Western CPE Blog
Breaking tax and accounting news and analysis from the experts at Western CPE.
Jeffrey and Sandra Siegel v. Comm., TCM 2019-11
Alimony Requirement #6: Tax Court Allowed Alimony Paid in Arrears Under Court Order (Jeffrey and Sandra Siegel v. Comm., TCM 2019-11) Jeffrey Siegel was divorced in 2003. He was required to make spousal maintenance payments of $10,110 per month and child support of $5,000 per month. After the divorce, Siegel’s business went into bankruptcy, his income fell drastically, and he fell behind in making the payments required by the judgment of divorce. On Feb. 12, 2012, after several legal proceedings, the Supreme Court of New York found Siegel to be in contempt and sentenced him to 150 days in jail …
James Tarpey v. US, CA-9, Doc. No. 22-35208
Tax Shelter Promoter Penalties Applied Because Of Faulty Appraisals (James Tarpey v. US, CA-9, Doc. No. 22-35208 (Aug. 17, 2023)) James Tarpey, a lawyer, and businessman, formed Project Philanthropy, Inc. d/b/a/ Donate for a Cause (“DFC”) around 2006. DFC facilitated the donation of timeshares for timeshare owners who no longer wanted to pay timeshare fees or otherwise wanted to dispose of their timeshare properties. Tarpey promised potential customers that they could receive generous tax savings from donating their unwanted timeshares to DFC. Tarpey himself appraised the value of some of the properties donated to DFC, and other properties were appraised …
Estate of Scott M. Hoensheid et al. v. Comm., TCM 2023-34
Donation of Appreciated Stock was Assignment of Income (Estate of Scott M. Hoensheid et al. v. Comm., TCM 2023-34) Scott Hoensheid in anticipation of the sale of Commercial Steel Treating Corp. (CSTC), a closely held corporation, contributed 1380 shares of CSTC to Fidelity Charitable Gift Fund (a donor advised fund). Contributing appreciated stock. When a taxpayer disposes of appreciated property via charitable contribution, they typically do not recognize any gain. This is because the taxpayer can avoid paying tax on the unrealized appreciation in the property and deduct the fair market value of the property contributed to a qualified charitable …
Duncan Bass v. Comm., TCM 2023-41
Non-Cash Donations of More Than $5,000 Require an Appraisal (Duncan Bass v. Comm., TCM 2023-41) Duncan Bass made noncash charitable gifts in 2017 to Goodwill, the Salvation Army, and Lend-A-Hand, which were reported on three Forms 8283 attached to his tax return. According to the Form 8283, the gifts to Goodwill had an appraised fair market value of $10,286 and were purchased for $4,360, while the gifts to the Salvation Army had an appraised fair market value of $10,060 and were purchased for $4,175. The gifts to Lend-A-Hand had an appraised fair market value of $10,340 and were purchased for …
Kenneth and Anita Brooks v. Comm., TCM 2022-122
Deed Was Not a Proper Contemporary Written Acknowledgement (Kenneth and Anita Brooks v. Comm., TCM 2022-122) On Dec. 15, 2006, the Kenneth and Anita Brooks Family LLC purchased 85 acres of real property known as Cotton Row Farm in Liberty County, Georgia, for $1,350,000. On the same day, the LLC subdivided the property into two parcels of 44 and 41 acres. The LLC granted and recorded a conservation easement over the 41-acre parcel on Dec. 27, 2007, to Liberty County. The LLC claimed a charitable contribution deduction of $5,100,000 on its 2007 Form 1065 for the contribution of the easement …
Martha Albrecht v. Comm., TCM 2022-53
Contemporaneous Receipt Did Not Include “No Goods and Services” Statement So No Charitable Deduction Allowed (Martha Albrecht v. Comm., TCM 2022-53) Martha Albrecht and her late husband acquired a large collection of Native American jewelry and artifacts during their marriage. In December 2014, Ms. Albrecht donated 120 items from this collection to the Wheelwright Museum of the American Indian. In connection with the donation, the Wheelwright Museum and Ms. Albrecht executed a “Deed of Gift” dated Dec. 19, 2014, that consisted of five pages. The first page stated that Ms. Albrecht “hereby donates the material described below to the Wheelwright …
Wendell H. Murphy, Jr., and Wendy Murphy v. Comm., TCM 2023-72
“Reasonable Cause” for Omitted Basis on Form 8283 Saves the Deduction (Wendell H. Murphy, Jr., and Wendy Murphy v. Comm., TCM 2023-72) Wendell and Wendy Murphy, through Duplin Land Development Inc., an S corporation, owned two tracts of land, which they developed into a 1,500-lot residential community with two 18-hole golf courses, a clubhouse, a recreation facility, and multiple nature trails. Tract 1 shares a border with Northeast Cape Fear River, and Tract 2 is an interior, land-locked tract to the north. Duplin Land Development, Inc. donated in 2010 perpetual conservation easements – each constituting a “qualified real property interest” …
Nadine Vichich v. Comm., 146 TC No. 12
Widow Can’t Use Deceased Husband’s AMT Credits (Nadine Vichich v. Comm., 146 TC No. 12) Before his marriage to Nadine Vichich, William Vichich exercised incentive stock options that resulted in AMT liability, which he reported on a 1998 tax return filed jointly with his first wife, Marla. Payment of the AMT liability in 1998 generated an AMT credit carryforward of $304,442. Ms. Vichich was married to Mr. Vichich from 2002 until his death in 2004. On her 2009 tax return, Ms. Vichich reported an AMT credit of $151,928 derived from her deceased husband’s 1998 AMT credit carryforward that she used …
Denine and Bryan Kerns, pro sese v. Comm., TCM 2019-14
Failed to Reconcile Advance Premium Tax Credit on Form 8962 (Denine and Bryan Kerns, pro se v. Comm., TCM 2019-14) Denine and Bryan Kerns purchased their health insurance through Covered California. They received an advanced premium tax credit (APTC) of $8,420 in 2014. They timely filed their 2014 return, reporting AGI of $97,061. They claimed personal exemptions for themselves and no exemptions for dependents. The IRS determined that the Kerns were not eligible for any credit because their household income exceeded the maximum allowable under §36B(b) and (c)(1)(A). For 2014, 400% of the FPL was $62,040. The Kerns’ household income …
Chalaundra Sneed v. Comm., TCS 2023-11
Advance Premium Tax Credits Require Taxpayer Attach Form 8962 to Tax Return (Chalaundra Sneed v. Comm., TCS 2023-11) Chalaundra Sneed enrolled in health insurance for herself and her two dependents through the Oklahoma insurance Marketplace. She received Advance Premium Tax Credits (APTC) on the basis of the information she provided in her application. Ms. Sneed did not attach a copy of Form 8962, Premium Tax Credit (PTC), to her income tax return, but later mailed it separately. The notice of deficiency determined that Ms. Sneed was ineligible for the PTC because her MAGI for year at issue exceeded 400% of …
Alice Kimble v. US, (CA-FC), 2021-1 USTC 50,110
FBAR Violation Recklessness and, Thus, Willful (Alice Kimble v. US, (CA-FC), 2021-1 USTC 50,110; (Mar. 25, 2021)) Because the penalty for willfully failing to file FBAR is a maximum penalty of the greater of $100,000 (inflation adjusted to $136,399 for 2021) or 50% of the balance in the account or the amount of the transaction, the determination of willful versus non-willful is meaningful. What’s willfulness? The US Supreme Court in Safeco Ins. Co. of Am. v. Burr, 551 US 47, 57 (2007), defined “recklessness” as “violating an objective standard: action entailing an unjustifiably high risk of harm that is either …
Lindsey Jones v. Comm., CA-9, 2022-1 USTC §50,111
Unsigned Return Was Still a Valid Married Filing Joint Return (Lindsey Jones v. Comm., CA-9, 2022-1 USTC §50,111 (Feb. 3, 2022)) The Ninth Circuit Court of Appeals found that the Tax Court did not err by concluding that Lindsey Jones tacitly consented to the filing of a joint return. A joint tax return signed by one spouse on behalf of the other is valid so long as the non-signing spouse tacitly consented to filing the joint return. See Hennen v. Comm., [CCH Dec. 24,658], 35 T.C. 747, 748–49 (1961). The key question is whether both spouses intended at the time …
Sam Bankman-Fried Sentenced to 25 Years
Sam Bankman-Fried, the former wunderkind of the cryptocurrency world, was sentenced to 25 years in prison on Thursday, March 28th, 2024, for his role in defrauding FTX customers of $8 billion. He was facing a maximum sentence of 110 years, and prosecutors were hoping for 40-50 years. For a deep-dive into the background of the Sam Bankman-Fried fraud case from an accounting point of view, see Jeff Sailor, CPA’s on-demand video course, Focus on Fraud: FTX! What Happened? (1 CPE Credit, Accounting) In a statement from the Department of Justice, U.S. Attorney General Merrick Garland said: “There are serious consequences for …
The 90-Day Clock is Ticking for Beneficial Ownership Reporting
An Alabama Federal District Court found the Corporate Transparency Act and its Beneficial Ownership Interest (BOI) reporting to be unconstitutional (National Small Business United et al v. Yellen et al). The Justice Department on behalf of Treasury filed a Notice of Appeal on March 11, 2024. What happens now? While the litigation is ongoing, FinCEN will continue to implement the Corporate Transparency Act as required by Congress, while complying with the court’s order. Other than the particular individuals and entities subject to the court’s injunction, reporting companies are still required to file beneficial ownership reports as provided in FinCEN’s regulations. …
Bipartisan “Stop Subsidizing Giant Mergers Act” Takes Aim at Tax-Free Reorganizations
Few proposals have been made to change tax-free reorganizations in the past century, but today, a Democrat and a Republican have combined forces to attempt exactly that. This morning (3/21), Sen. Sheldon Whitehouse (D., R.I) and Sen. J.D. Vance (R., OH) introduced new legislation aimed at transforming the tax implications of big mergers by revising the corporate tax code. The Stop Subsidizing Giant Mergers Act is described in a statement from the senators as “ending a wasteful subsidy for mergers where combined average annual revenues exceed $500 million.”The bipartisan bill sets its sights on companies’ ability to complete tax-free mergers. …
New IRS Memo Answers Questions Related to Form 8300 and Cannabis
Once a business receives cash exceeding $10,000 (in either a transaction or related transactions), a Form 8300 must be filed. Cannabis businesses are cash intensive businesses and therefore are subject to the reporting requirement.A March 1, 2024 Chief Council Memorandum 202409016 addresses a series of questions related to the filing of Form 8300 that have arisen in examinations of cannabis businesses. The memorandum provides guidance on many of these issues in a 16 question-and-answer format. Additional guidance on questions related to cash couriers/armored cars who transport cash between growers/manufacturers and dispensaries/sellers is in process.Example from Q and A #2. What …
President Biden Proposes 2025 Budget
President Biden has proposed a 2025 budget, and it’s a pie-in-the-sky plan that has no chance of getting through Congress. It is instead a political statement of what might be, not what will be. So, why read about the proposals? Because some well-read client will ask about a provision that particularly irritates them. (Think real estate investor and the Section 1031 proposed limit.)The proposed budget includes tax increases of $5.1 trillion over the next ten years, and it assumes that the Tax Cut and Jobs Act will not be extended past 2025.Here are a few items from President Biden’s proposed budget.The …
Student Loan Discharge for Small Loans Has Started
The Department of Education has announced that it will automatically discharge $1.2 billion in loans for nearly 153,000 borrowers who are eligible for the shortened time to forgiveness benefit under the Saving on a Valuable Education (SAVE) Plan. For a borrower to be eligible for this forgiveness, they must be enrolled in the SAVE Plan, have been making at least 10 years of payments, and have originally taken out $12,000 or less for college. For every $1,000 borrowed above $12,000, a borrower can receive forgiveness after an additional year of payments. All borrowers on SAVE receive forgiveness after 20 years …
California Board of Accountancy: Everything You Need to Know
In the world of accounting, the Golden State is a beacon of professionalism and integrity thanks to its regulatory body, the California Board of Accountancy (CBA). Understanding the ins and outs of this organization is the first step every aspiring California CPA should take in their CPA journey. Let’s explore everything you need to know about the California Board of Accountancy. Ensuring Professional Standards and Public Trust The California Board of Accountancy plays a crucial role in regulating the accounting profession in the state. Established under the California Accountancy Act, the CBA’s primary mission is to protect consumers by ensuring …
California Corner: Calling the Practitioner Hotline
The FTB continues to request (actually beg) practitioners to utilize the self-service options available on its website using “MyFTB Account.” Accessing information on the website frees up hotline agents to handle cases that cannot be resolved without live contact.Tax Practitioner Hotline(916) 845-7057Tax practitioner hotline implements virtual hold technology. As a result of practitioner feedback, the Tax Practitioner Hotline successfully implemented Virtual Hold technology. Virtual Hold allows callers to save their place in the phone queue and receive a call back instead of waiting on hold for a potentially extended period of time.In March 2023 alone, over 24,000 tax practitioners utilized …