Archives for November 2015

Okay. We understand that it is a public service announcement. But it is ironic that the IRS is providing recommendations to tax return preparers on protecting client information (IRS Publication 4557, Safeguarding Taxpayer Data). The guidance is good. But, shouldn’t the IRS be leading by example? Here, we have a federal agency that allows dishonest employees to steal taxpayers’ identities and has systems that do not adequately protect the sensitive data of taxpayers as evidenced by the hundreds of thousands of taxpayers who had their identities stolen due to inadequate security measures. We have prisoners filing false tax returns in the thousands, and the IRS has no systems in place to know that an inordinate amount of tax returns are showing the same address, and that address being a federal prison. When will Congress give the IRS the power and funds to shut down the tax shops run by unlicensed and unethical tax preparers that file false returns and steal taxpayer SSNs?

The IRS has reminded tax return preparers that they are prime targets for identity thieves who seek data to use on fraudulent tax returns. The IRS recommends [Read more…] about IRS Public Service – Identify Theft Guidance

You’ve made your bed, now lie in it! This is the conclusion that the Tax Court came to in the case of (Rochlani v. Commissioner, TCM, Dec. 60,397(M)). The Taxpayers (husband and wife) had an unincorporated business but then incorporated the business. Ignoring their C Corporation legal entity, they deducted their business expenses on Sch. C on their personal income tax return as they had done in prior years. The IRS denied their Sch. C deductions and the Tax Court ruled in favor of the IRS.

Why? Because it is clear [Read more…] about Taxpayer Who Incorporated Business Could Not Deduct Business Expenses On Personal Tax Return

Bloomberg Business has reported that the estate of billionaire William Davidson has sued Deloitte LLP for $500 million (Aaron v. Deloitte Tax LLP, 653203/2015, NYS Supreme Court, NY County, Manhattan). Prior to his death, Davidson owned the Detroit Pistons NBA team and the Tampa Bay Lightning NHL team. Per Bloomberg, the estate is alleging that Deloitte failed to disclose the material risks of the tax plan that it recommended to Davidson. We are talking real money here. The IRS assessed the estate $2.7 billion in taxes. The estate eventually paid around $625 million.

While we have not yet had the opportunity to read the suit, it may be related to the use of family limited partnerships (FLPs) which can be heavily discounted to reduce the fair market value that is includable in the estate. The use of these FLPs has historically been an effective way to reduce federal estate taxes.

Why this case is of particular interest? [Read more…] about Lesson Learned from a Billionaire