IRS Says When a Grape is No Longer a Grape- March 31, 2007 We all know that (most) wines come from grapes, but many of us might not know exactly when grapes turn into wine for federal income tax purposes. According to the IRS (in Chief Counsel Advice Memorandum 200713023), grapes turn into wine when a taxpayer begins crushing the grapes. This IRS Memorandum highlights a few of the tax planning considerations for businesses that produce and sell their own goods. In general, taxpayers are not entitled to immediately deduct the cost associated with...http://www.irstaxtrouble.com/2007/03/irs-says-when-grape-is-no-longer-grape.html Yet Another Lottery-Related Tax Question- March 30, 2007 Here is yet another lottery-related tax question: Does a state lottery have to withhold tax from lotto winnings if a single taxpayer wins more than one lottery prize from the same lotto ticket where the total winnings exceed $5,000, but the individual winnings do not exceed $5,000The IRS recently held that the state would not have to withhold the tax as long as the lotto numbers were different. The IRS reasoned that a lotto ticket that had different winning numbers were not identical wagers. ..http://www.irstaxtrouble.com/2007/03/yet-another-lottery-related-tax.html Does Anyone Really Win the Lottery- March 29, 2007 The Prebola v. Commissioner case serves as a reminder that winning the lottery requires significant tax planning. It also serves as a reminder that absent advanced tax planning, the federal and state governments are the only true lottery winners. Lottery winnings are treated as income from gambling. As noted in the Prebola case, lottery winnings are accorded ordinary tax treatment, rather than capital gains tax treatment. This means that the federal government can impose a 38%+ tax on...http://www.irstaxtrouble.com/2007/03/does-anyone-really-win-lottery.html IRS Obtains Promissory Note: Can it Collect on the Note- March 21, 2007 In United States v. Spangler, the Eleventh Circuit Court of Appeals upheld a lower court order requiring a taxpayer to transfer a promissory note to the government so that the note payments would be credited towards the amount of the taxpayers court ordered tax restitution. Given that the IRS has a poor track record in collecting taxes from taxpayers via the traditional avenues, this scenario raises the question as to whether the IRS would be able to collect tax payments from third parties via.http://www.irstaxtrouble.com/2007/03/irs-obtains-promissory-note-can-it.html Rule of Thumb: IRS Employees Not Subject to Ethical or Moral Standards- March 16, 2007 Unlike tax attorneys, IRS employees are not subject to any ethical or moral standards. Take the case of Wormley v. Department of the Treasury. The Wormley case presents the unusual question as to whether an IRS employee should be fired if she is arrested and convicted of assault for biting off a portion of her neighbor's thumb during a physical altercation. The court opinion sets out the following facts: Patricia Wormley was employed as an IRS tax examining clerk in Philadelphia. Wormely was.http://www.irstaxtrouble.com/2007/03/rule-of-thumb-irs-employees-not-subject.html IRS Incentive to Delay Processing Cases: Extra Tax Penalties & Interest- March 16, 2007 I think that most citizens would agree that the IRS should not benefit from failing to do its job in a timely manner. The recent United States v. Ryals case provides an example of how the IRS can benefit from denying taxpayer claims and delaying the collection of taxes. Ryals owed taxes for tax years 1977 and 1978. The tax court found Ryals liable for these taxes in 1989 and the IRS assessed the taxes at that time. By March 2003 Ryals tax liability had grown (due to tax penalties and...http://www.irstaxtrouble.com/2007/03/irs-incentive-to-delay-processing-cases.html Section 104 Survives Non-Murphy Constitutional Challenge- March 14, 2007 The now famous Murphy decision has left some uncertainties with regard to whether compensation for a personal injuries that are unrelated to lost wages or earnings are taxable. There can be little doubt that the IRS will ask the Supreme Court to settle the issue if the IRS is not successful in the coming Murphy rehearing. Two days ago the Ninth Circuit Court of Appeals issued its opinion in Polone v. Commissioner, solidifying its view that this type of compensation is in fact taxable and...http://www.irstaxtrouble.com/2007/03/section-104-survives-non-murphy.html IRS Uses Taxpayer Records to Secure Tax Fraud Conviction- March 12, 2007 Taxpayers who are being investigated for tax fraud should be very careful about turning over incriminating records to third parties. The recent Yang v. United States case provides an excellent example of how this can be a problem. The Yang brothers and their parents were being investigated by the IRS for tax fraud related to the familys China Buffet Restaurant. You Bin Yang was living with his parents when he called the local police to report that his house was burglarized. The burglars had.http://www.irstaxtrouble.com/2007/03/irs-uses-taxpayer-records-to-secure-tax.html IRS Estate Tax Liens Might Not be as HelpfulHarmful as One Would Think- March 11, 2007 It can take years (if not decades) to resolve property disputes resulting from a taxpayers demise. The IRS uses the general unfiled estate tax lien to protect its interest in a decedents assets during this period. The federal estate tax lien is by far the IRS primary estate tax collection tool, yet the estate tax lien system is not as efficient as many taxpayers would expect. The general estate tax lien arises when the estate does not pay an estate tax liability that is due and owing. This...http://www.irstaxtrouble.com/2007/03/irs-estate-tax-liens-might-not-be-as.html The IRS Appeals Office is NOT Independent or Unbiased- March 7, 2007 The IRS Appeals Office was created with the aim of providing taxpayers with an impartial and informal forum to have taxpayer and IRS disputes reviewed and tax controversies resolved. This function serves a vital role in our governments system of administering our tax laws, yet appeals office employees frequently and blatantly violates IRS policies and our tax laws. The IRS recent announcement that it does not agree with the Tax Courts determination in the Moore v. Commissioner case provides...http://www.irstaxtrouble.com/2007/03/irs-appeals-office-is-not-independent.html |