Tax Blog/Blawg

Wish you had planned your transaction differently for tax purposes?  In limited circumstances, the courts may allow a taxpayer to claim tax consequences consistent with a transaction’s economic substance even if inconsistent with its form.

In tax litigation involving structured transactions, when the form of a transaction produces favorable tax results for the taxpayer, the IRS often trots out various economic substance / form over substance-type theories to ignore or recast the form a transaction.  Conversely, when an alternative form of a transaction would produce more ...

With the new Democratic Administration coming in as well as concerns for the next round of assistance for folks hurt by the pandemic, we are hearing more support for an increase and expansion of the Earned Income Tax Credit.  Although basically in favor of this, I have some mixed emotions.

As far as the “good” is concerned, I think it’s terrific that Congress is taking into consideration the needs of the working poor, the families where there are one or two persons working 1 to 3 jobs, just to make ends meet, and usually falling short.  Without trying to demonize the folks who are not ...

There are few limits to human ingenuity.  We are witnessing this inventiveness as multiple vaccines roll out across the globe to tackle the Covid-19 pandemic.  Similar worldwide efforts may someday result in technologies to address climate change, and in particular the presence of atmospheric carbon gases which are widely-regarded as the cause. 

For now, it remains unknown what types of technologies will ultimately supply the cure.  Possibilities range from alternative energies that do not release carbon gases (the trick is finding such an energy that is reliable, abundant and ...

The two happiest days in a boat owner’s life are the day they purchase the boat and the day they sell it, or so the old adage goes.  The same saw may apply to the purchase of private jets, as they are massively expensive to maintain and operate, particularly if the owner hires others to deal with the many hassles of ownership.  Nevertheless, due to the pandemic, there has been a spike in private air travel.  Many wealthy individuals opt for chartering jets or joining private jet membership clubs like Net Jets, Blue Sky Jets, and Wheels Up.  But for some, there’s nothing like owning your own ...

Congress late last night passed legislation modifying the Paycheck Protection Program (the “PPP”). The Consolidated Appropriations Act, 2021 (the “Act”) provides $900 billion for COVID-19 related relief, which also includes $285 billion for the restart and expansion of the PPP, is expected to be signed by the President this week. First-time borrowers looking for an initial PPP loan and certain eligible borrowers with existing PPP loans have through March 31, 2021 to apply for the next round of PPP loans (once the SBA starts accepting applications). 

Borrowers with ...

Taxpayers should never be taxed on income they don’t receive.  But it happens.  It occurred in a recent decision, Koopmann v. United States, No. 09-CV-333 T (Fed. Cl. Sept. 30, 2020), and there are lessons that may be learned from what went wrong for the litigant in that case. 

In Koopmann, the taxpayer retired from United Airlines in 2000, and was covered by United Airlines' non-qualified deferred compensation plan.  About two years after the taxpayer’s retirement, United Airlines filed a Chapter 11 bankruptcy petition, which ultimately resulted in an approved reorganization plan ...

Hardly a day goes by when some politician or editorial person doesn’t suggest that we don’t need the IRS or should simply do away with it. Most of them come in connection with suggestions for changing the tax system to something like a national retail sales tax. What these people fail to understand, and this writer is not challenging the sincerity of their views, is that without the IRS, our tax gap would explode geometrically.

We call our system a “voluntary” one, but we remain short of “volunteers”: there are simply too many people and businesses who don’t get around to ...

Well for starters, the IRS won’t be very happy!  Beyond that, the IRS has several avenues it can pursue. 

In extreme situations, such as where a taxpayer owes a considerable sum of money and has not filed for several years, the IRS may consider pursuing criminal liability under I.R.C. § 7203, which makes it a misdemeanor to “willfully” fail to file a Federal Income Tax Return.  This is rarely applied unless a pattern of three consecutive non-filing years are present, but potentially any single willful failure to file could result in this prosecution.  There is a six-year statue of ...

In an article published in Pennsylvania CPA Journal / CPA Now on November 16, 2020, Chamberlain Hrdlicka Philadelphia-based Shareholder Phil Karter discusses what you need to know about the IRS audit process.

“Despite the generally low rates of audits, the IRS tends to gravitate toward certain hot button issues that can increase the chances of instigating an examination,” explains Karter. “These include unreported income (especially where there is nondisclosure of foreign assets), excessive business tax deductions (particularly for Schedule C businesses), loss ...

People are always asking how long the IRS can wait from the time you file your return to conduct an audit of your income and expenses.  The simple, most definitive answer is "it all depends," so let's take a look at the rules. 

The time in which the IRS must conduct its audit is governed by what's known as a "statute of limitations."  That statute doesn't begin to run until you actually file a return.  Once you file a return, the IRS has three years from the time the return was filed (or, April 15^th of the year in which you file, if it is filed early) to conduct and complete an audit.  That means that the IRS ...