Tax News

CCH (cch.taxgroup.com) reports:

  The government properly withheld documents responsive to a corporation's Freedom of Information Act (FOIA) request because they were protected by attorney work-product privilege. However, the IRS was required to segregate and disclose the factual portions of documents withheld under the deliberative process privilege. Therefore, the IRS was required to submit affidavits detailing the withheld portions of documents to enable the district court and the corporation to evaluate the government's claims of exemption. Moreover, the district court was required to conduct an in camera review of the documents if sufficiently specific affidavits were not provided. Further, the district court's decision that the IRS properly applied the tax convention information exemption was remanded because the decision was made without the benefit of thorough briefing by the parties.

  Affirming in part, reversing and remanding in part in part a DC Wash. decision, 2006-2 USTC ¶50,607.

Pacific Fisheries Inc., CA-9, 2008-2 USTC ¶50,510

Other References:

 
Code Sec. 6103

  CCH Reference - 2008FED ¶36,894.802

  CCH Reference - 2008FED ¶36,894.8046

  CCH Reference - 2008FED ¶36,894.825

  Tax Research Consultant

  CCH Reference - TRC IRS: 9,502
CCH Reference - TRC IRS: 9,502.15
CCH Reference -
TRC IRS: 9,550
 

CCH (cch.taxgroup.com) reports:

  The General Services Administration (GSA) has updated the maximum per diem rates for locations within the continental United States (CONUS). The list increases or decreases the maximum lodging and meals and incidental expenses amounts in certain existing per diem localities, adds new per diem localities and removes some previously designated per diem localities. The list is effective for fiscal year (FY) 2009.

  The Governmentwide Per Diem Advisory Board was established in May 2002 by the GSA in order to review the federal per diem rate setting process and the governmentwide lodging program. Effective for FY 2009, the standard CONUS lodging rate is $70.

Maximum Per Diem Rates for Continental U.S.

Other References:

 
Code Sec. 274

  CCH Reference - 2008FED ¶14,417.421

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  A regulation has been adopted that explains the application of Illinois retailers' occupation (sales) tax, service occupation tax, and use tax to seminar materials. "Seminar materials" mean educational or informational material and any other item prepared, compiled, or obtained for distribution to seminar customers, such as books, practice guides, tapes, and compact discs. "Seminar" means any presentation, conference, training program, or continuing education course designed for educational, informational, professional, or recreational purposes.

 

CCH (cch.taxgroup.com) reports:

  An IRS Appeals Officer correctly concluded that the ten-year statute of limitations on collection of an individual's unpaid Federal income tax liabilities did not expire before the IRS filed its notice of Federal tax lien. Prior to expiration of the limitations period, the taxpayer agreed to extend the period for collection until December 31, 2011. Although the taxpayer asserted that the extension only applied to employment taxes, the Form 900, Tax Collection Waiver, signed by the taxpayer in connection with a defaulted installment agreement, clearly showed that the unpaid tax liabilities related to Form 1040 individual income tax liabilities.

H. Joy, TC Memo. 2008-197, Dec. 57,518(M)

Other References:

 
Code Sec. 6330

  CCH Reference - 2008FED ¶38,184.63

 
Code Sec. 6502

  CCH Reference - 2008FED ¶39,020.65

  Tax Research Consultant

  CCH Reference - TRC IRS: 45,204.25

  CCH Reference - TRC IRS: 48,056.25

Tax Analysts report:

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  As part of his latest budget compromise proposal, California Governor Arnold Schwarzenegger is proposing a three-year temporary one cent sales and use tax rate increase (excluding diesel, gasoline and jet fuel); a two-year suspension of the corporation franchise and income tax net operating loss (NOL) deduction, which would be followed by a phased-in conformity to the federal NOL carryback and carryover periods; and enactment of a modified tax amnesty, a runaway Hollywood production tax credit, and provisions that better align accrual of revenues and accrual of spending.

  If enacted as proposed, the one cent sales tax rate increase would be followed by a permanent 11/4 -cent reduction beginning in the fourth year. Conformity to the federal NOL deduction would be phased-in over three years starting in 2010 and would allow taxpayers to claim a two-year NOL carryback and a 20-year NOL carryover. Currently, California does not allow NOL carrybacks and limits the carryover period to 10 years. The Governor's press release does not provide any further details regarding his tax amnesty proposal, the alignment of revenue and expense accruals, or the runaway Hollywood production tax credit.

  A fact sheet outlining the Governor's proposed budget compromise is available on the Governor's Web site at:
http://gov.ca.gov/index.php?/fact-sheet/10443/.

Fact Sheet , Governor Schwarzenegger's Office, August 20, 2008.
 

CCH (cch.taxgroup.com) reports:

  The IRS violated a discharge injunction with respect to a debtor whose tax liability was not discharged in bankruptcy. The liability was not discharged because a period of three years, not including periods of equitable tolling, had not run between the date of filing of the debtor's income tax return and the date of filing of the bankruptcy petition.

  Although the IRS believed its collection activity was done in good faith, it nevertheless knowingly and willfully violated the discharge injunction and, therefore, was subject to damages arising from the violation. While the IRS acted within its discretion to establish a policy of adding an additional six months to the three-year look-back period, the law changed, and any action subsequently taken by the IRS to collect the discharged debt, although in good faith and in conformance with the IRS policy, was contrary to the law. Consequently, the IRS was liable for damages arising from the violation.

  Because the IRS affirmatively pleaded sovereign immunity and because the government had not waived sovereign immunity, the debtor could not be awarded punitive damages. The debtor was, however, entitled to monetary damages for any losses proximately caused by the violation of the discharge injunction. Finally, because the debtor only alleged a violation that had occurred in the past, and not a continuing violation, coercive sanctions against the IRS were not required.

In re S.L. Distad, BC-DC Utah, 2008-2 USTC ¶50,500

Other References:

 
Code Sec. 6503

  CCH Reference - 2008FED ¶39,032.15

 
Code Sec. 6871

  CCH Reference - 2008FED ¶40,630.15

  CCH Reference - 2008FED ¶40,630.175

  CCH Reference - 2008FED ¶40,630.38

  Tax Research Consultant

  CCH Reference - TRC IRS: 57,054.15
CCH Reference -
TRC IRS: 30,200
CCH Reference -
TRC IRS: 45,118
CCH Reference -
TRC IRS: 57,158
 

CCH (cch.taxgroup.com) reports:

  A federal district court properly denied an individual and a corporation's (taxpayers) request for disclosure of an IRS officer's time records under the Freedom of Information Act (FOIA). The officer's time records were similar to "personnel and medical" files and were exempt from disclosure. Contrary to the taxpayers' argument, the officer's privacy interest outweighed any public interest and disclosure would not have contributed significantly to the public's understanding of IRS operations. Further, because the records were created in connection with the conditions of the officer's employment, and not her investigation of the taxpayers, the records could not be released under the Privacy Act without her consent. Moreover, the district the court did not abuse its discretion when it denied the taxpayers' request to conduct an in camera review of the remaining withheld documents because the IRS's declarations and the Vaughn index set out in detail which documents were withheld and the reasons for withholding them and the taxpayers failed to show that the IRS acted in bad faith.

  Unpublished opinion affirming a DC N.J. decision, 2008-2 USTC ¶50,498.

L.S. Berger, CA-3, 2008-2 USTC ¶50,499

Other References:

 
Code Sec. 6103

  CCH Reference - 2008FED ¶36,894.804

  CCH Reference - 2008FED ¶36,894.8044

  CCH Reference - 2008FED ¶36,894.8046

  CCH Reference - 2008FED ¶36,894.809

  CCH Reference - 2008FED ¶36,894.825

 
Code Sec. 7852

  CCH Reference - 2008FED ¶43,840.60

  Tax Research Consultant

  CCH Reference - TRC IRS: 9,500
CCH Reference - TRC IRS: 9,502.15
 

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  Two different types of bundled transactions that involve the sale of equipment along with the sale of wireless Internet service are subject to Louisiana sales and use tax. In both types of transactions, the provider bundles a taxable transaction (i.e., the sale of equipment) with a nontaxable transaction (i.e., the sale of wireless Internet service).

 

CCH (cch.taxgroup.com) reports:

  The Florida Department of Revenue has released advisory comments regarding the changes to the administrative and judicial review of property taxes enacted by H.B. 909, including changes to the Value Adjustment Board ("Board"). The enactment of H.B. 909 was reported previously. (TAXDAY, 2008/06/20, S.9)

 

CCH (cch.taxgroup.com) reports:

  A bill passed by the California Legislature would conform California personal income tax law to federal amendments made by the Mortgage Forgiveness Debt Relief Act of 2007 (Public Law 110-142) that allow a personal income taxpayer to exclude from his or her gross income the discharge of the individual's qualified principal residence indebtedness in the 2007 through 2009 calendar years. However, if enacted , the bill would limit the California exclusion to indebtedness discharged in the 2007 and 2008 calendar years only. Additional provisions would limit the amount of the exclusion to $250,000 ($125,000 in the case of a married individual filing separate) and would define "qualified principal residence indebtedness" for purposes of the exclusion to mean an individual's qualified acquisition indebtedness of up to $800,000 ($400,000 in the case of a married individual filing separately), rather than the $2 million ($1 million in the case of a married individual filing separately) limitation provided under federal law. The exclusion would be applicable for California personal income tax purposes beginning with the 2007 taxable year.

S.B. 1055, as enrolled, August 19, 2008
 

CCH (cch.taxgroup.com) reports:

  An individual could not bring an action against his employer to recover federal taxes withheld from his wages and paid over to the IRS. His allegations that the employer was required to establish a statutory employer-employee relationship and secure a determination of worker status before withholding taxes consisted primarily of legal conclusions without authority or factual support. Withholding federal income tax and making payments to the IRS are mandatory duties for employers. Moreover, the exclusive remedy for a tax refund is an action against the United States, not against an employer.

H. Nino v. Ford Motor Company, DC Mich., 2008-2 USTC ¶50,497

Other References:

 
Code Sec. 3403

  CCH Reference - 2008FED ¶33,593.1635

 
Code Sec. 7422

  CCH Reference - 2008FED ¶41,688.362

  Tax Research Consultant

  CCH Reference - TRC FILEIND: 15,306

CCH (cch.taxgroup.com) reports:

  The government's letter to an individual did not constitute an acceptance of the individual's settlement offer and did not create a valid and binding settlement of the parties' dispute. The letter did not mirror the terms of the offer because it made no reference to the interest that would accrue if he failed to pay the settlement amount within 120 days of the government's acceptance.

  Instead, it provided that the offer would be accepted on condition that payment is made within 120 days, with the understanding that the settlement did not constitute a compromise of the individual's income tax liability. Since the letter altered the terms of the individual's offer, it was construed as a counteroffer by the government.

  Related decision at 2006-2 USTC ¶50,555.

E.A. Brinskele, FedCl, 2008-2 USTC ¶50,493

Other References:

 
Code Sec. 7122

  CCH Reference - 2008FED ¶41,130.175

  Tax Research Consultant

  CCH Reference - TRC IRS: 42,116

CCH (cch.taxgroup.com) reports:

  The IRS has released a fact sheet to help taxpayers determine whether an activity is engaged in for profit or merely as a hobby. The fact sheet discusses the hobby loss rules and lists several non-inclusive factors to be considered when making this determination, including:

  --Does the time and effort put into the activity indicate an intention to make a profit?

  --Do you depend on income from the activity?

  --If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?

  --Have you changed methods of operation to improve profitability?

  --Do you have the knowledge needed to carry on the activity as a successful business?

  --Have you made a profit in similar activities in the past?

  --Does the activity make a profit in some years?

  --Do you expect to make a profit in the future from the appreciation of assets used in the activity?

  If an activity is not for profit, losses from that activity may not be used to offset other income and deductions cannot exceed the gross receipts from the not for profit activity. Further, hobby deductions are claimed as itemized deductions in the following order and only to the extent stated in each of three categories:

  --Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.

  --Deductions that do not result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.

  --Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.

IRS Fact Sheet FS-2008-23, 2008FED ¶46,549

Other References:

 
Code Sec. 183

  CCH Reference - 2008FED ¶12,177.169

  Tax Research Consultant

  CCH Reference - TRC BUSEXP: 3,052

  CCH Reference - TRC BUSEXP: 15,250

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  A California sales and use tax regulation regarding cell phones and other wireless telecommunication devices provided a safe harbor from unfair competition claims filed by a taxpayer against a provider. The provider advertised a cellular phone for sale at half the retail price if the purchaser also enrolled in a calling plan package. The California Code of Regulations requires that sales tax must be computed on the non-sale price of the product. The regulation permits, but does not require, that the charge be passed on to the customer. The provider did so without informing the customer prior to sale that the tax would be based on the full price of the cell phone. The amount of tax is shown on the sales invoice furnished to the customer at the time of sale. The taxpayer alleged that the provider engaged in unfair competition and misleading advertising by failing to inform the consumer that the tax would be imposed on the full price of the cell phone. The unfair competition law prohibits any unlawful, unfair, or fraudulent business act or practice, but its scope is limited. Specific legislation may limit the judiciary's power to declare conduct unfair. If the Legislature has permitted certain conduct, courts may not override that determination. When specific legislation provides a safe harbor, plaintiffs may not use the general unfair competition law to assault that harbor. The sales invoice the provider gave to the taxpayer stated the amount of the sales tax imposed on the sale. It provided the taxpayer notice of the amount of sales tax that would be imposed and it constituted a contract of sale between the provider and the taxpayer. As with any other contract, the taxpayer had the right to refuse to enter into the contract for the price stated. The taxpayer's unfair competition and misleading advertising claims failed because the provider complied with all applicable regulations.

  CCH Tax Research NetWork subscribers can view the opinion in its entirety.

  Yabsley v. Cingular Wireless, LLC , California Court of Appeal, Second Appellate District, Division Six, 2d Civil No. B198827, August 18, 2008.
 

CCH (cch.taxgroup.com) reports:

  The phrase "items of ordinary income" contained in an agreement entered into between a partnership and a venture capital firm did not include short-term capital gains. The interpretation of the phrase was based on the definition of "ordinary income" in the Internal Revenue Code (IRC), which unambiguously does not include capital gains. Therefore, the agreement, which provided a special allocation of ordinary income to the firm, did not provide an allocation of short-term capital gains.

  The agreement used the term "items of ordinary income" without actually defining that term and there was no indication that the parties intended to distinguish the definition of ordinary income from that in the IRC. The partnership's claim that the term "ordinary income" included all income taxed at ordinary income tax rates was unreasonable. In addition, the terms "ordinary income" and "capital gains" are defined in Black's Law Dictionary based on the source of the income rather than the tax rate, which was consistent with Code Sec. 702.

  Further, a settlement agreement entered between the partnership and the venture capital firm in a state court lawsuit did not bar the firm from joining the partnership-level proceeding seeking readjustment of certain partnership items as a participating partner under Code Sec. 6226(c)(2). The mutual release in the settlement agreement specified that the firm released its rights and claims against the partners; the parties did not intend the release to also include claims against the United States.

Imprimis Investors LLC, FedCl, 2008-2 USTC ¶50,489

Other References:

 
Code Sec. 61

  CCH Reference - 2008FED ¶5504.04

 
Code Sec. 702

  CCH Reference - 2008FED ¶25,083.2683

 
Code Sec. 1222

  CCH Reference - 2008FED ¶30,442.40

 
Code Sec. 6226

  CCH Reference - 2008FED ¶37,709.70

  Tax Research Consultant

  CCH Reference - TRC PART: 15,056.05
CCH Reference -
TRC PART: 60,554
 

CCH (cch.taxgroup.com) reports:

  Revised instructions to be used by tax-exempt organizations in completing the redesigned Form 990, Return of Organization Exempt From Income Tax, have been released by the IRS. The IRS released the redesigned Form 990 in December 2007, to be used for reporting tax year 2008 information in 2009. The redesigned form consists of a core form to be completed by all organizations and 16 schedules to be completed depending on the organization's type and activities. Transition rules, however, are in place so small organizations have time to adjust to the new form.

  For the 2008 tax year, most organizations with gross receipts less than $1.0 million and total assets less than $2.5 million may chose to use Form 990-EZ, Short Form Return of Organization Exempt From Income Tax (not redesigned for 2008), or the updated Form 990. For the 2009 tax year, entities can chose between Form 990-EZ or Form 990 if gross receipts are less than $500,000 and total assets less than $1.25 million. The filing thresholds will be set permanently at $200,000 gross receipts and $500,000 total assets beginning with the 2010 tax year. Organizations that generally have gross receipts of less than $25,000 will file Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations Not Required to File Form 990 or 990-EZ, for tax years 2007-2009. The gross receipts threshold is raised to $50,000 for tax years 2010 and later.

  The IRS released an initial draft of the instructions on April 7, 2008. With the latest release, the IRS has provided a description of changes from the April draft instructions. Many changes are intended to provide greater clarity regarding the specific information sought. The revised instructions provide additional examples, reduce the reporting burden, and establish or revise definitions and standards in certain areas. For example, the instructions define key employee for reporting compensation on Part VII of the core form and Schedule J (Compensation Information), Transactions With Interested Persons on Schedule L, and governance, management and disclosure on the core form. There are also significant changes to the instructions for many of the schedules, including Schedule H, Hospitals; Schedule J, Schedule K, Tax-Exempt Bonds; and Schedule L.

  The revised Form 990 instructions have a sequencing list that is particularly useful in determining the order to use in completing the various portions of the form (Parts I-XI) and any of the sixteen schedules that might be required (General Instruction C). Terms that are bolded in the instructions appear in alphabetical order in the Glossary. A compensation table is provided to aid in determining where and how to report various types of compensation paid to officers, directors, trustees, key employees and highest compensated employees (Specific Instructions for Part VII). Appendix E provides guidance relative to group returns and Appendix F explains how to report activities conducted indirectly through joint ventures and disregarded entities. Public inspection guidance is available in Appendix D. A properly completed Form 990 requires an organization to complete Parts I through XI of the Form 990, and any schedules for which a "Yes" response is indicated in Part IV of Form 990.

  Although the latest instructions are identified as a draft, the IRS indicated there will be no significant changes in content when the final version of the instructions is released later in 2008, although the wording and format may change. The Service stated that it was releasing the instructions now so that organizations and practitioners can review the content and prepare for the 2009 filing season (for 2008 tax returns).

  Practitioners commended the IRS for a huge effort and for releasing the instructions before 2009. At the same time, they noted the burdens placed on exempt organizations to meet the new reporting requirements.

  "The IRS has worked tirelessly to satisfy all stakeholders who often have very conflicting interests and opinions," Jane Searing, a shareholder with Clark Nuber in Bellevue, Washington told CCH. "It is really helpful that they are releasing the final instructions before the third quarter ends for calendar year organizations. This helps organizations and their service providers complete the work necessary to implement systems for collecting the information required on the new form. Although we have not had time to fully digest this latest version, we are hopeful this set of instructions will help clear up some of the outstanding questions and concerns over the version issued in April."

  "The revised form presents a huge burden for public charities," Nancy Ortmeyer Kuhn of Caplin & Drysdale in Washington, D.C. told CCH. "The expanded Form 990 requires a lot more information from charities that file the form. Many [organizations] will have to redo their accounting systems and they're still working on it. It's a huge job to capture the information they have to report. The community is hoping the IRS will understand this concern." Kuhn said it would be appropriate for the IRS to provide transition relief for reporting under the new system. One way to do this would be not to impose penalties when the IRS examines the first returns, Kuhn said.

  Reactions also varied as practitioners honed in on different schedules. "People were really unhappy with the [draft instructions'] definition of "key employee" [for Schedule J]," Suzy McDowell of Steptoe & Johnson LLP told CCH. The old definition looked for control of a discrete segment or five percent of the organization, McDowell stated. The revised definition "now requires organization-wide control or influence, or control of at least 10 percent of the organization." This is an improvement, McDowell said, although "exempt organizations won't be completely happy." McDowell said that another part of the instructions for Schedule J provided "extensive clarification" for the definitions of "reportable (wage) compensation" and "other compensation," a change that will be helpful.

  "The complexity is very evident and appears on the very first page of the instructions," Kuhn told CCH. There are three categories of transactions with "interested persons" that must be reported on Schedule L (Transactions With Interested Persons), Kuhn said, and each category uses a different definition of interested persons, she indicated. The American Bar Association commented that "this is complexity that doesn't need to be there," Kuhn said. "So [the lack of change] was disappointing."

  The instructions indicate when an organization can rely on "reasonable efforts" to obtain certain information from interested persons and third parties, such as family and business relationships, compensation paid by related organizations, and the involvement of an interested person in particular transactions. "This is good," Kuhn told CCH. "It shows there is an understanding that some information may not be available." McDowell agreed. "That's a big change that will give exempt organizations some relief."

  The IRS has identified approximately 1.3 million public charities and other non-charitable exempt organizations. For tax year 2004, the most recent year available, the IRS reported that it had received 364,000 Forms 990 and 142,000 Forms 990-EZ, a total of 506,000 returns. The IRS intends to release "draft" instructions in the next few weeks for the Form 990-EZ, the short form currently used by smaller tax-exempt organizations with gross receipts under $1 million and total assets of less than $2.5 million. The new Form 990-EZ will be phased in for smaller organizations over a three-year period.

  By Brant Goldwyn and Mary Krackenberger, CCH News Staff

IR-2008-98,
2008FED ¶46,548

IRS Completed 2008 Form 990 Instructions and Background Documents

IRS Background Paper --Summary of Form 990 Redesign Process

IRS TE/GE Division Exempt Organizations 2008 Form 990 Background Paper --Form 990, Moving from the Old to the New

IRS Background Paper --Changes to April Draft Instructions

Redesigned Forms 990 Instructions (August 2008)

Other References:

 
Code Sec. 6033

  CCH Reference - 2008FED ¶35,425.33

 
Code Sec. 6104

  CCH Reference - 2008FED ¶36,911.10

  Tax Research Consultant

  CCH Reference - TRC EXEMPT: 12,252.15

  CCH Reference - TRC EXEMPT: 12,258.05

CCH (cch.taxgroup.com) reports:

  The IRS has provided domestic asset/liability percentages and domestic investment yields needed by foreign life insurance companies and foreign property and liability insurance companies to compute their minimum effectively connected net investment income under Code Sec. 842(b). This guidance is effective for tax years beginning after December 31, 2006.

  For the first tax year beginning after 2006, the relevant domestic asset/liability percentages are 124.4 percent for foreign life insurance companies and 197.1 percent for foreign property and liability insurance companies. The relevant domestic investment yields are 4.9 percent for foreign life insurance companies and 4.2 percent for foreign property and liability insurance companies. In addition, instructions are set forth for computing foreign insurance companies' estimated tax liabilities for tax years beginning after 2006.

Rev. Proc. 2008-53, 2008FED ¶46,547

Other References:

 
Code Sec. 842

  CCH Reference - 2008FED ¶26251.70

  CCH Reference - 2008FED ¶26,251.72

  Tax Research Consultant

  CCH Reference - TRC INTLIN: 3,102.25

CCH (cch.taxgroup.com) reports:

  Various prescribed rates for federal income tax purposes for September 2008 have been provided by the IRS. The annual short-term, mid-term, and long-term applicable federal interest rates (AFRs) are 2.38 percent, 3.46 percent and 4.58 percent, respectively. The semiannual short-term, mid-term, and long-term AFRs are 2.37 percent, 3.43 percent and 4.53 percent, respectively. Quarterly short-term, mid-term and long-term AFRs are 2.36 percent, 3.42 percent and 4.50 percent, respectively. Finally, the monthly short-term, mid-term and long-term rates are 2.36 percent, 3.41 percent and 4.49 percent, respectively.

  The short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFRs) for September 2008 for purposes of Code Sec. 1288(b) are 1.81 percent, 3.21 percent and 4.53 percent, respectively, when annual compounding is used.

  Additionally, the Code Sec. 382 adjusted federal long-term rate is 4.53 percent, and the long-term tax-exempt rate is 4.65 percent. The Code Sec. 42(b)(2) appropriate percentage for the 70-percent present-value, low-income housing credit is 7.93 percent, and the appropriate percentage for the 30-percent present-value, low-income housing credit is 3.40 percent. Finally, the Code Sec. 7520 AFR for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest is 4.2 percent.

Rev. Rul. 2008-46, 2008FED ¶46,546

Rev. Rul. 2008-46, FINH ¶30,596

Other References:

 
Code Sec. 42

  CCH Reference - 2008FED ¶173.02

  CCH Reference - 2008FED ¶176.01

  CCH Reference - 2008FED ¶4385.03

 
Code Sec. 382

  CCH Reference - 2008FED ¶17,115.28

 
Code Sec. 642

  CCH Reference - 2008FED ¶24,308.1885

 
Code Sec. 1274

  CCH Reference - 2008FED ¶31,310.05

 
Code Sec. 7520

  CCH Reference - 2008FED ¶42,785.40

  CCH Reference - FINH ¶22,630.05

 
Code Sec. 7872

  CCH Reference - FINH ¶18,950.05

  Tax Research Consultant

  CCH Reference - TRC ACCTNG: 36,162.05

CCH (cch.taxgroup.com) reports:

  The IRS has issued proposed regulations that affect domestic corporations that transfer property to foreign corporations in certain transactions or that distribute the stock of certain foreign corporations, and certain shareholders of such domestic corporations.

Regulations Under Code Sec. 367(a)(5) and (b)

  Regulations proposed under Code Sec. 367(a)(5) and
(b) apply when a domestic corporation transfers certain property to a foreign corporation in an exchange described in Code Sec. 361(a) or (b). The regulations apply to property transfers by U.S. transferors, including RICs, REITs and S corporations.

  Generally, under Code Sec. 367(a)(5) a U.S. transferor to a foreign acquiring corporation in a Code Sec. 361 exchange recognizes gain with respect to the transfer of appreciated property under
Code Sec. 367(a)(1). This rule does not apply if the U.S. transferor is controlled by five or fewer domestic corporations. The proposed regulations confirm the general rule, but provide an elective exception, under which the exceptions provided by Code Sec. 367(a) and associated regulations may be available. The proposed regulations apply to all property transferred by a U.S. transferor in a Code Sec. 361 exchange, other than property to which Code Sec. 367(d) applies, and preserve or recognize the net built-in gain in Code Sec. 367(a) property transferred in the exchange. The regulations also contain an anti-stuffing rule with respect to Code Sec. 367(a) property. Inside gain is recognized currently by the U.S. transferor or preserved for future taxation in the stock received in the transaction by the controlling domestic corporate shareholder of the transferor.

  The proposed regulations include a control requirement regarding the U.S. transferor. Instances where a U.S. transferor must recognize gain on the transfer of the Code Sec. 367(a) property are also clarified, as are adjustments to the basis of stock received by control group members. Moreover, the U.S. transferor must include a statement with its U.S. income tax return for the year of the exchange under which it agrees to recognize gain and file an amended tax return if it enters into certain transactions with a principal purpose of avoiding U.S. tax.

  Proposed regulations under Code Sec. 367(b) provide an additional exception to the general rules that apply to certain transfers of stock of a foreign acquired corporation by a U.S. transferor to a foreign acquiring corporation in a Code Sec. 361 exchange. The proposed regulations provide that the U.S. transferor must include in income the Code Sec. 1248 amount attributable to the stock of the foreign acquired corporation only if immediately after the exchange, the foreign acquiring corporation or the foreign acquired corporation is not a CFC with respect to which the U.S. transferor is a
Code Sec. 1248 shareholder. The Code Sec. 1248 amount can be preserved in the hands of a corporate Code Sec. 1248 shareholder following the distribution of the stock of the foreign acquiring corporation by the U.S. transferor. Special rules for outbound triangular asset reorganizations are also proposed.

Regs Under the Code Sec. 367 Coordination Rule

  The coordination rule, found at
Reg. §1.367(a)-3(d)(2)(vi)(A), has been used inappropriately in transactions intended to repatriate earnings and profits of foreign corporations without the recognition of gain or a dividend inclusion. In response, the IRS issued Notice 2008-10, I.R.B. 2008-3, 277 (TAXDAY, 2007/12/31, I.7), which announced the revision of the application of the coordination rule exception. The proposed regulations incorporate, with modifications, the provisions of that IRS guidance.

Regs Under Code Sec. 1248(f)

  The proposed regulations under Code Sec. 1248(f) apply when a domestic corporation distributes stock of certain foreign corporations in a distribution to which Code Sec. 337, 355 or 361 applies. The proposed regulations include regulations described in Notice 87-64, 1987-2 CB 375. Under the proposed regulations:

  --A domestic distributing corporation that is a section 1248 shareholder of a foreign corporation and that distributes stock of such foreign corporation in a Code Sec. 337 distribution shall generally include in income as a dividend the Code Sec. 1248 amount attributable to the stock distributed.

  --If such a domestic distributing corporation distributes such stock in a Code Sec. 355 distribution, other than stock received by the domestic distributing corporation in a
Code Sec. 361 exchange, shall generally include in income as a dividend the Code Sec. 1248 amount attributable to the stock distributed, but only to the extent the domestic distributing corporation does not otherwise recognize gain on the Code Sec. 355 distribution.

  --If such a domestic distributing corporation distributes stock of such corporation received in a Code Sec. 361 exchange, in a
section 355 distribution or a Code Sec. 361 distribution, it shall include in income as a dividend the Code Sec. 1248 amount attributable to the stock distributed.

  The general rule will not apply to certain Code Sec. 337 distributions of the stock of a foreign corporation or certain Code Sec. 355 distributions of a stock of stock of a foreign corporation. An elective exemption to the general rule for certain distributions pursuant to a plan or reorganization is also provided.

Other Changes

  The proposed regulations suspend the application of
Code Sec. 1248(e) when capital gains are taxed at a rate equal to or greater than the rate at which ordinary income is taxed. Changes under Code Sec. 6038B establish reporting requirements for certain transfers of property by a domestic corporation to a foreign corporation in certain Code Sec. 361 exchanges.

Effective Dates

  A number of different effective dates apply with respect to the proposed regulations.

  --Proposed Reg. §1.367(a)-7 and the revisions to §1.6038B-1 apply to transfers occurring on or after the date that is 30 days after the date these regulations are published as final regulations in the Federal Register.

  --In accordance with Notice 87-64, §1.1248-6(d) applies to sales, exchanges or other dispositions of stock of a domestic corporation occurring on or after September 21, 1987.

  --The revisions described in Notice 2008-10 generally apply to transactions occurring on or after December 28, 2007.

  --Proposed Reg. §§1.1248-8(b)(2)(iv), 1248(f)-1 through
1.1248(f)-3, and the modifications to Proposed Reg. §1.367(b)-4 apply to transfers or distributions occurring on or after the date that is 30 days after the date these regulations are published as final regulations in the Federal Register.

Comments Requested

  The IRS is seeking comments on a number of aspects of these proposed regulations. Written or electronic comments and requests for a public hearing must be received by November 18, 2008.

Proposed Regulations, NPRM REG-209006-89, 2008FED ¶49,829

Other References:

 
Code Sec. 358

  CCH Reference - 2008FED ¶16,552L

 
Code Sec. 367

  CCH Reference - 2008FED ¶16,641F

  CCH Reference - 2008FED ¶16,642E

  CCH Reference - 2008FED ¶16,646E

  CCH Reference - 2008FED ¶16,647FE

  CCH Reference - 2008FED ¶16,647J

 
Code Sec. 1248

  CCH Reference - 2008FED ¶30,961D

  CCH Reference - 2008FED ¶30,963D

  CCH Reference - 2008FED ¶30,966C

  CCH Reference - 2008FED ¶30,967A

  CCH Reference - 2008FED ¶30,967E

  CCH Reference - 2008FED ¶30,967J

  CCH Reference - 2008FED ¶30,967I

  CCH Reference - 2008FED ¶30,967M

 
Code Sec. 6038B

  CCH Reference - 2008FED ¶35,580E

  Tax Research Consultant

  CCH Reference - TRC INTL: 30,076

  CCH Reference - TRC INTLOUT: 9,404

Tax Analysts report:

CCH (cch.taxgroup.com) reports:

  James R. Eads, Jr., has been named the new Executive Director of the Federation of Tax Administrators (FTA). He is formerly the Public Affairs Director for Ryan, a state tax consulting firm. Eads' previous experience includes service as Chief Counsel for the Arkansas Department of Finance & Administration Revenue Division and as state tax counsel for Sears and AT&T Corp. He also worked for Ernst & Young and the Internal Revenue Service.

  Eads replaces Harley Duncan, who resigned after 20 years with the FTA to take a position with KPMG. Eads will assume his new post on September 8.

News Release, Federation of Tax Administrators, August 14, 2008.
 

CCH (cch.taxgroup.com) reports:

  The IRS's proposed overhaul of Code Sec. 6694 regulations (NPRM REG-129243-07, I.R.B. 2008-27, 32; TAXDAY, 2008/06/17, I.1) drew a subdued response from tax professionals at an August 18 hearing in Washington, D.C. Representatives from practitioner groups and the return-preparation industry appear ready to live with the regulations if they are finalized as proposed. Recommended changes are largely limited to clarifications of proposed rules, such as those dealing with reliance on a taxpayer's legal conclusions, disclosure, a preparer's reliance on the advice of others, penalties and the treatment of appraisers.

New Standard

  The IRS issued the proposed regulations in June in response to changes made to Code Sec. 6694 by Congress in 2007. The Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) replaced the realistic-possibility-of-success standard in Code Sec. 6694(a) with the heightened more-likely-than-not standard for undisclosed, nonabusive positions. The preparer must have a reasonable belief that the tax treatment of the position would more likely than not be sustained on its merits. Additionally, Congress extended Code Sec. 6694 to cover preparers of all returns, not just preparers of income tax returns.

  Preparers also risk significantly increased penalties under the 2007 Small Business Act. The old, first-tier $250 penalty in Code Sec. 6694(a) has jumped to the greater of $1,000 or 50 percent of the income derived, or to be derived, by the preparer. The penalty for willful or reckless conduct in Code Sec. 6694(b) increased from $1,000 to the greater of $5,000 or 50 percent of the income derived or to be derived by the preparer.

Legal Conclusions

  Under the proposed regulations, a preparer may generally rely in good faith on information provided by the taxpayer. However, the proposed regulations expressly prohibit the preparer from relying on information from a taxpayer with respect to legal conclusions on federal tax issues.

  J. Edward Swails, speaking on behalf of the American Institute of Certified Public Accountants (AICPA), warned that the prohibition could be interpreted as "changing the government's long-standing position that preparers can rely on taxpayer information regarding items that involve mixed issues of fact and law." These include, Swails explained, earnings and profits, depreciation and inventory. Swails also predicted that the prohibition would require preparers to "re-perform the research and analysis conducted by in-house tax professionals."

  Brian Donahue, director of government relations for H&R Block, Inc., urged the IRS to clarify the definition of legal conclusion. For example, if a client believes that he or she owns a property outright but actually has a life estate in the property, would the taxpayer's representation of an ownership interest be a legal conclusion, Donahue asked.

Alternative Reference Sources

  The first-tier penalty in Code Sec. 6694(a) would not be imposed if the IRS determines that the understatement was due to reasonable cause and the preparer acted in good faith. Among the factors the IRS will consider is the preparer's good-faith reliance on the advice of the taxpayer or others.

  The Pennsylvania Society of Public Accountants (PSPA) asked the IRS to expand the factors and accept alternative reference sources in addition to the authorities in Reg. §1.662-4(d)(3)(iii). "The alternative reference sources would be for purposes of sustaining that a preparer has reasonable cause and acted in good faith," said Paul J. Cannataro, speaking on behalf of the PSPA. An example of an alternative reference source would be CCH's Master Tax Guide, Cannataro told CCH.

  "The pressure from taxpayers to complete returns causes practitioners to work as many as 80 to 90 hours a week," Cannataro said. "For less complicated issues, the alternative reference sources provide a more expedient solution to the overwhelmed practitioner's problems."

Disclosure

  The proposed regulations permit a preparer to contemporaneously document in his or her file that disclosure was made to the client. However, boilerplate language is not allowed. The IRS has estimated that preparers will be able to prepare the contemporaneous document in 15 minutes. "The 15-minute estimate is inaccurate and misleading," Cannataro said.

NATP Comments

  The National Association of Tax Professionals (NATP), which did not send a representative to testify in person at the hearing, provided written comments to the IRS. The NATP urged the IRS to exercise caution in penalizing preparers for nonwillful errors. "IRS auditors should be disabused from raising a penalty as a result of a material error unless it is willful and there is a repeated pattern of it happening with the preparer. A one-time penalty should not be the basis for application of a penalty."

  Appraisers cautioned that the proposed regulations could be interpreted as treating appraisers as nonsigning preparers. The proposed regulations govern both signing and nonsigning preparers.

  Anita C. Soucy, attorney-advisor, Treasury Office of Tax Legislative Counsel, asked if a person could be retained to appraise a property and also prepare a return (related to the property). Jay Fisherman, speaking on behalf of the American Society of Appraisers, responded that this scenario would create a conflict of interest for the appraiser.

  Deborah Butler, associate chief counsel (Procedure & Administration), indicated that the proposed regulations will be finalized before the end of the year. The AICPA recommended that final Code Sec. 6694 regulations give preparers some transition relief. "The effective date should include a transition rule allowing preparers to comply with the requirements of Notice 2008-13 (TAXDAY, 2008/01/02, I.1), rather than the final regulations, for any return filed or any advice given within the 60 days following publication of the final regulations."

  In July, AICPA President Barry C. Melancon told CCH that equalizing the preparer and taxpayer penalty standards at substantial authority for undisclosed nonabusive return positions is the organization's top legislative priority (TAXDAY, 2008/07/24, M.2). The pending Renewable Energy and Job Creation Bill of 2008 (HR 6049), the so-called "extenders bill," would equalize the standards. While the bill passed in the House, it stalled in the Senate before Congress's August recess.

  The PSPA urged the IRS to support equalizing the preparer and taxpayer standards at substantial authority at the hearing. "The IRS has the obligation to make Congress aware of laws that cause inefficiency in the tax system. One such example is the unequal standard placed on preparers versus taxpayers," Cannataro said.

  By George L. Yaksick, Jr., CCH News Staff

AICPA Comments on Proposed Rules (REG-129243-07) Regarding Tax Return Preparer Penalties

National Association of Tax Professionals Comments on Tax Return Preparer Penalties Under Code Secs. 6694 and 6695
 

CCH (cch.taxgroup.com) reports:

  The IRS has issued a new revenue procedure that taxpayers must follow when they wish to obtain automatic consent to change accounting methods. The new procedure generally applies to applications to change accounting methods that are filed on or after August 18, 2008, for a year of change ending on or after December 31, 2007.

  In general, a change in accounting method occurs when there is a change in the overall plan of accounting for gross income or deductions or when there is a change in the treatment of any material item. Except as otherwise provided, a taxpayer must obtain the consent of the IRS before changing accounting methods for tax purposes. Under the general rule, a taxpayer obtains IRS consent to an accounting method change by filing Form 3115, Application for Change in Accounting Method, during the tax year in which the taxpayer wants to make the proposed change.

  Previously, in Rev. Proc. 2002-9, 2002-1 CB 327, the IRS provided guidance on how taxpayers could receive automatic consent for certain accounting method changes specified in that revenue procedure. This latest guidance from the IRS supersedes Rev. Proc. 2002-9 and updates the automatic consent procedures for accounting method changes by clarifying some of the terms and conditions of Rev. Proc. 2002-9 and incorporating many of the modifications that have been made to that procedure since it was released.

  General procedures. Taxpayers who fall within the scope of the new procedure are automatically granted the consent of the IRS to change an accounting method described in the Appendix of the procedure. In most situations, a completed and filed current Form 3115 will serve as the application for consent to change accounting methods. The taxpayer must include the designated automatic accounting method change number, as identified in the Appendix of the procedure, on the application. A user fee does not have to be paid with the application.

  Taxpayers under IRS examination can file an application to change accounting methods under the automatic consent procedure, but only during certain time periods or under certain conditions. Taxpayers before an IRS Appeals Office or before a federal court can also file an application to change accounting methods under the automatic consent procedure but may receive limited audit protection if the accounting method to be changed is an issue under consideration.

  Five-year change prohibition. In general, a five-year prohibition on accounting method changes under the automatic consent procedure applies. Thus, unless otherwise provided, a taxpayer that changed its overall method of accounting or applied for consent to change its overall method of accounting during any of the five tax years ending with the year of change may not obtain automatic consent to change its overall method of accounting under the new procedure. A similar restriction applies to a change in a method of accounting for a specific item.

  Code Sec. 481 adjustment period. Many accounting method changes require a Code Sec. 481 adjustment so that amounts are not duplicated or omitted following the change. Unless otherwise provided, the new procedure sets forth a Code Sec. 481 adjustment period of four tax years for net positive Code Sec. 481 adjustments and one tax year for net negative Code Sec. 481 adjustments. Taxpayers may elect to use a one-year Code Sec. 481 adjustment period for positive net Code Sec. 481 adjustments that are less than $25,000. Special rules apply for taxpayers that are ceasing to engage in a trade or business or are terminating their existence.

  Incorporation of additional accounting method changes. Additional accounting method changes that have been incorporated in the new automatic consent procedure include: (1) changes for lessor improvements abandoned at termination of the lease; (2) changes for accounting for, or identifying disposed, depreciable repairable and reusable spare parts; (3) changes from depreciating land or nondepreciable land improvements to not depreciating them; (4) changes to capitalize and depreciate repairable and reusable spare parts; (5) changes from the cash method to the accrual method for specific items; (6) changes to the overall cash method for specified transportation industry taxpayers; (7) changes to an overall cash/hybrid method for certain banks; (8) changes to an overall cash method for farmers; (9) changes for nonshareholder contributions to capital under Code Sec. 118; (10) changes for retainages under Code Sec. 451; (11) changes relating to timing of incurring liabilities for employee bonuses and vacation pay under Code Sec. 461; (12) changes for rebates and allowances under Code Sec. 461; (13) changes from a ratable inclusion of rental income or expense to inclusion in accordance with the rent allocation; (14) changes from permissible methods of identifying and valuing inventories; (15) changes in the official used vehicle guide utilized in valuing used vehicles; (16) changes relating to invoiced advertising association costs for new vehicle retail dealerships; (17) changes to dollar-value pools of manufacturers; and (18) changes to comply with Reg. §1.1012-1(c)(1)-(4).

  Transition rules. The new automatic consent procedure generally applies to applications to change accounting methods that are filed on or after August 18, 2008, for a year of change ending on or after December 31, 2007. However, if a taxpayer within the scope of Rev. Proc. 97-27, 1997-1 CB 680, timely filed a Form 3115 under that procedure before August 18, 2008, requesting consent for a change in accounting method described in that procedure for a year of change ending on or after December 31, 2007, and the Form 3115 is still pending with the IRS National Office on August 18, 2008, the taxpayer may choose to make the change under the new procedure. The taxpayer must notify the IRS National Office of its intent to make the change under the new procedure before the later of September 18, 2008, or the issuance of a letter ruling granting or denying consent for the change.

  If a taxpayer filed an application under Rev. Proc. 2002-9 with the IRS National Office to make a change in accounting method and the application was postmarked or received before August 18, 2008, the taxpayer makes the change under Rev. Proc. 2002-9. However, a taxpayer that filed an application under Rev. Proc. 2002-9 before August 18, 2008, for a year of change that is the taxpayer's first tax year ending on or after December 31, 2007, may choose to file an amended application for that year under the new procedure.

Rev. Proc. 2008-52, 2008FED ¶46,545

Other References:

 
Code Sec. 77

  CCH Reference - 2008FED ¶530

  CCH Reference - 2008FED ¶6304.20

 
Code Sec. 162

  CCH Reference - 2008FED ¶8526.024

  CCH Reference - 2008FED ¶8610.01

  CCH Reference - 2008FED ¶8610.143

  CCH Reference - 2008FED ¶8630.025

  CCH Reference - 2008FED ¶8630.027

  CCH Reference - 2008FED ¶8630.1242

  CCH Reference - 2008FED ¶8630.45

  CCH Reference - 2008FED ¶8754.1695

 
Code Sec. 163

  CCH Reference - 2008FED ¶9104.0442

  CCH Reference - 2008FED ¶9104.62

  CCH Reference - 2008FED ¶9303.0668

  CCH Reference - 2008FED ¶9303.10

 
Code Sec. 166

  CCH Reference - 2008FED ¶10,690.155

 
Code Sec. 167

  CCH Reference - 2008FED ¶11,009.046

  CCH Reference - 2008FED ¶11,009.135

  CCH Reference - 2008FED ¶11,037.675

  CCH Reference - 2008FED ¶11,043.01

  CCH Reference - 2008FED ¶11,043.015

  CCH Reference - 2008FED ¶11,043.021

  CCH Reference - 2008FED ¶11,043.283

  CCH Reference - 2008FED ¶11,043.285

  CCH Reference - 2008FED ¶11,043.288

  CCH Reference - 2008FED ¶11,043.40

  CCH Reference - 2008FED ¶11,043.45

 
Code Sec. 168

  CCH Reference - 2008FED ¶11,279.051

  CCH Reference - 2008FED ¶11,279.0516

  CCH Reference - 2008FED ¶11,279.0545

  CCH Reference - 2008FED ¶11,279.058

  CCH Reference - 2008FED ¶11,279.073

  CCH Reference - 2008FED ¶11,279.18

  CCH Reference - 2008FED ¶11,279.19

  CCH Reference - 2008FED ¶11,279.55

  CCH Reference - 2008FED ¶11,279.68

  CCH Reference - 2008FED ¶11,279.70

 
Code Sec. 171

  CCH Reference - 2008FED ¶11,855.073

  CCH Reference - 2008FED ¶11,855.65

 
Code Sec. 174

  CCH Reference - 2008FED ¶12,047.035

  CCH Reference - 2008FED ¶12,047.037

  CCH Reference - 2008FED ¶12,047.046

  CCH Reference - 2008FED ¶12,047.057

  CCH Reference - 2008FED ¶12,047.10

  CCH Reference - 2008FED ¶12,047.115

 
Code Sec. 179B

  CCH Reference - 2008FED ¶12,136.20

 
Code Sec. 194

  CCH Reference - 2008FED ¶12,335.073

  CCH Reference - 2008FED ¶12,335.25

 
Code Sec. 197

  CCH Reference - 2008FED ¶12,455.30

 
Code Sec. 199

  CCH Reference - 2008FED ¶12,476.0235

  CCH Reference - 2008FED ¶12,476.0334

  CCH Reference - 2008FED ¶12,476.0386

  CCH Reference - 2008FED ¶12,476.0387

 
Code Sec. 263

  CCH Reference - 2008FED ¶13,709.017

  CCH Reference - 2008FED ¶13,709.03

  CCH Reference - 2008FED ¶13,709.033

  CCH Reference - 2008FED ¶13,709.035

  CCH Reference - 2008FED ¶13,709.037

  CCH Reference - 2008FED ¶13,709.105

  CCH Reference - 2008FED ¶13,709.385

  CCH Reference - 2008FED ¶13,709.469

  CCH Reference - 2008FED ¶13,709.564

 
Code Sec. 263A

  CCH Reference - 2008FED ¶13,815.037

  CCH Reference - 2008FED ¶13,815.044

  CCH Reference - 2008FED ¶13,815.24

  CCH Reference - 2008FED ¶13,815.63

  CCH Reference - 2008FED ¶13,822.05

  CCH Reference - 2008FED ¶13,822.30

  CCH Reference - 2008FED ¶13,822.80

  CCH Reference - 2008FED ¶13,848.01

  CCH Reference - 2008FED ¶13,848.04

  CCH Reference - 2008FED ¶13,848.045

  CCH Reference - 2008FED ¶13,848.10

  CCH Reference - 2008FED ¶13,848.15

  CCH Reference - 2008FED ¶13,850.01

  CCH Reference - 2008FED ¶13,850.28

  CCH Reference - 2008FED ¶13,850.50

 
Code Sec. 280F

  CCH Reference - 2008FED ¶15,108.042

 
Code Sec. 404

  CCH Reference - 2008FED ¶18,352.18

 
Code Sec. 446

  CCH Reference - 2008FED ¶20,620.0257

  CCH Reference - 2008FED ¶20,620.026

  CCH Reference - 2008FED ¶20,620.027

  CCH Reference - 2008FED ¶20,620.0274

  CCH Reference - 2008FED ¶20,620.0312

  CCH Reference - 2008FED ¶20,620.0314

  CCH Reference - 2008FED ¶20,620.054

  CCH Reference - 2008FED ¶20,620.055

  CCH Reference - 2008FED ¶20,620.075

  CCH Reference - 2008FED ¶20,620.076

  CCH Reference - 2008FED ¶20,620.102

  CCH Reference - 2008FED ¶20,620.111

  CCH Reference - 2008FED ¶20,620.143

  CCH Reference - 2008FED ¶20,620.144

  CCH Reference - 2008FED ¶20,620.166

  CCH Reference - 2008FED ¶20,620.20

  CCH Reference - 2008FED ¶20,620.217

  CCH Reference - 2008FED ¶20,620.222

  CCH Reference - 2008FED ¶20,620.226

  CCH Reference - 2008FED ¶20,620.236

  CCH Reference - 2008FED ¶20,620.238

  CCH Reference - 2008FED ¶20,620.239

  CCH Reference - 2008FED ¶20,620.241

  CCH Reference - 2008FED ¶20,620.2412

  CCH Reference - 2008FED ¶20,620.242

  CCH Reference - 2008FED ¶20,620.243

  CCH Reference - 2008FED ¶20,620.2432

  CCH Reference - 2008FED ¶20,620.247

  CCH Reference - 2008FED ¶20,620.248

  CCH Reference - 2008FED ¶20,620.249

  CCH Reference - 2008FED ¶20,620.2505

  CCH Reference - 2008FED ¶20,620.2507

  CCH Reference - 2008FED ¶20,620.251

  CCH Reference - 2008FED ¶20,620.258

  CCH Reference - 2008FED ¶20,620.259

  CCH Reference - 2008FED ¶20,620.284

  CCH Reference - 2008FED ¶20,620.285

  CCH Reference - 2008FED ¶20,620.286

  CCH Reference - 2008FED ¶20,620.292

  CCH Reference - 2008FED ¶20,620.304

  CCH Reference - 2008FED ¶20,620.311

  CCH Reference - 2008FED ¶20,620.323

  CCH Reference - 2008FED ¶20,620.3235

  CCH Reference - 2008FED ¶20,620.625

  CCH Reference - 2008FED ¶20,620.627

  CCH Reference - 2008FED ¶20,620.6275

  CCH Reference - 2008FED ¶20,620.6305

  CCH Reference - 2008FED ¶20,620.641

 
Code Sec. 448

  CCH Reference - 2008FED ¶20,803.03

  CCH Reference - 2008FED ¶20,803.032

  CCH Reference - 2008FED ¶20,803.50

  CCH Reference - 2008FED ¶20,803.75

 
Code Sec. 451

  CCH Reference - 2008FED ¶21,005.027

  CCH Reference - 2008FED ¶21,005.7035

  CCH Reference - 2008FED ¶21,005.7043

  CCH Reference - 2008FED ¶21,005.9327

  CCH Reference - 2008FED ¶21,005.933

  CCH Reference - 2008FED ¶21,005.946

  CCH Reference - 2008FED ¶21,030.073

 
Code Sec. 454

  CCH Reference - 2008FED ¶21,503.075

  CCH Reference - 2008FED ¶21,503.35

 
Code Sec. 455

  CCH Reference - 2008FED ¶21,517.075

  CCH Reference - 2008FED ¶21,517.35

 
Code Sec. 461

  CCH Reference - 2008FED ¶21,817.0285

  CCH Reference - 2008FED ¶21,817.029

  CCH Reference - 2008FED ¶21,817.128

  CCH Reference - 2008FED ¶21,817.163

  CCH Reference - 2008FED ¶21,817.2345

  CCH Reference - 2008FED ¶21,817.235

  CCH Reference - 2008FED ¶21,817.2377

  CCH Reference - 2008FED ¶21,817.287

  CCH Reference - 2008FED ¶21,817.3215

  CCH Reference - 2008FED ¶21,817.704

 
Code Sec. 467

  CCH Reference - 2008FED ¶21,911.01

 
Code Sec. 471

  CCH Reference - 2008FED ¶22,206.021

  CCH Reference - 2008FED ¶22,206.5075

  CCH Reference - 2008FED ¶22,208.50

  CCH Reference - 2008FED ¶22,208.76

  CCH Reference - 2008FED ¶22,210.24

  CCH Reference - 2008FED ¶22,218.01

  CCH Reference - 2008FED ¶22,218.35

 
Code Sec. 472

  CCH Reference - 2008FED ¶22,240.027

  CCH Reference - 2008FED ¶22,240.03

  CCH Reference - 2008FED ¶22,240.037

  CCH Reference - 2008FED ¶22,240.04

  CCH Reference - 2008FED ¶22,240.041

  CCH Reference - 2008FED ¶22,240.047

  CCH Reference - 2008FED ¶22,240.25

  CCH Reference - 2008FED ¶22,240.33

  CCH Reference - 2008FED ¶22,240.55

  CCH Reference - 2008FED ¶22,240.70

  CCH Reference - 2008FED ¶22,241.04

  CCH Reference - 2008FED ¶22,241.45

 
Code Sec. 475

  CCH Reference - 2008FED ¶22,268.023

  CCH Reference - 2008FED ¶22,268.20

 
Code Sec. 481

  CCH Reference - 2008FED ¶22,277.027

  CCH Reference - 2008FED ¶22,277.029

  CCH Reference - 2008FED ¶22,277.38

  CCH Reference - 2008FED ¶22,277.40

  CCH Reference - 2008FED ¶22,277.493

  CCH Reference - 2008FED ¶22,277.498

  CCH Reference - 2008FED ¶22,277.50

  CCH Reference - 2008FED ¶22,277.502

  CCH Reference - 2008FED ¶22,277.51

  CCH Reference - 2008FED ¶22,277.58

  CCH Reference - 2008FED ¶22,277.595

  CCH Reference - 2008FED ¶22,277.70

 
Code Sec. 585

  CCH Reference - 2008FED ¶23,662.10

 
Code Sec. 811

  CCH Reference - 2008FED ¶25,900.20

 
Code Sec. 832

  CCH Reference - 2008FED ¶26,157.021

 
Code Sec. 846

  CCH Reference - 2008FED ¶26,331.105

 
Code Sec. 860D

  CCH Reference - 2008FED ¶26,662.65

 
Code Sec. 861

  CCH Reference - 2008FED ¶27,131.128

  CCH Reference - 2008FED ¶27,146.49

 
Code Sec. 904

  CCH Reference - 2008FED ¶27,901.82

 
Code Sec. 985

  CCH Reference - 2008FED ¶28,848.028

  CCH Reference - 2008FED ¶28,848.032

 
Code Sec. 986

  CCH Reference - 2008FED ¶28,861.25

 
Code Sec. 1273

  CCH Reference - 2008FED ¶31,283.45

  CCH Reference - 2008FED ¶31,283.50

  CCH Reference - 2008FED ¶31,283.60

 
Code Sec. 1276

  CCH Reference - 2008FED ¶31,361.40

 
Code Sec. 1281

  CCH Reference - 2008FED ¶31,421.04

  CCH Reference - 2008FED ¶31,421.35

 
Code Sec. 1363

  CCH Reference - 2008FED ¶32,062.035

  CCH Reference - 2008FED ¶32,062.20

  CCH Reference - 2008FED ¶32,062.40

 
Code Sec. 1400J

  CCH Reference - 2008FED ¶32,472.10

 
Code Sec. 1400L

  CCH Reference - 2008FED ¶32,477.026

 
Code Sec. 1400N

  CCH Reference - 2008FED ¶32,487.031

 
Code Sec. 7121

  CCH Reference - 2008FED ¶41,090.115

 
Statement of Procedural Rules 601.201

  CCH Reference - 2008FED ¶43,360.16

 
Statement of Procedural Rules 601.204

  CCH Reference - 2008FED ¶43,384.031

  CCH Reference - 2008FED ¶43,384.10

  CCH Reference - 2008FED ¶43,384.45

  Tax Research Consultant

  CCH Reference - TRC DEPR: 15,304
CCH Reference - TRC ACCTNG: 21,100
CCH Reference - TRC ACCTNG: 21,200
 

CCH (cch.taxgroup.com) reports:

  The IRS has provided guidance regarding when a child of divorced or separated parents will be treated as a dependent of both parents. Under Code Sec. 152(e), a child of divorced or separated parents will only be treated as a dependent of the noncustodial parent for purposes of the dependency exemption only if the custodial parent provides a written declaration that he or she will not claim the child as a dependent for the tax year and the noncustodial parent attaches the declaration to his or her return. Many other provisions that provide for benefits and exclusions attributable to the dependents of a taxpayer reference the rules of Code Sec. 152, including its use in relation to the children of divorced or separated parents. However, under this procedure, the IRS will treat the child as a dependent of both parents for purposes of several provisions relating to medical expenses, medical coverage and employee benefits, regardless of whether or not the custodial parent released the claim of the exemption.

  Specifically, the IRS will treat a child as a dependent of both parents, without a declaration of the custodial parent, under the following circumstances:

  --the exclusion from gross income of certain employer reimbursements of expenses incurred for the medical care of the employee's child under Code Sec. 105(b);

  --the exclusion from gross income of employer contributions to an accident or health plan on behalf of the employee's children under Code Sec. 106(a) and Reg. §1.106-1;

  --the exclusion from gross income of fringe benefits qualifying as no-additional-cost services or qualified employee discounts under Code Sec. 132(a) that are treated as used by the employee due to use by an employee's child under Code Sec. 132(h)(2);

  --the deduction of medical expenses of the taxpayer's child under Code Sec. 213(a); and

  --the exclusions under Code Secs. 220(f)(1) and 223(f)(1) for distributions from Archer Medical Savings Accounts and Health Savings Accounts, respectively, if the dist