New Supreme Court decision shows when deposits will not be taxable on receipt
Article Abstract:
The US Supreme Court, in its Indianapolis Power and Light decision, has ruled that the rights retained by the payor of a prepaid amount required by a company as a prerequisite of doing service determines whether the amount is an advanced payment taxable to the recipient or a nontaxable security deposit for accrual-method taxpayers. Indianapolis Power and Light did not require deposits by all customers but only from those particular customers deemed uncreditworthy; the deposits were refundable upon termination of service. The Supreme Court ruled that the key question in these cases is the dominion the company exercises over deposited amounts versus the right of customers to their deposits. Since the depositor controls the timing of the refund, the deposit is not considered income and is not an advanced payment taxable to the recipient.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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Reliance on professionals may be a penalty defense
Article Abstract:
No clear rule has yet been established on the liability of taxpayers who attribute their failure to comply with certain tax requirements on their reliance on a professional's advise. However, the Supreme Court's decision on the 'Boyle' case sheds some light on how this matter should be approached. The Court ruled that the taxpayer's duty to file a tax return cannot be delegated. Even if taxpayers engage the services of a tax consultant, they are still duty-bound to make sure that their returns are filed on time. This nondelegable duty rule arising from the 'Boyle' case is supported by most courts, but they still examine the particular conditions surrounding each case. It appears that the courts remain interested in finding evidence to establish whether taxpayers have indeed been negligent.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1992
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