Coben Tistadt – Bregante+Company LLP

International Data Sharing with the IRS

In a recent news release, the IRS announced the opening of a new International Data Exchange Service (IDES) for financial institutions and foreign countries to securely provide information on financial accounts held by U.S. persons. More than 145,000 financial institutions have registered and more than 110 countries have agreed to provide this information to the IRS.

This announcement marks another step in the IRS’ attempts to tax previously “hidden” offshore accounts. (U.S. taxpayers with over $10,000 in foreign accounts are required to file an annual foreign bank account report (FBAR) and report worldwide income.)

The IRS currently has in place an offshore voluntary disclosure initiative (OVDI), which provides incentives for U.S. taxpayers with unreported foreign income to disclose. The OVDI offers reduced penalties — […]

By Coben Tistadt|July 12th, 2015|Categories: Individual Tax, IRS|Tags: FBAR, IDES, Internal Revenue Service, International Data Exchange Service, IRS, Offshore banks, Offshore Voluntary Disclosure Initiative, OVDI, Overseas Accounts, penalties|Comments Off

A Mortgage Broker is not Engaged in a Real Property Trade or Business

In a recent Chief Counsel Advice memorandum (CCA 201504010), the IRS concluded that mortgage brokers are not engaged in a real property trade or business for the purpose of qualifying as real estate professionals. Real property trades or businesses are defined in the Internal Revenue Code to be “real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental operation, management leasing, or brokerage trade or business.” (I.R.C. § 469(c)(7)(C))

Taxpayers who qualify as real estate professionals are given an exception to the general rule that all rental activities are passive activities (and thus subject to passive loss limitations.) A real estate professional is one who (1) performs more than half of his/her personal services in real property trade or businesses in which he/she materially participate, […]

By Coben Tistadt|May 25th, 2015|Categories: Announcements, Business Operations, IRS, Real Estate|Tags: CCA, Chief Counsel Advice, Internal Revenue Service, IRS, Mortgage broker, property broker, real estate professional, Tax law|Comments Off

Accountable Plans and the IRS

In a 2010-2012 audit initiative, the IRS found many businesses were either not familiar with the accountable plan rules, or were not following them. It seems likely, therefore, that the IRS is going to apply more scrutiny to the issue of accountable plans when auditing businesses and their owners.

An accountable plan is a business plan for expense reimbursement or advances that satisfies the following requirements:

(1) Reimbursements/advances are only made for deductible business expenses incurred in the performance of employee duties;

(2) Reimbursements/advances are substantiated through an expense report, diary, log, trip sheets, or similar record such as a detailed receipt;

(3) Excess advances are returned to the business (except for cases where an allowance doesn’t exceed per diem rates); and

(4) Substantiation and returns of […]

By Coben Tistadt|April 30th, 2015|Categories: Business Operations, Business Tax, IRS|Tags: 2010, 2012, accountable plan, business operations, bussiness, deductible business expense, Internal Revenue Service, IRS, payroll tax, reimbursement, taxable compensation|Comments Off

Tax Court Rules that a Trust can be a Real Estate Professional

Real estate activities are normally considered passive activities subject to passive loss limitations, unless a taxpayer qualifies for the real estate professional exception. To meet this exception, 1) more than one-half of the taxpayer’s personal services must be in real-property activities in which the taxpayer materially participates, and 2) these real-property personal services must be more than 750 hours.

The IRS has taken the hard stance that trusts cannot qualify for this exception, because “personal services” are defined to be “work performed by an individual in connection with a trade or business (Treas. Reg. § 1.469-9(b)(4)). Since trusts are not individuals, the IRS argues, trusts cannot perform personal services.

In Frank Aragona Trust, the Tax Court disagreed with the IRS’ position. The court noted […]

By Coben Tistadt|July 24th, 2014|Categories: Business Operations, Business Tax, Individual Tax, Real Estate, Trusts and Estates|Tags: 2014, Frank Aragona Trust, real estate, real estate professional, real estate professional exception, trust|Comments Off

Lease Termination Fee of $6.25M Allowed

ABC Beverage Corporation (“ABC”) determined its lease payments under a 40-year lease of a bottling plant in Hazelwood, Missouri were in excess of market rates and therefore exercised a right-to-buy option under the lease. Appraisals obtained by ABC placed the value of the property without the lease at $2.75 million. ABC determined that the value of the property with the 40-year lease to be at least $9 million, and negotiated a purchase price in excess of $9 million. ABC deducted the $6.25 million difference calling it a lease termination fee. The IRS disallowed the deduction and concluded the $6.25 million should be capitalized under IRC 167(c)(2), which states that “no portion of the adjusted basis [of property subject to lease] shall be […]