Self rental rules governing passive vs. non-passive income and losses are a classic tax trap for the unwary. Practitioners must carefully examine self-rental situations to ensure proper tax treatment. Two recent Tax court decisions give practitioners more guidance in this area for corporate clients. The T.R. Carlos decision establishes that the netting of profits and losses from separate self-rental properties is not allowed, following the IRS’s long-standing position in this area. That decision, along with the Cal Interiors Incorporated decision, is discussed in detail in a recent issue of TAXES Magazine by University of South Florida professors James A. Fellows and John F. Jewell. The article reviews the passive income rules for self rentals and notes how these two decisions affect the application of those rules.

 

 

The release of the IRS’s Executive Compensation — Fringe Benefits Audit Techniques Guide reveals the Service’s game plan for looking at the often contentious area of employee fringe benefits and how they are treated for tax purposes. Sports tickets, luxury boxes in sporting venues, company credit cards, corporate aircraft and various other fringe benefits are the kinds of perks offered to top executives that are sure to merit close attention by IRS field agents during an audit. In this newly released guide, the IRS provides many warnings to its auditors about how corporations will try to hide such items under expenses when they should be classified as compensation taxable to the employee. CCH’s Federal Tax Course Letter recently took a close look at this new audit guide and provided practitioners with advice on what is in the IRS guide and what it means in terms of looking at current benefit plans and planning for future benefit plans.

 

 

---

A recent decision by the U.S. Sixth Circuit Court of Appeals that found unconstitutional some tax incentives Ohio offered to auto manufacturer, DaimlerChrysler leaves tax incentives in many states in question. The court found that franchise tax breaks offered to the auto giant violated the Commerce Clause. The court did not strike down property tax breaks for the Toledo manufacturing facility, however. The decision leaves many questions behind and faces near-certain appeal, according to tax expert Rick J. Shapiro in a recent issue of CCH’s Journal of Taxation of Financial Products. Shapiro outlines the arguments in the case, which was brought by a citizens’ group, and notes that states may already be lining up to petition Congress to protect their efforts to offer incentives to businesses.

 

 

Was this article useful?
Send us your comments: CCH-FocusOnTax@cch.com

---

The far-reaching impact of Sarbanes-Oxley and its subsequent interpretation by the Securities and Exchange Commission has reached into corporate tax departments, even to the level of property taxation. Property tax expert Todd Barron notes this development in a recent issue of the Practitioner Perspectives supplement to CCH’s Property Tax Alert newsletter. Section 404 of Sarbanes-Oxley, with its requirements to develop and document processes that impact financial statements, is where the real opportunity lies for property tax compliance improvement and perhaps even savings, Barron notes. Using this opportunity, property tax professionals can improve fixed asset reconciliation, boost property tax automation and improve support for tax assessment appeals.

 

 

Estate tax returns have a strong chance of being audited by the IRS. This is particularly true with high-value estates. In 2003, IRS statistics show audits of 1,570 returns out of 5,714 filed for gross estates of $5 million or more. The odds of audit are high for smaller estates as well, notes estate tax expert Robert I. Ury in a recent issue of CCH’s Journal of Tax Practice and Procedure. In this article, Ury walks practitioners step-by-step through the process of preparing a return for examination with notes on the potential pitfalls in various areas.

 

 

---