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Upcoming. I am again participating in the Iowa State University Center for Agricultural Law and Taxation fall tax schools. Both in-person and webinar sessions are available. There are worse ways to get 16 hours of CPE.
Treasury’s Guidance Plan Sets Sights on Stepped-Up Basis - Jonathan Curry, Tax Notes ($):
Buried among the 205 projects listed in the newest edition of the Treasury-IRS priority guidance plan is an item that aims to tackle the question of when, if ever, a grantor trust can obtain a tax-free step-up in basis.
The 2022-2023 plan, released late November 4, indicates that the guidance will determine the availability of stepped-up basis for assets in a grantor trust when the “assets are not included in the owner’s gross estate for estate tax purposes” — commonly referred to as an intentionally defective grantor trust. Grantor trust assets ordinarily obtain carryover basis at the death of the grantor.
If it's not in the gross estate, don't expect a step-up.
Related: 10 Common Questions in Estate Planning
Auto Industry May Need More Time To Meet EV Credit Rules - Kat Lucero, Law360 Tax Authority ($):
Consumers and trade groups are asking the Department of the Treasury to delay the EV tax credit's new domestic sourcing requirements to allow the auto supply chain to catch up to a point where it can meet the conditions created by Democrats' recently passed climate law.
Under the Inflation Reduction Act, signed by President Joe Biden in August, new EVs, as well as their batteries and critical minerals that go into them, must be sourced from North America in order for consumers to get the full $7,500 tax credit.
If the fate of the planet is at stake, maybe sourcing should be a secondary concern.
Online secondhand sellers balk at new tax reporting threshold - Sharon Udasin, The Hill.
The obstacle comes from a revised portion of the tax code included in President Biden’s American Rescue Plan of 2021, which requires sellers to report transactions over third-party networks that exceed $600 — a considerable shift from the previous $20,000 threshold.
Sellers must fill out a 1099-K form for such transactions, and while the IRS says the change impacts only tax reporting rules — rather than broader taxability of income — for smaller re-sellers like Williams, it’s a big change.
As the IRS notes, any income from online sales is taxable, whether or not you get a 1099. But getting a 1099 makes it a lot more likely that it gets reported.
Microcaptive Disclosure On Return May Avert Penalty, IRS Says - Emlyn Cameron, Law360 Tax Authority. "In Chief Counsel Advice Memorandum 202244010, the Internal Revenue Service said a taxpayer that gives all necessary information about such a transaction on Form 8886 in a timely filed return has a strong argument against being penalized for failure to disclose transactions without economic substance under Internal Revenue Code Section 6662(i)."
Amana Society Service Company wins tax credit fight with Iowa Department of Revenue. (Iowa Department of Revenue).
The Taxpayer appealed the Department's denial of a renewable energy tax credit... An Administrative Law Judge (ALJ) granted in part and denied in part both the Taxpayer's and Department's motions for summary judgment, finding the Department's rule was inconsistent with the statute and the statute controlled, enabling the taxpayer to claim the tax credit for calendar years 2018 and 2019 but not for calendar year 2020. Upon review, the Director adopted the ALJ's Proposed Summary Judgment Order and added that the Department's rule on the tax credit altered the meaning of the statute rather than interpreting it, exceeding its authority.
Understanding the Extension of ACA Enhanced Premium Tax Credit (PTC) - Thomson Reuters Tax & Accounting. "Within this provision, a refundable premium tax credit (PTC) is available on a sliding-scale basis for individuals and families who are enrolled in a qualified health plan purchased on the state or federal exchange Marketplace, and who aren’t eligible for other qualifying coverage or affordable employer-sponsored health insurance plans providing minimum value [IRC Sec. 36B(a)]."
Pay your taxes or pay penalties, too, which will go up in 2023 due to inflation - Kay Bell, Don't Mess With Taxes. "The IRS imposes a failure-to-pay penalty of 0.5 percent for each month or part of a month that tax goes unpaid, up to a total of 25 percent of the remaining amount due. The penalty for filing late is steeper. The IRS assesses it at 5 percent of any tax due that isn't paid as of its filing date, usually April 15. Remember, even if you get an extension to file your return as late as Oct. 15, you still must pay any tax due by the April deadline."
IRS Grants Late Rollover Relief to Victim of Fraud - Ed Zollars, Current Federal Tax Developments. "The IRS granted a taxpayer who had been the victim a fraud an extension of time beyond the 60-day deadline to complete a rollover of her IRA funds in PLR 202244029."
2022 Tax Season: The Tax Season From Hell (Part 4) - Russ Fox, Taxable Talk. "We’re raising our rates for the 2023 Tax Season. There are two major components of this. First, as I’ve detailed in the past, inflation is impacting every input. From the paper we use to the software we rely on, everything has gone up between 10% to 488% from last year. Like every business, we must pass that on to our clients. Second, we believe we’ve been charging too little and we need to adjust our rates (while providing a far better level of service than we did in the 2022 Tax Season)."
Social Security Planning for Farmers and Ranchers - Roger McEowen, Agricultural Law and Taxation Blog. "An individual can receive full Social Security benefits if they aren’t drawn until full retirement age is achieved. Another way to state it is that if an individual delays taking Social Security benefits until reaching full retirement age, the individual receives additional benefits for each year of postponement until reaching age 70."
IRS Expands Cafeteria Plan Change-in-Status Rules in Connection with Family Glitch Fix - Parker Tax Pro Library. "The IRS expanded the application of the permitted change-in-status rules for health coverage under Code Sec. 125 cafeteria plans in order to allow participants to revoke an election for family coverage under a group health plan to allow a family member to enroll in a qualified health plan through a health insurance exchange."
The State Business Tax Climate Index Is Your Guide to Economic “Wins Above Replacement” - Jared Walczak, Tax Policy Blog. "Tax competition is a little like WAR—not conflict, but Wins Above Replacement. The term comes from baseball, where it is intended as a sabermetric statistic to measure how many more wins a team can claim due to a specific player above the amount that would be generated by a replacement-level player. It’s much the same way in public finance: a well-structured tax code won’t make the Wyoming Basin a metropolis, nor will poor tax structure make Manhattan a ghost town. But tax structure does play a role in a state’s economic successes or failures, and often a substantial one. Every state can benefit from a simple, neutral, transparent, pro-growth tax structure."
IRA and 401(k) Contribution Limits Are Increasing. That’s Great News If You Are Rich - Howard Gleckman, TaxVox. "TPC looks at contributions through a different lens—the value of the tax benefit for each income group. But it tells the same story. Low- and middle-income workers put away very little in retirement savings, while high-income workers saved a lot. The group that benefits the most on average is the highest-income 80th-99th percentiles, those households making between about $190,000 and almost $1 million dollars this year. They get more than half the benefit of retirement savings tax breaks. All households making about $100,000 or less get about 20 percent of the benefit."
Next Steps for the U.S. and OECD - Alex Parker, Things of Caesar ($). "A top tax official with the OECD insists that U.S. participation in the global minimum tax is still very possible, despite Congress' inaction. He's likely right, although we're still figuring out what that participation will look like."
Lower-Income Americans are Taxed Much Less Heavily Than Lower-Income Europeans - David Henderson, Econlog. The post includes this quote from a book it reviews:
The top 10 percent of households in the United States earn about 33.5 percent of all income, but they pay 45.1 percent of income-related taxes, including Social Security and Medicare taxes. In other words, their share of all income-related taxes is 1.35 times
larger thanas large as their share of income. That is the most progressive income tax share of any OECD nation. In Germany, the top 10 percent earn 29.2 percent of the income and pay 31.2 percent of income-related taxes, 1.07 times their share of income. The French top 10 percent earn 25.5 percent of the income and pay 28.0 percent of the income taxes, 1.10 times their share of income.
Purchasing Purely for Tax Perks Isn’t a Profit Motive, Court Says - Mary Katherine Browne, Tax Notes ($). "The Tenth Circuit found that a couple wasn’t entitled to tax benefits relating to solar lenses purchases because their sole motivation was to offset their wage income taxes."
This case arises out of an ill-starred plan that ended up with its assets frozen and put into receivership. A federal court opinion noted:
Defendants knew that when they made statements to customers and prospective customers about the tax benefits and their purported solar lens leasing "trade or business," that the only way a customer has ever "made money" from buying a lens is from the tax benefits; no customer has earned money from rental income or income from a bonus contract.
The Moral? If it can't make money without the tax benefits, you may not get the tax benefits.
Further reading: Federal Court Orders Tax Scheme Promoters to Disgorge $50 Million in Gains From Fraudulent Solar Energy Tax Scheme
Columbus man pleads guilty to conspiring to launder proceeds from online romance fraud - IRS (Defendant name omitted):
According to court documents, Defendant and his coconspirators laundered proceeds of online romance scams. The perpetrators of the romance scams created several profiles on online dating or social media sites. The perpetrators then contacted men and women throughout the U.S. and elsewhere, with whom they cultivated a sense of affection and, often, romance. The perpetrators would then request money, ordinarily for investment reasons or need-based reasons. The perpetrators provided account information and directed where the money should be sent. In part, these accounts were controlled by Defendant.
In furtherance of the scheme, Defendant used bank accounts in his name and in the name of companies that that he controlled. Defendant established Dr. C. Defendant Health Care Agency and Dealership & Health Care LLC and used the companies for the purpose of money laundering. Defendant was the sole signer on bank accounts in the names of both entities. Defendant and the coconspirators together funneled hundreds of thousands of dollars in proceeds from romance scams into bank accounts in Mr. Defendant's control. Defendant conducted financial transactions in order to move funds from the United States to Ghana.
In total, accounts in Mr. Defendant's control received approximately $744,815.30 in criminally derived funds as part of his criminal activity.
Maybe this explains those no-follower Twitter accounts with attractive owners that show up briefly as new "followers." But if you are an actual person and not a romance scammer, you are welcome to follow me on Twitter: @joebwan.
Not for use with actual live bears. Today is National Hug a Bear Day!