Tax Blog/Blawg

As noted by Janet Novack at forbes.com, Judge England of the District Court for the Eastern District of California last week issued an order permitting the IRS to serve a "John Doe" summons on the California State Board of Equalization.  The summons seeks the names of residents who transferred property to relatives for little or no considerations.  The IRS hopes that the information it receives will identify individuals who should have, but did not, file Forms 709 - Gift Tax Returns.

According to Ms. Novack's post, the IRS' efforts involving information obtained from other states has ...

Editors’ note.  This is the first of a new periodic series on the Tax Blawg.  Mainstream press articles often implicate complex, technical tax issues.  Admirably, the press attempts to simplify the tax issues to make them more interesting and digestible for the general public, but sometimes simplification can leave readers with an incomplete or misleading understanding of the big tax picture.  For that portion of the audience who wants a little more background than the mainstream press can realistically provide, this series will unwind the tax issues discussed in prominent news ...

In a recent TaxBlawg post, my colleague Jonathan Prokup discussed the IRS’ intention to begin requesting electronic files as part of taxpayer examinations so that it can analyze the “metadata” contained in those files.  One of the concerns raised in the post, as announced in Chief Counsel Advice 201146017, was the possibility that such data in the hands of the IRS may be insecure and therefore potentially susceptible to theft by third-party hackers (which, by the way, could conceivably expose the IRS to damages for disclosure of taxpayer information under IRC § 6103

After MF Global filed for bankruptcy protection just over a month ago, investigators discovered that approximately $1.2 billion of assets in customers’ accounts had somehow disappeared.  Although no one at the firm has confirmed where the money went, news reports have suggested that the money may have been used to cover bad trades and debts to other financial institutions.  For example, the New York Times recently reported that investigators believe MF Global, in a frantic attempt to remain solvent, may have paid at least $200 million in customer funds to JPMorgan Chase.  Also, late ...

Two weeks ago, the Fifth Circuit summarily rejected a taxpayer request for an en banc rehearing in Southgate Master Fund LLC v. United States.  The appellate court had previously concluded that the taxpayer was not entitled to a claimed capital loss from a transaction involving the acquisition of distressed debt via a partnership because the partnership was a “sham” that should be disregarded for federal tax purposes.  The taxpayer's petition for rehearing, along with two amicus briefs, raised the specter that the Fifth Circuit's opinion would require taxpayers to have a non-tax ...

As reported earlier this week in the tax press, the recently completed initial filing season for Schedule UTP produced at least one major surprise in the eyes of IRS officials, who had anticipated a much greater number of items listed on the average Schedule UTP than actually materialized.  In fact, the IRS’s predictions were off by a wide margin, with the number of disclosed positions of the 1,500 or so Schedule UTPs filed averaging only slightly more than three items per schedule for CIC taxpayers, and less than two items for non-CIC taxpayers.  Pre-filing expectations of item ...

Peter Pappas at the Tax Lawyer's Blog takes note of a recent report from TIGTA regarding audits of small corporations (those with less than $10 million in assets, according to the IRS).  As Mr. Pappas says, language from the report suggests that Treasury may consider the closely held nature of many small businesses to be an indicator of a propensity to structure transactions to avoid taxes.

Many corporations in the United States are considered closely held because they are owned by one shareholder or a closely knit group of shareholders. As such, these shareholders typically have a ...

Over the weekend, a variety of Canadian news sources (see, e.g., the Financial Post and the Edmonton Journal) reported on anticipated guidance from the IRS, which would result in the waiver of penalties on certain U.S. citizens living in Canada for past failures to file Form TD F 90-22.1, commonly known as the "FBAR."  According to the news reports, the IRS will waive failure-to-file penalties for such individuals who file delinquent tax returns and FBARS so long as the individual owes no taxes.  In addition, taxpayers who were unaware of the FBAR filing requirement will be able to file ...

As discussed in a story in this morning's Tax Notes, the IRS intends to begin requesting electronic files as part of  taxpayer examinations so that it can analyze the "metadata" contained in those files.  Metadata, sometimes referred to as "data about data," generally shows information about a computer file, such as its editing history.  The IRS claims that such information "may be relevant" to taxpayer examinations because the information "may support or undermine the credibility of the records offered to substantiate the accuracy of the [taxpayer's] return."  See Chief Counsel ...

For taxpayers who entered the IRS’s second Offshore Voluntary Disclosure Initiative (“OVDI”) prior to August 31, 2011, November 29th marked the end of the extended deadline that some taxpayers requested for submitting all of the materials included in the disclosure (e.g., amended returns, FBARs).  Coincidentally with the timing of this deadline, many individuals who only recently learned of their reporting obligations (or, in some cases, of the existence of their accounts in the first place) are asking themselves what they can do now, having missed the opportunity to ...

Our in-house and private-practice corporate readers will likely enjoy one of the Tax Foundation's newest reports: Rethinking U.S. Taxation of Overseas Operations. As the abstract describes:

The United States produces a third of the world's wealth but contains less than 5 percent of the world's population. This disparity pushes many U.S. businesses and entrepreneurs to embrace globalization to improve productiv­ity and expand market reach. Large and small businesses alike are increasingly using the tools of faster information, cheaper transporta­tion, and overseas ...