Tax practice

by Roger Russell

MUTUAL FUND CAPITAL GAINS TO BE TAXED AT LOWER RATES: The Internal Revenue Service and the Treasury Department have clarified that capital gain dividends received from a mutual fund in 2004 will be taxed at the new, lower capital gain rates enacted last year.

New York — A federal judge has granted an Internal Revenue Service petition to enforce nine summonses against Big Four firm KPMG LLP, ordering it to disclose the identity of participants in tax shelters promoted by the firm. The ruling by the District Court for the District of Columbia also ordered KPMG to turn over documents related to the shelters.

by George G. Jones and Mark A. Luscombe

by Roger Russell

PWC TAPS STAMM TO LEAD U.S. TAX PRACTICE: PricewaterhouseCoopers has named J. Richard (Rick) Stamm to lead the firm’s U.S. tax practice, succeeding Rick Berry, who will retire in June. Stamm will assume the post on July 1. He will work closely with Berry through a transition period between now and the end of June.

The ranking minority member of the Senate Finance Committee projected that, at that level, the IRS would raise a minimum of $100 billion in additional revenues on an annual basis. Currently, the voluntary compliance rate is roughly 85 percent.

Health saving accounts have been slow to catch on. Despite glowing praise from administration officials, and even the president on several occasions, HSAs have been under-subscribed.

by Roger Russell

by Alfred M. King

IRS TO CHALLENGE CERTAIN S CORP AND EXEMPT ENTITY TRANSACTIONS: The Internal Revenue Service said that it intends to challenge certain transactions involving S corporations and tax-exempt entities, such as charities, that improperly shift taxation away from S corporation shareholders. In Notice 2004-30, the IRS declared that these abusive transactions are considered “listed transactions.” Participants in a listed transaction must disclose their participation, and promoters must keep lists of investors and, in certain cases, register the transactions with the IRS.

by Roger Russell

The Supreme Court has recently decided two tax cases.

Washington — The Internal Revenue Service will disallow deductions for theft losses claimed by taxpayers with respect to decreases in the market value of stock purchased in the open market that may be attributable to the fraudulent misrepresentations or other illegal misconduct of corporate officials.

Washington — Commissioners of the tax administrations of Australia, Canada, the United Kingdom and the United States have begun discussions to form a joint task force to increase collaboration and coordinate information about abusive tax transactions.

GRASSLEY, BAUCUS INVESTIGATE IN-KIND CHARITABLE CONTRIBUTIONS: Sen. Chuck Grassley, R-Iowa, chairman of the Committee on Finance, and Sen. Max Baucus, D-Mont., ranking member, have advanced their review of in-kind charitable contributions by asking the Internal Revenue Service to explain its actions to prevent abuse and for key documents detailing such contributions.

Now that the most pressing deadlines for filing 2003 tax returns are behind us, it’s time to switch gears and return to a more planning-driven mindset.

by Roger Russell

SENATORS EXPAND LEASING TAX SHELTERS PROBE: Federal agencies may have played a role in approving abusive tax shelter leases using federally funded infrastructure assets, according to Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee, and ranking member Sen. Max Baucus, D-Mont.The senators have been investigating how major U.S. companies receive huge tax deductions by pretending to lease the infrastructure of cities and foreign countries, and then pretending to lease them back.

by J. Edward Ketz