Georgia mortgage broker license

Legislation

PL 108-218, the Pension Funding Equity Act of 2004, reduced required employer contributions to defined benefit pension plans for 2004 and 2005.

Regulations

Final Regulations Under Code section 121, dealing with allowing a partial second exclusion on a change of principal residence within two years on account of change in employment, health or other circumstances which a taxpayer "could not reasonably anticipate" disallows the second exclusion when the cause of the move is marriage, adoption, improvement in financial circumstances or a preference for a different residence.

Proposed Regulations Under Code section 368 clarify that the "continuity of interest" and "continuity of business enterprise" requirements are not required to be met in an E or F reorganization.

Proposed Regulations Under Code section 752 limit the extent to which liabilities of a disregarded entity owned by a partnership are considered in determining a partner's basis in the partnership to the extent of the fair market value of all assets owned by the disregarded entity that may be subject to creditor claims including enforceable rights to contributions from its owners.

Temporary Regulations Under Code Section 7701 treat the filing of an S election by a limited liability company as the equivalent of checking the box to cause treatment as a corporation.

Proposed Regulations Under Code section 7701, applicable after March 31, 2004, clarify that a disregarded entity liable for Federal taxes is treated as an entity separate from its owner for purpose of these liabilities, allowing assets of the entity to be subject to lien and levy following an assessment.

Cases

In Commissioner v. Banks, ___ F.3rd ____, and in Commissioner v. Banaitis. ___ F.3rd __, the U.S. Supreme Court agreed to hear IRS appeals from two pro-taxpayer decisions allowing reporting only of the net settlement for taxable damages after the subtraction of attorney's fees and expenses; the courts are deeply divided on the issue with the First, Second, Third, Fourth, Seventh, Eighth, Tenth and Federal Circuit Courts of Appeal as well as the Tax Court requiring reporting of the gross proceeds with the Fifth, Sixth and Eleventh Circuit Courts of Appeal allowing the reporting of net proceeds while the Ninth Circuit permits reporting only of the net settlement in states where an attorney lien applies to the proceeds.

In McEuen v. Commissioner, TC Summary Opinion 2004-107, the Tax Court denied a financial analyst needing an MBA degree to be promoted to investment banker a deduction for her tuition, reasoning that the degree was needed to meet the minimum education for the job.

In Graves v. Commissioner, TC Memo 2004-140, the Tax Court, allowing a business bad debt in the case of a loan from a sole shareholder-employee to his corporation, determined that the bad debt was allowable only as a miscellaneous itemized deduction subject to the 2 percent floor inasmuch as it arose out of performance of services as an employee.

In United States v. Maginnis. 93 AFTR2d 2004460, the Ninth Circuit Court of Appeals affirmed a decision of an Oregon Federal District Court that a lottery winner's sale of future installments is taxable as ordinary income; the Tax Court had previously so determined.

In Dobson v. Dobson, ___ KY App ___, the Kentucky Intermediate Appellate Court determined that a spouse could be required to pay a portion of joint tax liability where funds had been utilized for marital purposes despite a prior 1RS finding of "innocent spouse" status.

In Yates v. Hendon, 287 F.3rd 521, the U.S. Supreme Court settled a split among the Courts of Appeal, unanimously determining that a single owner qualified retirement plan is protected from creditors (except the 1RS itself) under the "anti-alienation" provisions of ERISA.

In Williams v. Commissioner, 123 TC No. 8, the Tax Court determined that a bankrupt individual could not use losses from his controlled S corporation even from the pre-bankruptcy portion of the year inasmuch as the losses for the entire year belonged to the estate.

In Colorado Gas Compression, Inc. v. Commissioner. 93 AFTR2d 2004-1622, the Tenth Circuit Court of Appeals reversed a decision of the Tax Court and determined that a corporation terminating S status after the January 1, 1989 cutoff of the old gain recognition rules but reelecting S status prior to the disposition of assets is entitled to apply the old threeyear "lookback" rule rather than the current law in determining gain.

In United States v. Marino. 93 AFTR2d 2004-2435, a Florida District Court overruled a Bankruptcy Court and determined that an individual who agreed to be the sole shareholder, president and mortgage lender license holder to accommodate another individual with credit problems was responsible for unpaid payroll taxes although uninvolved with day-to-day operations; the Court gave heavy weight to the fact that the "figurehead" was the only authorized signator.

In Kimbell v. United States. 93 AFTR2d 20042400, the Fifth Circuit reversed a Texas Federal District Court and held that the effective transfer of a !/2 percent interest in a limited liability company allowed a 49 percent discount on the retained portion where formalities were satisfied, business reasons for the formation of the LLC existed and sufficient assets were maintained outside of the LLC.

In Janis v. Commissioner. T.C. Memo 2004-117, the Tax Court determined that the basis of inherited property is the value after discounts and not prior to these reductions.

In Sorenson v. H&R Block. Inc.. 94AFTR2d 20045177, the First Circuit Court of Appeals agreed with a Massachusetts Federal District Court that Block breached contract law and fair trade practices by advising the IRS prior to the audit that the taxpayer had committed fraud but that damages were limited to the $630 cost of the return; the Court denied a larger recovery both on grounds that a tax preparer had no fiduciary obligation to a client under state law and on grounds that a taxpayer has primary responsibility for the accuracy of his return.

In Hunter v. Commissioner. TC Memo 2004-81, the Tax Court determined that 1RS is put on notice of a change in address by a new taxpayer address shown on a Form 2848 (Power of Attorney); the Court indicated that Form 8822 (Change of Address) is not the only way of providing "clear and concise notice" to the 1RS of a change.

In opkv v. United States. 94 AFTR 2d 2004-5157, a Pennsylvania Federal District Court indicated that the U.S. Supreme Court decision in Craft allowing an 1RS lien to attach to tenants by the entireties property for the liability of one spouse applies not only in states with entireties protection created by statute but also in states where this husband-wife protection is based upon common law; it accepted the 1RS position that the interest of each spouse should be valued equally; in In Re Gallivan. 94 AFTR2d 2004-5275, a Missouri Bankruptcy Court also agreed that tenants by the entireties property gets 50-50 treatment.

In Robinette v. Commissioner, 123 TC No. 5, a divided Tax Court determined that IRS could not revoke an Offer in Compromise based on an alleged late filed return for a subsequent year when the accountant testified that the return was timely mailed between 11 p.m. and midnight on October 15 where IRS had no record of receipt.

In Internal Revenue Service v. Holmes, 93 AFTR2d 2004-1648, a Georgia Federal District Court agreed with the Bankruptcy Court in finding that 1RS must consider a debtor's Offer in Compromise while in bankruptcy; a Virginia Federal District Court had previously reached the same conclusion.

In Poindexter v. Commissioner. 122 TC No. 15, the Tax Court determined that a taxpayer at a collection due process hearing may challenge the accuracy of an amount reported on the taxpayer's own return.

In Pavne v. United States. 93 AFTR 2d 2004-1286, an Illinois Bankruptcy Court accepted the presumption that a return was filed for a "missing" year when returns for a number of years both before and after that year were professionally prepared and filed together, allowing discharge of all years in bankruptcy despite a pre-filing assessment by 1RS for the year in issue (going against the weight of authority holding that a post-assessment filing either is automatically not a "return" or under the facts is not an "honest and reasonable attempt to satisfy the requirements of the tax law)."

In In Re Steinkrauss. 94 AFTR2d 2004-5291, a Massachusetts Bankruptcy Court denied a discharge of taxes for a couple (attorney and real estate broker) who failed to file returns for eight years while they constructed an expensive new house.

Revenue Rulings, Procedures and Notices

In Revenue Ruling 2004-38, IRS indicated that the required high deductible for establishment of a health savings account is violated by participation in a health plan offering prescription drug coverage subject to a lower deductible.