Courts split on individuals' deficiency interest deduction

Article Abstract:

Taxpayers are confused by court decisions on the deductibility of individual deficiency interest associated with a trade or business. Internal Revenue Code Sec 163(h)(2)(A) allows individuals to deduct interest paid or accrued on debt appropriate allocable to a trade or business. However, this is contradicted by Temporary Regulation 1.163-9T(b)(2)(i)(A), which refuses a deduction for interest paid on individual income tax deficiencies, including income that is related to trade or business. As a result, the courts have interpreted the intent and application of Sec 163(h)(2)(A) differently. Pro-taxpayer decisions include 'Redlark,' 'Kikalos,' 'Allen,' 'Miller,' 'Standing,' 'Polk' and 'Reise' while pro-IRS decisions include 'Miller,' 'Redlark' and 'Stecher.' Without Supreme Court decision or legislation action, uncertainty regarding the application of the law will prevail.

Personal Income Tax Deductions, Tax deductions, Debt

---

Tax court rejects stock aggregation; accepts minority discount

Article Abstract:

The Tax Court has ruled against the IRS in a case involving the compulsory aggregation of family-controlled shares as part of the valuation of a decedent's estate. The court's decision in the 'Mellinger' case has reassured tax planners that in cases where a QTIP trust has been established on the death of the first spouse, shares held in the QTIP trust cannot be compulsorily combined for valuation purposes with shares of the surviving spouse, upon the death of the second spouse. The Mellinger case arose from the IRS's insistence that the stock held by the late Harriet and Frederick Mellinger be aggregated for valuation purposes. The court's ruling has allowed the Mellinger estate to save over $10 million in estate taxes.

Inheritance Taxes, Cases, Estate planning, Estate tax, Estate taxes, Tax policy, Inheritance tax, United States. Internal Revenue Service, Tax courts

---

Advance payments: current income or tax-free deposits

Article Abstract:

An analysis of the judicial and administrative history of advance payments, security deposits and fiduciary repositories indicated that such payments are taxable on receipt unless separately identifiable and segregated property are held as a trust or custodian for a payor's benefit. Findings also suggested the need for guidelines indicating when amounts can qualify as payments, deposits or repositories. Several issues promote confusion when receipts do not correlate with the immediate delivery of goods or services to customers. These concerns focus on whether the amounts received represent the earned income and whether the recipients have an economic benefit associated with the control to determine income recognition.

Personal Income Taxes, Corporate Income Taxes

Similar abstracts:

• Abstracts: Democracy and dispute resolution: individual rights in international trade organizations
• Abstracts: The effects of individual difference factors on the acceptability of ethical and unethical workplace behaviors
• Abstracts: Wash-sale rules mutual fund loss deductions. To deduct or capitalize: courts and IRS interpret Indopco. Planning pays for stock redemptions through related corporations
• Abstracts: The SEC attacks abuses in the use of Form S-8 registration statement. Re-visiting the question: must a broker-dealer securities firm use another broker-dealer securities firm in selling its own restricted securities under Rule 144
• Abstracts: ABA goes over head of INS on detainee issue; ABA says INS refuses to give pro bono lawyers access to some detainees

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.