Door Surtax proposal look very tempting.

 

buzz20140909Robert D. Flach has some fresh Tuesday Buzz,  including a link to a discussion of the prospects for tax reform (dismal) and the immediate future for figures in the T.V. show “Real Housewives of New Jersey” (dismal also).

TaxGrrrl has two new guest posts: Steven Chung, The Vehicle Miles Traveled Tax and Dominic Ferszt, The Accidental Tax Invasion. The second post is an excellent summary of the FATCA nightmares Steven Miller says offshore taxpayers should just suck up and get used to.

Kay Bell, Signs of change for sports league tax exempt status

 

Martin Sullivan, Can Multinationals’ Offshore Cash Fund a U.S. Infrastructure Bank? (Tax Analysts Blog). Apparently fixing a tax code debacle may be doable if we create a domestic spending boondoggle.

 

TaxProf, The IRS Scandal, Day 516

 

20140729-1Scott Drenkard, North Dakota Democrat Tax Commissioner Candidate Proposes Flat Tax—Big Tax Climate Improvement (Tax Policy Blog). In North Dakota, Tax Commissioner is a statewide elective office.

Imagine an Iowa Democrat proposing what Joseph Astrup proposes:

His plan would flatten and simplify the individual income tax to a single bracket, while lowering the top rate from 3.22 percent to 2.52 percent. The exemption would be raised to $40,000 for singles and $80,000 for married filers.

In fairness, I can’t imagine an Iowa Republican proposing something like this, either. But if an Iowa politician does want to take some inspiration from North Dakota, the Tax Update’s Quick and Dirty Iowa Tax Reform Plan would be a fine place to start.

 

Tracy Gordon, It’s Not Easy to Escape the Local Pension Vise (TaxVox). Maybe not, but it’s necessary.

Peter Reilly, Tax Court Judge Appreciates Art More Than Your Average Revenue Agent, Which presumably makes a certain art professor appreciate the Tax Court more than the IRS.

Share

Tax Roundup, 5/16/2013: Acting-out edition. And a real Iowa economic development initiative.

Thursday, May 16th, 2013 by Joe Kristan
No-longer-Acting IRS Commissioner Steven Miller

No-longer-Acting IRS Commissioner Steven Miller

So the Worst Acting Commissioner Ever is gone.  From The Wall Street Journal:

 President  Barack Obama  forced the resignation Wednesday of the acting commissioner of the Internal Revenue Service in connection with the inappropriate targeting of conservative political groups.

“Americans are right to be angry about it and I’m angry about it,” Mr.  Obama said in announcing the departure of acting IRS Commissioner Steven Miller, who took over the post in November. “The IRS has to operate with absolute integrity.”

Mr. Miller’s resignation is necessary, given the evidence that he hasn’t been honest about IRS harassment of right-side political organizations, but it won’t be sufficient to quell the scandal.   Yesterday’s line, that the scandal was the work of “two rogue employees” in Cincinnati, is risible in light of the involvement of the D.C. and Laguna Niguel offices in the harassment.  That is, unless the two rogue employees were Doug Shulman and Steven Miller.

The TaxProf rounds up a big day in big media coverage: The IRS Scandal, Day 7.  Other blog coverage:

 

Tony Nitti, IRS Takes Time Away From Bullying Tea Party To Release Snoop Lion’s Tax Lien:

So in my view, the problem here isn’t so much that the IRS “targeted” a particular type of taxpayer — because that’s what the IRS does – but rather that in targeting the Tea Party, the Service is reflecting a political bias, something an arm of the government simply cannot do.

I think that’s about right.  Given the long delays in Tea Party applications, while similar applications by left-side groups were routinely approved, it’s pretty hard to believe that it wasn’t discrimination against right-side viewpoints.

 

Christopher Bergin, Scandal, Scandal, Scandal (Tax Analysts Blog):

Among the many ridiculous tasks our politicians pile on the tax collector, the agency has been charged with determining whether political organizations applying for 501(c)(4) status are too political and to do that without getting political. Sounds like a winner to me. Last Friday, the IRS admitted it failed in performing that task. What a surprise.
The IRS also fails in administering a social welfare program known as the earned income tax credit. And just think of how well it will administer the myriad of rules it will have to deal with once the new health care system becomes fully operational.

But we can trust them to regulate preparers, right?

Victor Fleischer raises related point in a New York Times piece.  While I think some of the focus on “institutional” issues is a way to change the subject from political bullying, I don’t mind if it leads people to realize that the tax law is for collecting taxes, not the Swiss Army Knife of public policy.

Howard Gleckman at TaxVox clings to the “botched processing” line: The IRS and the Tea Party: Treasury Report Finds Big Bungling but Small Scandal

Joseph Henchman, President Obama Obtains Resignation of IRS Acting Commissioner; Takes Effect in June (Tax Policy Blog)

TaxGrrrl, Acting IRS Commissioner Miller Out In Midst Of IRS Tax Exempt Scandal

Kay Bell, Obama fires IRS Acting Commissioner

Peter Reilly, Have Some Sympathy For IRS Cincinnati Gang That Couldn’t Sort Straight

Going Concern, Acting IRS Commissioner Is Gonna Take Off Now

Me, So the Worst Acting Commissioner Ever is done.  Too bad, they just finished his official portrait.

 

 

In other news:

Minnesota Budget Deal Includes $2 Billion Tax Hike (Elizabeth Malm, Tax Policy Blog):

The budget adds another income tax bracket on single filers earning $150,000 or more annually. The state’s top rate will now be 9.85 percent, making it the fourth highest top rate in the country. Politicians are spinning this as only affecting the “top 2 percent,” but that misses the point.

Pushing more of the tax burden onto a smaller, wealthier group is poor policy, not because I care about rich people more (an absurd and inaccurate, but unfortunately common, assertion), but because those incomes are volatile. Income tax revenues that derive a large share of receipts from the wealthiest are unstable, and there’s a lot of research to back that up (a few examples can be found here and here). This point is exacerbated by the fact that lawmakers might also throw in an additional temporary income tax surcharge on those earning $500,000 or more.

This will do more for Iowa’s economic development than anything the Iowa economic development bureaucracy ever will.

 

Tax Justice Blog, State News Quick Hits: Why a Revenue Uptick is Not a Surplus, and More

You’re as young as you feel.  A Rhode Island man pleaded guilty yesterday to charges arising out of an alleged kickback operation involving the Navy.

At age 81.

Maybe there are federal prisons with shuffleboards.

 

Share

Goat sacrificed.

Wednesday, May 15th, 2013 by Joe Kristan

So the Worst Acting Commissioner Ever is done.  Too bad, they just finished his official portrait.

 Goat

Somehow I don’t think this ends the scandal.

Share

Tax Roundup, 5/14/2013: Worst Acting Commissioner Ever? And a career tip.

Tuesday, May 14th, 2013 by Joe Kristan

 

Acting Commissioner Steven T. Miller

Acting Commissioner Steven T. Miller

Steven Miller, acting head of the IRS since Doug Shulman left office, apparently hasn’t been any more honest than The Worst Commissioner Ever about IRS harassment of right-side political groups.  AP reports:

Miller was first informed on May, 3, 2012, that applications for tax-exempt status by tea party groups were inappropriately singled out for extra scrutiny,    the IRS said Monday.

At least twice after the briefing, Miller wrote letters to members of Congress to explain the process of reviewing applications for tax-exempt status without disclosing that tea party groups had been targeted.

We’re supposed to tell the truth when we file our returns.  It’s not asking too much for them to return the favor.

Not just harassment, but leaking confidential information.  IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups (ProPublica.org)

No, too late.  White House: Too early to talk about firing IRS employees  (Examiner.com)

So it’s the Supreme Court’s Fault?  Pelosi: IRS Scandal “An Opportunity” To Scrutinize 501(c)(4)s And “Overturn Citizens United”  All right, then.

 

TaxProf, The IRS Scandal, Day 5

Russ Fox, Drip, Drip, Drip: The IRS Scandal Continues to Grow

Jeremy Scott, Lerner’s Admission and Apology Ring Hollow (Tax Analysts):

 The incompetence boggles the mind. It’s also bewildering how the Service could sit in front of GOP lawmakers and chastise them for underfunding tax enforcement when employees were using some of those supposedly precious funds to conduct a politically charged vendetta against conservative exempt organizations.

I think the perpetrators were quite competent in doing what they set out to do.  The only incompetence was in getting caught.  But he’s absolutely right that the agency’s poor-mouthing, including next week’s furloughs, will no longer convince anybody.

 

TaxGrrrl,  Congress And The President Want You To Get Mad At IRS Over Tax Exempt Targets (Just Not At Them):

It’s clear that those at the top knew something (it has been reported that Shulman was alerted to the issue in 2012) and that it wasn’t the work of a handful of rogue operatives. It was a plan. And then IRS lied about it. And they should be held accountable.

But it still disturbs me that no one in Washington really seemed to care until the behavior went public.

Many of us didn’t believe the IRS would really do something so outrageous.  I had seen some of the questions that IRS was asking Tea Party outfits, and they seemed out of line, but I figured the IRS was being an equal-opportunity annoyance.  That they did it politically is what is triggering the outrage.

 

Howard Gleckman,  The IRS Was Wrong to Single Out Tea Parties, But Many Political Groups Should Not be Tax-Exempt.  Yes, let’s change the subject.

Going Concern, Here Are Some of Things People Are Saying About the IRS Scandal,  An excellent roundup of the state of play, but with too much emphasis on the “incompetence” slant and not enough on “evil.”

Patrick Temple-West, IRS targeted groups critical of government, and more (Tax Break)

Kay Bell, Rubio demands resignation of nonexistent IRS commissioner; Obama vows to ‘find out exactly what happened’.  He can get some sleuthing tips from O.J.

Linda Beale,  More on the IRS’s “targeting of conservative groups”.  She tries to play down the issue.  It shows how slim are the pickings for those who don’t want to think this is a big deal.

 

In other news:

Tax.com has moved.  For reasons that elude me, Tax Analysts has apparently given up the handy Tax.com domain and moved their excellent group blog to a tab on their home page, Tax.org.  I think that’s a mistake, but it’s worth going out of your way to find it.

Martin Sullivan, Do U.S. Multinationals Have It Tough? (Tax Analysts).

Russ Fox, Leisure Suit Larry Goes to Tax Court

Peter Reilly,  Electing To Capitalize Expenses Can Pay Off On Sale

Kyle Pomerleau,  Another Year, another Obamacare Tax (Tax Policy Blog)

Jack Townsend,  The Dangers of the Unrecorded Interview by Criminal Agents — FBI or IRS

It’s Tuesday, so it’s Buzz Day at Robert D. Flach’s place.

 

Career Advice.  Protip: Threatening to Kill Your Colleagues, Even in the Midst of a Brutal Busy Season, Is Never Cool (Going Concern).  OK, I take it back.  Mistakes were made. There was no threat intended in my overzealous pursuit of tax return excellence.  It was just an administrative shortcut.  OK, incompetent, but not evil.  I vow to find out exactly what happened.  If I threatened anyone, it was outrageous.

 

Share

Tax Roundup, 11/14/2012: So what about the other $8.4 trillion?

Wednesday, November 14th, 2012 by Joe Kristan

Tell me when they get serious about the budget.  The federal budget deficit is running about $1 trillion annually.  So how does the President propose to address it?  Primarily by increasing taxes by $1.6 trillion — over 10 years.  And, of course, no real spending cuts.  The TaxProf links this:

Wall Street Journal:  Obama Sets Steep Tax Target: President to Seek $1.6 Trillion More in Revenue, Double Level From 2011 Talks:

President Barack Obama will begin budget negotiations with congressional leaders Friday by calling for $1.6 trillion in additional tax revenue over the next decade, far more than Republicans are likely to accept and double the $800 billion discussed in talks with GOP leaders during the summer of 2011. …

Kevin Smith, a spokesman for House Speaker John Boehner (R., Ohio), dismissed the president’s opening position for the negotiations. He said Mr. Boehner’s proposal to revamp the tax code and entitlement programs is “consistent with the president’s call for a ‘balanced’ approach.” …

In negotiations between Messrs. Boehner and Obama in mid-2011, the two sides neared agreement on a plan to cut the deficit by $4 trillion over 10 years, including $800 billion in new revenue. The deal fell apart after Mr. Obama asked to raise the revenue component to $1.2 trillion, and to this day each side blames the other for the collapse. Based on that history, some senior GOP aides said they believed a likely compromise would call for about $1 trillion in new tax revenue, possibly from capping deductions for wealthier taxpayers.

As noted here, a straight dollar cap on itemized deductions would still be a tax increase on pass-through businesses.  Taxpayers who report business income on their personal returns have to deduct the state income taxes as itemized deductions, rather than as “above-the-line” business expenses.  A straight deduction cap would eliminate the deduction for state income taxes on business income.

How would you be able to tell if they are serious?  When they admit that to have government benefits for everybody, you have to increase taxes for everybody, and that cutting spending by cutting “fraud, abuse and waste” never happens.  The rich guy isn’t buying.

Chart 29. The federal deficit has grown so large that tax increases only on America’s millionaires will not be our silver bullet. Even if the government took all of the income earned by those who have an after-tax income of $1 million or more, the amount of revenue generated would fall far short of eliminating the deficit. The expected federal deficit for 2012 is about $1.2 trillion. The latest IRS data indicates that the total after-tax income for all millionaires is roughly $709 billion. If every penny of that after-tax income were taken by the government through a 100% tax rate, and we assume that no spending cuts are made to accompany the tax increase, this would account for only about 60% of the amount needed to erase the deficit. With numbers like this, one thing is clear: soaking the wealthy with increasingly higher tax rates simply cannot be the only answer to our nation’s fiscal problems.

 

TaxProf,  Democrats Embrace Romney’s Tax Plan to Limit Deductions

Patrick Temple-West,  Essential reading: Democrats like a Romney idea on income tax, and more (Tax Break)

Tell me when they get serious about the budget II: Branstad, Grassley push for extension of wind tax credit (Radio Iowa, via The Beanwalker)

So much for that deficit solution.  ‘Fat Tax’ in Denmark Is Repealed After Criticism (New York Times)

Howard Gleckman,  Congress Can’t Avoid Tax Rate Hikes By Closing “Loopholes” (TaxVox)

 

 

Meanwhile, this upcoming tax season is likely to be horrible.  Acting IRS Commissioner Steven T. Miller tells the IRS that many taxpayers may have to wait until late March next year to file, depending on whether and when an “AMT Patch” is enacted (my emphasis):

Without an AMT patch, about 28 million taxpayers would be faced with a very large, unexpected tax liability for the current tax year (2012). In addition, in order to allow time for the IRS to make the programming changes necessary to conform our processing systems to reflect expiration of the AMT patch and the credit ordering rules, the IRS would, at minimum, need to instruct more than 60 million taxpayers that they may not file their tax returns or receive a refund until the IRS completes the necessary systems changes. Because of the magnitude and complexity of the changes, it is entirely possible that these taxpayers would not be able to file until late March 2013, if not even later. Tens of millions of these taxpayers would unexpectedly have to pay additional income tax for 2012, leaving them with a balance due return or a much smaller refund than expected.

Tax season has become more compressed into the last few weeks before April 15 because 1099s and K-1s are issued later every year as a result of tax law complexity.  It looks like it could get much worse.

 

You Gotti like it.   John A. Gotti, son of the convicted organized crime figure, scores a legal victory, convincing the Tax Court not to grant summary judgment for the IRS in a tax case involving a corporation he controls with his wife.  It involves a dispute over whether IRS correspondence mailed to a jail address was a proper notification at the taxpayer’s “last known address.”

 

Another sign of the apocolypse.  There is now on online exchange for trading transferable film tax credits.  Tax Analysts reports ($link)

The newly launched Online Incentives Exchange LLC (OIX) purports to be the first “truly national, transparent, liquid exchange for the trading of state tax credits,” competing against direct brokerages in the trading of transferable and/or refundable state tax credits.

Right now, only Louisiana tax credits are trading on the exchange. Organizers plan to enable trading of California and Georgia credits in December and to eventually list on the exchange transferable and refundable tax credits in the 45 states where those incentives are available.

I prefer Iowa’s new practice of imprisoning filmmakers, myself.

 

Richard Morrison,  What Canada Can Teach Us about Corporate Taxes (Tax Policy Blog)

William Perez,  TIGTA Reveals Cause of Refund Delays that Occurred in Early 2012

Kay Bell,  Superstorm Sandy tax considerations; California cities’ soda tax falls flat

Paul Neiffer,  IRS Announces It Does Not Like Fixed Dollar Gifts

Jason Dinesen,   No to Additional Preparer Testing, Yes to CPE Requirements. I say no to the entire preparer regulation scheme.

Brian Strahle,  What Are Your Year-End State and Local Tax Needs?

Robert D. Flach has an exasperated Buzz.

 

Worse than a computer virus?  McAfee On The Run: Murder and Mayhem (But Few Taxes) In Belize  (TaxGrrrl)

In these troubled times, it’s good to know there are still things we can believe in.  Sixth Circuit Agrees That Cliff Claven Is Not A Thief (Peter Reilly)

x

 

Share