Congress brought massive changes to the federal tax code in 2004, and now with tax season underway, return preparers face the challenges of dealing with those changes on 2004 tax returns. Continuing legal and regulatory developments have made this year a big one for practitioners and don’t forget that many changes from previous years’ legislation are becoming law for the 2004 returns as well. CCH’s 1040 Express Answers gives practitioners a quick look at these massive changes and how they will affect 2004 individual income tax returns. This guide is based on the 1040 and it presents the changes from all sides through the eyes of a practitioner preparing a client’s tax return and the related schedules.  We are also offering Focus on Tax readers some quick-reference tools from this volume that will come in handy in preparing 1040s.

 

Some big state tax issues arose in 2004 that will continue into 2005 as states struggle to raise revenues and expand their tax bases by adding more businesses to their tax rolls. The editors of Sales & Use Tax Alert and State Income Tax Alert talked to leading practitioners in state taxes and pulled together what they saw as the top issues from 2004 along with their predictions on how those issues will play out in 2005. The top issues on both sales and use taxes and state corporate income taxes came down to the states’ efforts to force businesses onto the tax rolls.  On the sales and use tax side, this involves states forcing business to register to collect sales and use taxes in order to do business with the state. So even businesses that clearly have no physical presence in a state might have to choose between forgoing state business or collecting sales and use taxes on all sales in that state.  On the corporate income tax side, states continue to press for “economic nexus” rulings from courts. Simply put, states are asking courts to say a business that has any presence—not just a physical one—must file income tax returns and pay taxes in any state where they do business. Some states have won these cases while others saw this argument shot down when courts found physical presence was necessary for income taxes just as it is for sales and use taxes. These are just a few of the issues that CCH editors highlight in year-end review articles in Sales & Use Tax Alert and State Income Tax Alert. For the rest of the hottest issues of 2004 in state taxes, click the links below for the full articles.

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Determining the tax basis of LLC members can be a complex task, especially when related parties are involved as loan guarantors or when individual members themselves guarantee loans while other members do not. The calculations to determine liability sharing are often necessary for many LLCs, because having co-guarantors to loans for these businesses is a common practice. In the latest issue of the Journal of Passthrough Entities, authors James A. Fellows, Thomas J. Dickerson and Michael A. Yuhas discuss recent developments in liability sharing calculations along with some general tips on making the right decisions on how liability should be applied to tax computations, particularly the allocation of losses among LLC members. Family members or related companies sometimes guarantee loans for LLCs. How do those factors affect the determination of who has economic risk? The authors look at the result of the IPO II case and its web of related parties and novel legal arguments with regard to allocation of losses. They note the decision offers little comfort to practitioners as they try to sort out exactly what the IRS has argued in recent cases involving allocation of losses and liability sharing in partnerships and LLCs.