Category Archives: Income Tax/Other Tax Topics

Proposed IRS Regs May Fundamentally Change Partnership Debt Allocation Rules

The debt obligations of partnerships are allocated among the partners and are included in the determination of a partner’s basis. Among other things, partnership basis is important because it allows for the deduction by partners of their allocable share of partnership losses. Under existing regulations, partnership liabilities are generally divided into two categories: recourse and nonrecourse.

A partnership liability is recourse to the extent that a partner is deemed to bear the ultimate “economic risk of loss” in the event the partnership’s assets become worthless. Recourse debts are allocated among the partners based on who bears this risk of loss. The current risk of loss test assumes that all partners will satisfy their payment obligations under this hypothetical worst case scenario, regardless of their actual financial condition. If no partner is considered to bear the risk of loss, then the liability is treated as nonrecourse and allocated essentially in accordance with the partners’ shares of partnership profits and losses.

The new proposed regulations eliminate

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Deducting Business Travel Expenses

business_travel_deductionsDoes your job require travel away from home?  Expenses for temporarily working away from your home are deductible if properly documented.

In summary opinion 2014-10, the Tax Court ruled in favor of the taxpayer, that his six-month work assignment, which was over 1,000 miles away from his home, was temporary.  However, his expense deduction ended up being sharply limited because the taxpayer could not produce the proper documentation as required under the code.

Time and again, we read about and meet with taxpayers who have incurred legitimate expenses, but fall short on the documentation front.  Proper substantiation is

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FATCA Withholding Begins July 1, 2014

globe3When does the new FATCA withholding begin?  Effective July 1, 2014, withholdable payments of U.S.-source FDAP income will be subject to 30% FATCA (Foreign Account Tax Compliance Act) withholding.  The new requirement applies to payments made to Foreign Financial Institutions (“FFIs”) and Non-Financial Foreign Entities (“NFFEs”).  The types of income that are subject to the withholding include interest, dividends, rents, royalties, annuities and compensation.  Withholding begins on January 1, 2017 for withholdable payments of gross proceeds from the disposition of property that produces FDAP income.  To avoid the 30% FATCA withholding, FFIs and NFFEs must comply with certain information reporting and due diligence requirements.  The FATCA withholding regime is designed to compel

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Reporting Deadlines Approaching for Incentive Stock Option and Employee Stock Purchase Plans

calendar2Under Section 6039 of the Internal Revenue Code, corporations are required to furnish statements to current and former employees who exercised an incentive stock option in 2013 or first transferred legal title to shares acquired as part of the corporation’s 423 employee stock purchase plan in 2012. These statements must be furnished on Forms 3921 and 3922 no later than January 31, 2014.

Corporations must all also file returns with the IRS on Forms 3921 and 3922 no later than February 28, 2014.

Form 3921 is for ISO exercises and provides

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Tax Alert: Saving the 3.8% Surtax on Trust Net Investment Income

tax alertAs is the case for individuals, complex trusts (i.e., a trust other than a grantor trust or a simple trust) are now subject to the same 3.8% Medicare surtax (the “3.8% surtax”) on the lesser of (i) net investment income (“NII”); or (ii) adjusted gross income (“AGI”) in excess of a threshold amount. However, the threshold amount for trusts is much lower than for individuals.  The 2013 threshold amount for trusts is $11,950; whereas, for individuals, it is $200K for single filers ($250K for married couples filing jointly).

Because individuals have a higher threshold amount, complex trusts should consider

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