Tax News

CCH (cch.taxgroup.com) reports:

  New Mexico Governor Bill Richardson recently announced that he will call the state's legislature into a special session, beginning August 15, 2008, to discuss and address not only access to universal health care coverage and related reform issues, but also his plan to provide about $211 million in personal income tax and gross receipts tax relief to state residents.

  The tax proposals to be evaluated in the upcoming special session were comprehensively detailed in an earlier story (TAXDAY, 2008/07/18, S.18).

  Finally, the Governor will also ask the legislature to approve a $200 million road funding package.

Press Release, New Mexico Governor's Office, July 21, 2008.

 

CCH (cch.taxgroup.com) reports:

  Doctors and an accountant who donated stock in their medical practice to a newly formed tax-exempt professional services corporation (PSC) were only entitled to a small portion of the charitable contribution deductions that they claimed and accuracy-related penalties were imposed. The value of the donated stock, as determined by the taxpayers' expert, was too high. Based on trial testimony and other evidence, it was clear that the medical group was going to be consolidated into the PSC and should not have been valued as a going concern. Instead, the asset-based approach used by the IRS's expert was more appropriate since it valued the business on the basis of the medical group's equity with a discount to account for the noncontrolling, nonmarketable nature of the stock.

  In addition, the taxpayers were liable for the 40-percent accuracy-related penalty for gross valuation misstatement, if each taxpayer's underpayment exceeded $5,000, because they did not act in good faith and did not make a good-faith investigation as to the value of the donated stock. Despite the taxpayers' claimed reliance on appraisers and advisors, the taxpayers were well-educated and should have been aware of the problems in valuing the stock at so high a price when it was unlikely that the medical group would continue as an operating entity. To the extent that the taxpayers were not liable for the 40-percent penalty because their underpayments were $5,000 or less, they were liable for the 20-percent accuracy-related penalty due to negligence.

B.J. Bergquist, 131 TC No. 2, Dec. 57,492

Other References:

 
Code Sec. 170

  CCH Reference - 2008FED ¶11,660.58

 
Code Sec. 6662

  CCH Reference - 2008FED ¶39,651G.17

  CCH Reference - 2008FED ¶39,651G.24

  CCH Reference - 2008FED ¶39,654.48

  CCH Reference - 2008FED ¶39,654.60

 
Code Sec. 6664

  CCH Reference - 2008FED ¶39,661.65

  Tax Research Consultant

  CCH Reference - TRC INDIV: 51,152

  CCH Reference - TRC VALUE: 9,050

  CCH Reference - TRC PENALTY: 3,106.10

  CCH Reference - TRC PENALTY: 3,110.25

  CCH Reference - TRC PENALTY: 3,116.10

CCH (cch.taxgroup.com) reports:

  House lawmakers on July 22 circulated an updated package of $17.8 billion in housing tax provisions that could be added to the housing tax bill (HR 3221) that recently passed the Senate (TAXDAY, 2008/07/14, C.1). According to an unofficial summary of the Ways and Means Committee proposal obtained by CCH, the House has proposed requiring credit card information return reporting by merchants that would raise $9.082 billion. It would delay the implementation of worldwide allocation of interest rules and raise $7.322 billion. Part of that revenue would cover some of the cost of the Community Development Block Grant program, according to the summary. The bill would also raise $1.394 billion by modifying the exclusion of gains on the sale of a principal residence.

  The House proposal also includes a refundable first-time homebuyer credit estimated to cost $4.853 billion over 10 years, an additional standard deduction for real property taxes that would cost $1.537 billion, and a plan to simplify and increase the low-income housing tax credit program and the tax-exempt bond program at a cost of $1.946 billion. The House has also proposed treating certain federally guaranteed municipal bonds as tax-exempt bonds ($126 million), a temporary increase in mortgage revenue bonds ($1.475 billion) and alternative minimum tax (AMT) relief.

  The proposal would also protect Social Security numbers in real estate transactions ($20 million), encourage the rehabilitation of government-leased buildings ($96 million), and reform rules for real estate investment trusts ($359 million). The proposal also includes a plan to expand the Gulf Opportunity Zone tax incentives ($1.333 billion) and to allow taxpayers to accelerate the recognition of historic AMT/research and development credits ($966 million).

  The House proposal was circulating on the same day that the Congressional Budget Office (CBO) released a letter estimating that an administration plan to bail out Fannie Mae and Freddie Mac would cost an estimated $25 billion. The CBO said that only a 50-percent chance exists that the bailout will actually require federal funding. Lawmakers are expected to add the administration proposal to the housing bill. The whole bill is expected to come to the House floor for a vote during the week of July 21.

  By Stephen K. Cooper, CCH News Staff

Tax Analysts report: