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A Tisket A Tasket – Your Hedge Fund’s in a Basket
AM 2010-005 This was originally published on PAOO on November 18th, 2010. So today we get to introduce a new acronym. What is an "AM" you ask. Well it is Legal Advice...
The Powder To Blow It Away
Mr. Rolf arranged for an appraisal of his property. The appraiser did a valuation of the property with and without the structure that after standing nearly century went out in a blaze of glory to the edification of the Chenequa Volunteer Fire Department. The appraiser determined that the value of Mr. Rolf’s property had declined from $655,000 to $579,000. Accordingly, he claimed a charitable contribution of $76,000.
Time To Purge The Draft Posts
I swear if they ever have a machine to test for tax geekiness where they attach and insert all sorts of devices that monitor your reactions and then flash things on the screen that will be one of the things they use. If you just had a WOW – That’s really interesting, you are a total tax geek (Maybe some sort of highly specialized business broker just to be open to other possibilities. ). If you just had a WTF (That stands for What The ?) you are a normal human being.
IRS More Liberal Than Tax Court on Home Mortgage Interest
Which brings us to residence interest. There are two types. Acquisition indebtedness is used to purchase one or two residences. In addition to tracing the indebtedness to an acquisition of a personal residence the debt must be secured by “such” residence. There is a limit, not on the amount of interest but rather on the amount of indebtedness. $1,000,000 – not indexed for inflation. Then there is home equity indebtedness.
We Only Wash Losses Here
I’ve been sitting on this one for a while. It was issued July 27, 2010. It refers to the flash crash of the stock market on May 6 which caused many stop-loss orders to be triggered some of which resulted in gain recognition. Whoever (I don’t think Redacted Text was his real name) wrote to the IRS more or less logically (as if that means anything) thought investors should be able to reestablish those positions with appropriate basis as if no gain were recognized.
And Another Purge
If you were supposed to send somebody a 1099, you were supposed to ask them for their social security number of EIN. Since you didn’t ask they didn’t give it to you. Therefore you should have subjected their payments to back up withholding. It’s a nightmare. You can get out of the back-up withholding by getting them to sign a form swearing they reported the income. Good luck.
Let The Sun Shine In
I’m going to do this as a bonus post because I don’t have the ability to expand on it much. They have figured out a way to make a “curtain wall” of glass where all the windows are, in effect, solar panels. The Service has ruled that even though such a wall is clearly a “structural component” of the building, the entire cost is still subject to the 30% energy credit. That’s a great credit since it is one that can be used against the AMT (The only thing better is a refundable credit).
Inadvertent Termination
Much to my surprise, the IRS has ruled this to be an inadvertent termination. I suppose if you drove blind folded that any crashes you had would be inadvertent too, but I don’t recommend it. The shareholders have to amend their individual returns to pick up a deemed dividend for the amount of the earnings and profits. Also they have agreed that on receipt of the ruling they will make payments to bring distributions to shareholders into proportion with ownership. Why the stiffed shareholders are waiting till then is beyond me, but that’s the deal.
Courts and Value Billing
The disdain for professional imprimaturs unsupported by work has moved beyond the Son of Boss unbalanced entries to a deal that tax professionals felt deserved a bit more respect. Canal Corporation and Subsidiaries was a deferral deal. Instead of selling a subsidiary the taxpayer contributed it to a partnership and took a large distribution. The debt that funded the distribution was allocated to the contributing partner, which avoids the disguised sale rules. Of course, they didn’t really want a liability, so the guarantee that supported the allocation was pretty tenuous.
Time to Face the Music
The statute of limitations was closed on years prior to 2004. So the service took the position that the accruals had constituted an impermissible accounting method. This required a cumulative adjustment for all the accruals hitting the couple with just shy of $300,000 in tax and $60,000 in penalties for the 2004 year.