Ed Zollars' Tax Update Podcast

This week's presentation is based on a presentation I made for the Virginia Society of CPAs' 8th Annual Industry Conference in Williamsburg on May 28, 2009 on gadgets and gizmos.  The presentation includes a look at:Novatel's MifiApple's Airport ExpressApple iPhone 3GBlackberry Bold, Pearl and StormApple iPod TouchNetbooks The slides can be important to follow along, so you may wish to download them at http://www.edzollars.com/2009-05-29_Gadgets.pdf .The podcast is sponsored by Leimberg Services, located at http://www.leimbergservices.com .

Education incentives have been a favorite of Congress in recent years, but this week we look at the old favorite of education as a business deduction, a provision covered by regulations last updated back in 1967.  The Tax Court had cause to look into this in the case of Ray v. Commissioner, TC Summary Opinion 2009-71.Materials for this week's podcast can be downloaded at http://www.edzollars.com/2009-05-20_Education.pdf . The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

Last year there was lots of discussion regarding the changes to §6694 and how tax professionals were to apply the standards there against return positions.  However, while the standard to be applied may have changed, there were standards in place before and this week we look at the case of a CPA that ran afoul of the lower standards.  In the case if USA v. Kapp, (2009 TNT 84-30), the Ninth Circuit Court of Appeals sustained the issuance of an injunction against a CPA prohibiting him from taking a position on returns that failed the older §6694(a) standard for nondisclosed positions.The case is of interest because the panel gives a practical walkthrough of analyzing the level of support that existed for a position, as well as noting those items of support that Mr. Kapp wished to rely upon but which did not serve to help his cause.The materials for the podcast are at http://www.edzollars.com/2009-05-11_Preparer.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leim

The IRS has issued a revised ruling on the use of a net operating loss under the new rules Congress added in February.  The new ruling, Revenue Ruling 2009-26, updates and liberalizes the guidance previously given in Revenue Ruling 2009-19 issued on March 16.  The new guidance allows taxpayers to simply file a carryback for the appropriate number of years to make the election, but there are special due date rules you have to worry about.The materials are at http://www.edzollars.com/2009-05-04_NetOperatingLoss.pdf.The podcast is sponsored by Leimberg Information Services on the web at http://www.leimbergservices.com.

The definition of an employee is this week's key issue--and we look at the matter in the case of Maimon v. Commissioner, TC Summary Opinion 2009-53.  Dr. Maimon attempted to argue that he was not an employee of the professional corporation he worked in (and owned some shares in), but rather was an independent contractor.  He was interested in holding this position because he had ended up personally paying over legal fees and, ultimately, a $1 million settlement, in a case involving his medical services.The case is interesting because the Court held Dr. Maimon was not an officer and thus actually stepped through the common law tests for employment status.  In the end the court found Dr. Maimon was an employee, but the case gives a good outline of the analysis to go through even in cases that aren't quite as "bad facts" as this one.Materials for the podcast are available at http://www.edzollars.com/2009-04-25_Employee.pdf .The podcast is sponsored by Leimberg Services, located on the web at http://www.leimbergs

The Tax Court recently decided a pair of cases related to the innocent spouse provisions of §6015 and time limits on filing for relief.  In the case of Mannella v. Commissioner, 132 T.C. No. 10 the Tax Court held that even if the notice of intent to levy and rights under the innocent spouse provisions were never seen by the taxpayer, the two year period for relief under §6015(b) and (c) that is specifically imposed by statute begin to run.However, the Court held in this case and the earlier case of Lantz v. Commissioner, 132 T.C. No. 8 that the IRS regulation that imposed a similar two year time limit on equitable relief under §6015(f) was invalid, thus allowing the taxpayers to move forward with a claim for equitable relief.The materials for this podcast are at http://www.edzollars.com/2009-04-19_6015.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The IRS has shown recent interest in disputing whether real estate agents meet the requirements to be treated as real estate professionals that can use the rules of §409(c)(7) to treat rental real estate under the standard passive activity rules rather than having such items automatically treated as passive.  The IRS position is that since the law refers to a "brokerage" trade or business and such individuals generally are not licensed as real estate brokers they cannot qualify.In the case of Agarwal v. Commissioner, TC Summary 2009-29, the Tax Court did not agree with the IRS on that matter, instead allowing the taxpayer, who was a real estate agent who worked as an independent contractor under contract with a licensed brokerage firm, to qualify for §409(c)(7) treatment.  The podcast also discusses a 2007 case where it was the IRS who was (successfully) arguing that you can't use state law licensing definitions when the issue was whether an bookkeeping and tax preparation firm that was not licensed as a CPA

Can nonexistent cattle be overvalued?  The Ninth Circuit, disagreeing with the Tax Court and other circuits, says it cannot be in the case of Keller v. Commissioner, 2009 TNT 37-17 reversing on this issue the Tax Court's decision in TC Memo 2006-131.The materials for this podcast can be downloaded at http://www.edzollars.com/2009-03-02_Cattle.pdf .The podcast is sponsored by Leimberg Services at http://www.leimbergservices.com .

This week we look at a case dealing with the trust fund recovery penalty under §6672.  In the case of Richard A. Smith v. United States, 2009 TNT 30-6, CA10, (http://ca10.washburnlaw.edu/cases/2009/02/07-4210.pdf) the Tenth Circuit refused to overturn the holding in the US District Court of Utah that Mr. Smith was a responsible person, even though he had no ownership interest in the entity in question.  The case highlights the dangers for employees in accounting functions when the organization they work for begins to have cash flow problems, and payroll tax payments begin to be skipped.The materials are available at http://www.edzollars.com/2009-02-23_Responsible.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The new American Recovery Reinvestment Act of 2009 has a number of tax provisions, and this week's podcast looks at the small business net operating loss provisions of the Act.  This provision will require action for some taxpayers within 60 days after the bill is signed into law, as well as giving us a "sliding" window for when we start using a net operating loss for the year we elect to have it apply to.The podcast materials are located at http://www.edzollars.com/2009-02-16_NOL.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

Housing problems are all over the news (and with some of our clients), but today's story is a housing problem of a different sort.  We look at a case where lots of things went wrong in building a taxpayers' dream home where the taxpayers attempted to claim a casualty loss on their tax return.  In the cases of Grief v. Commissioner and Bui v. Commissioner, TC Summary Opinion 2009-18, the Tax Court finds that this couple is not going to get any relief from the IRC.The materials for this week's podcast can be downloaded at http://www.edzollars.com/2009-02-09_Casualty.pdf .I also note in the podcast that I'm posting updates on Twitter (http://www.twitter.com) .  My Twitter name is "edzollars" and if you want to follow me there that's fine.The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

What if a customer tells you they are going to reduce what they pay you for the work you just delivered to them because you owe them to fix for a bad job you did on an earlier contract?  If you are on the accrual basis, can you reduce your accrued receivable or record an expense if you are disputing that claim?  That is the issue being dealt with this week in the case of Trinity Industries v. Commissioner, 132 TC No. 2.The written materials can be downloaded at http://www.edzollars.com/2009-02-02_Timing.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

This week I look at a case involving a Northwest Airlines mechanic who was laid off and ended up using his "bumping" rights in other cities while hoping to return to his original home base.  The question of whether the taxpayer could deduct the expenses of working in the various locations is considered by the Seventh Circuit Court of Appeals after the Tax Court decided no deduction was allowed in the case of Wilbert v. Commissioner, 2009 TNT 12-12, CA7, affirming TC Memo 2007-152.The materials can be downloaded at http://www.edzollars.com/2009-01-25_TaxHome.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

Last year when Congress added the first-time homebuyer credit found in Section 36, they included the ability for unmarried individuals who jointly acquire a residence to allocate the credit among themselves, and gave the IRS the ability to write the rules to allow this to happen.  In Notice 2009-12 the IRS has outlined those rules, and they proved to be very taxpayer friendly.The materials for the podcast can be downloaded at http://www.edzollars.com/2009-01-20_UnmarriedCredit.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

The new year opens up with a podcast based on a topic that was part of a panel I was a part of at the Arizona Forum for Improvement of Taxation's winter conference.  I spoke with attorney Tracy Essig of Phoenix regarding these matters.  The materials can be downloaded at http://www.edzollars.com/ForeclosureDebtandTaxes.pdf .The podcast is sponsored by Leimberg Information Service, found on the web at http://www.leimbergservices.com .

Medical expenses were the issue this week in the case of Magdalin v. Commissioner, TC Memo 2008-293.  In this case the taxpayer had paid expenses for obtaining eggs and the services of a surrogate mother, and argued that these expenses should be treated as deductible medical expenses, pointing to the IRS's 2003 private letter ruling (PLR 200318017) that allowed a woman the expenses related to in vitro fertilizaiton, including expenses paid for an egg donor.  The IRS (and the Tax Court) didn't find the situations to be comparable and denied the deduction--but it gives us a chance to look at the rules around §213.The materials are at http://www.edzollars.com/2008-12-28_Medical.pdf .The podcast is sponsored by Leimberg Information Services, located on the web at http://www.leimbergservices.com .

After a bit of a break while I was out speaking in the past couple of weeks in Nevada, California, Ohio and Virginia we return to a Thanksgiving Day podcast dealing with self-employment taxes and employee status.  We look at the Tax Court's ruling in McWhorter v. Commissioner, TC Memo 2008-263 where a taxpayer argued he was not subject to self-employment tax because he should have been treated as an employee.The materials can be downloaded at http://www.edzollars.com/2008-11-27_Self_Employed.pdf .The podcast is sponsored by Leimberg Information Services, located at http://www.leimbergservices.com .

The podcast this week is based on a presentation I made Thursday at the Arizona Tax Institute on the current state of Section 6694.  The session was scheduled back a few months ago, but proved timely given recent tax law changes.  A copy of the slides can be downloaded at:http://www.edzollars.com/2008-11-09_6694Slides.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

We continue with issues related to S Corporation debt and the many ways to end up not being able to use debts to deduct losses flowing through.  This week we look at the Tax Court's opinion in the case of Russell v. Commissioner, TC Memo 2008-246.The materials for the podcast can be downloaded from http://www.edzollars.com/2008-11-03_SDebt.pdf .The podcast is sponsored by Leimberg Information Services at http://www.leimbergservices.com .

The IRS has issued final regulations on S Corporation open account debt that will change the way that many clients have to deal with their loans to the corporation.  These changes are effective immediately, so we have to understand how these rules work.  The podcast is being recorded this week while I'm at the Hilton Garden Inn in Owings Mills, Maryland.The materials are available at http://www.edzollars.com/2008-10-31_S_OpenAccount.pdf .The podcast is sponsored by Leimberg Services, located on the web on http://www.leimbergservices.com .