Tag Archive for Tax Blog

Repairs vs. Capitalization – Part 4

Improvements and B.A.R.

Betterment: Improves a material condition or defect if the defect existed prior to acquisition or during production of the UOP, even if the taxpayer was aware of the defect. Or is a material addition such as an enlargement, expansion or extension of the UOP. Or is reasonably expected to materially increase the productivity, efficiency, strength, quality or output of the UOP.

Adaptation: Amounts paid to adapt or change the use of the UOP from its original use when placed in service.

Restorations: Amounts paid to bring the UOP back to regular efficient operating condition Read More

Written by | Posted in IRS • Tax Policy

Corporate Tax Professionals – Want To Learn Tax Provision Preparation And Reporting?

For three decades organizations have come to us to find highly specialized tax professionals all over the world. It was the continual request to locate a wide range of technical tax expertise that led us to build TaxConnections in the first place. One of the most frequently requested searches from our corporate clients in recent years has been for Director – Tax Reporting or Manager – Tax Reporting. These roles are challenging for corporate tax departments to fill because the demand for this expertise outweighs the current availability of these trained tax professionals. The lack of available talent for these roles is about to change with better access to on demand Instructors who teach corporate tax provision preparation and reporting.

One of my corporate clients happens to be an expert in international tax provision Read More

Written by | Posted in Tax Education • TaxConnections

Should I Stay or Should I Go – Part 16

Answers to the Most Frequently Asked Questions Regarding OVDP

As a tax attorney specializing in the Offshore Voluntary Disclosure Program (OVDP), nary a day goes by that I don’t get a call from a person inquiring about the OVDP. The questions asked are relatively the same. After a while, I began to make a list of the most frequently asked questions. Below are my answers to them: (continued)

XX. Does the examiner have any discretion to settle offshore voluntary disclosure cases for amounts less than the 27.5 percent offshore penalty?

No. Examiners nave no authority to negotiate a different offshore penalty. However, in limited situations, the offshore penalty can be reduced from 27.5 percent to 12.5 percent Read More

Written by | Posted in FBAR • OVDP

Taxpayers Rights When Audited By Tax Authorities In South Africa (Chapter 3 – 3.3)

Posted in sections, this is my Doctoral Thesis on taxpayers rights when audited by the tax authorities in South Africa – equally applicable to many English-based law systems in Africa and abroad (eg. India). This will be of particular use to any tax practitioners doing work in Africa and in other English-based legal systems around the world.

Analysis Of Challenging The Commissioner’s Discretionary Powers In Auditing Taxpayers under The Constitution Of The Republic of South Africa

CHAPTER 3 – LIMITATIONS TO INVOKING SECTIONS 74A AND 74B OF THE INCOME TAX ACT

3.3 LAWFULNESS Read More

Written by | Posted in Africa • Audit

Defending Against Alter Ego Allegations

What is an “alter ego” allegation?

Aside of course being one of several nuanced yet distinct stages of intoxication, when it comes to the IRS it seems from my perspective that there are several elements of the alter ego doctrine that arose out of the California Supreme Court in Minifie V. Rowley, 187 Cal 481, 487 including:

1. domination and control by one person,
2. disregard of corporate formalities,
3. under capitalization or insolvency,
4. fraud, Read More

Written by | Posted in Audit • Corporate • Individual • IRS • Tax Tips

How Canada Taxes Real Estate Gains of Non-Residents

Like many countries. Canada taxes non-residents who realize gains on real estate located within its borders(1).

This will be true whether the real estate is capital property that is held for the purposes of earning from rental or a business; capital property held for personal use; or inventory of a business (e.g. where it is held for resale).

This article will focus on situations where the real estate is capital property.

The Income Tax Act (“the Act”) provides that non-residents are subject to tax in Canada on taxable gains from the “disposition” (which can include sales, as well as other events deemed to be dispositions, such as death) of “taxable Canadian property” (“TCP”)(2). TCP Read More

Written by | Posted in Capital Gains • International • Real Estate

Repairs vs. Capitalization – Part 3

Improvements vs. Repairs

The bulk of the new rules focus on changes in the Improvements vs Repair rules. Let’s review the “way it’s always been” so we have a basis for the changes. (§1.263(a)-3)

The general concept has always been if it’s an improvement (remember B.A.R.) it must be capitalized. The rules all go back to the definition of a UOP above. If an improvement is capitalized it may not be treated as its own UOP but must be treated as a part of the UOP it is improving. This is where we utilize the “component of” choice in selecting methods/class life of depreciable items.

Real property has some specific rules that do not apply to other tangible property. A Read More

Written by | Posted in IRS • Tax Policy

The Commerce Clause – Due Process and Cross Border Taxation

Introduction

Cross border taxation risks of international enterprise incorporates two basic themes, one of which is the interpretation of the United States Commerce Clause and the Due Process distinction from jurisdictional analysis. It is one of the two basic aspects that govern the authority of a source and resident country or state to tax international commerce.

In the electronic commerce world the courts have embraced an evolution of Due Process requisite of jurisdiction and of commerce. That analysis for both turns upon the judicial case law evolution that focuses on the contact with the state or country that imposes taxation from their border. Read More

Written by | Posted in Corporate • International

Estimated Tax Payments Due June 16th!! Don’t Forget!

Tips On Making Estimated Tax Payments

If you don’t have taxes withheld from your pay, or you don’t have enough tax withheld, then you may need to make estimated tax payments. If you’re self-employed you normally have to pay your taxes this way.

Here are six tips you should know about estimated taxes:

1. You should pay estimated taxes in 2014 if you expect to owe $1,000 or more when you file your federal tax return. Special rules apply to farmers and fishermen.

2. Estimate the amount of income you expect to receive for the year to determine the Read More

Written by | Posted in Income Tax • Individual • IRS • Tax Deductions • Tax Tips

Kovel Agreements: The Solution To Well-Meaning But Useless Tax Practitioner – Client Privilege?

Contrary to popular belief, there is no accountant-client privilege recognized in federal law. However, in 1998, Congress enacted a limited privilege for tax advice. Section 7525 extends the same common law protections of confidentiality that apply to communications between a taxpayer and an attorney to communications between a taxpayer and any “federally authorized tax practitioner.” IRC § 7525(a)(1).

Thus, if the communication would be considered privileged if it was between a taxpayer and an attorney, then so too will it be privileged if it is between the taxpayer and a federally authorized tax practitioner. IRC § 7525(a)(3)(A). The term, “federally authorized tax practitioner” applies to any individual who is authorized to practice before the IRS. For example, it includes CPAs, enrolled agents, and enrolled actuaries. Read More

Written by | Posted in Federal • IRS • Tax Fraud/Evasion/Crimes

The Unknown Tax Comic – Part 2

♦ If a tax accountant’s wife can’t get to sleep, what does she do?
Leans over to her husband and says “Tell me about work today, honey.”

♦ A lady goes to see her doctor with some very worrisome symptoms. After examining her, he says, “I’m terribly sorry to tell you this, but you only have six months to live.” The lady is very distraught, “Oh doctor, what should I do”, she asks. The doctor says, “I advise you to marry a CPA.””Will that make me live longer?”, she asks, hopefully. “No, ” says the doctor. “But it will seem longer.”

♦ A businessman was interviewing job applications for the position of manager of a large division. He quickly devised a test for choosing the most suitable candidate. He simply Read More

Written by | Posted in Tax Humor • TaxConnections

Repairs vs. Capitalization – Part 2

TD 9636 The New Rules

The Final Regulation released on 9/19/2013 made some substantial changes to the Repairs vs Capitalization rules. Surprisingly, most of them are in the small business taxpayers favor.

De Minimis Safe Harbor is a election made up to a specific dollar amount allowed to be expensed when it would normally be required to be capitalized. For the purpose of this discussion the election must be made on the timely filed original return(including extension), the election must be in a written internal policy for a non-tax reason and the policy must be made prior to the beginning of the tax year. The election (or failure to make Read More

Written by | Posted in IRS • Tax Policy
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