Tax research

Regardless of which of the multiple return dates applied to taxpayers, e-filed returns during the 2007 filing season began pouring in early in the process and kept coming at a steady pace.

Nearly three decades ago, California enacted Proposition 13, a highly debated piece of legislation that limited property taxes to 1 percent of the full value of the property, and reduced them statewide by an average of 57 percent.Today, a swelling number of grassroots movements in several states that are protesting skyrocketing property taxes and filing appeals may usher in the question of whether the U.S. will one day need similar legislation on a national level.

Former Internal Revenue Service district director Jesse Ayala Cota pleaded guilty to conspiring to defraud the United States through his involvement in a tax fraud scheme promoted by the Topeka, Kansas-based organization Renaissance, The Tax People Inc.Cota admitted in his plea agreement that from 1997 through April 2002, the conspirators, through Renaissance, operated a scheme to defraud the government by marketing a program designed to sell illegal tax deductions through false and misleading representations.

After learning that more than 450,000 federal workers and retirees owe a whopping $3 billion in back taxes to the Internal Revenue Service, the Senate Finance Committee is urging the president to step up efforts to collect from those delinquent employees.Senate Finance Committee chair Max Baucus, D-Mont., and ranking Republican member Sen. Charles Grassley, R-Iowa, sent a letter to President Bush requesting that he remind the delinquent federal employees and warn them of the consequences of non-compliance.

Tax practitioners looking to Congress, the Treasury or the Patent Office for a solution to the perceived problem of tax strategy patents may instead have found some assistance from an expected source - the Supreme Court.A unanimous Supreme Court, in the case of KSR v. Teleflex, decided on April 30, 2007, overturned a decision of the U.S. Court of Appeals for the Federal Circuit and found a patent claim invalid. In doing so, the high court also criticized the Federal Circuit for applying the wrong standard on patent claims and being too liberal in upholding patent claims for obvious improvements.

Sen. Chuck Grassley, R-Iowa, ranking member of the Senate Finance Committee, has sent a letter to his chamber colleagues in an attempt to blunt what he termed "inaccurate claims" about the private collectors employed by the Internal Revenue Service.In a "Dear Colleague" letter, Grassley pointed out that the agency's own collection infrastructure is better set up for placing liens and garnishing wages than it is for making initial phone calls to delinquent taxpayers to set up a payment plan.

Nexus - the amount of contact between a taxpayer and the state that subjects the taxpayer to taxation - continues to vary widely from state to state. In addition, the nexus for sales and use tax differs from the nexus for income tax.The nexus requirement is derived from the language in two different places in the Constitution - the commerce clause, which prohibits states from unduly burdening interstate commerce, and the due process clause, which requires a minimum connection between a state and an entity it seeks to tax.

Just in time for the summer, the U.S. Tax Court denied the like-kind exchange treatment for vacation homes that are not strictly held for investment purposes.In a memo issued Wednesday, the court said that a Georgia couple's exchange of vacation homes did not qualify for the treatment according to Section 1031(a) of the tax code -- finding that the holding of any residence, even if motivated in part by an expectation that the property will appreciate in value, is insufficient to justify the classification of that property as being held for investment.

The Internal Revenue Service is alerting taxpayers to the new versions of an old e-mail scam -- which attempts to fool people into believing that they are under investigation by the agency’s Criminal Investigation Division.An e-mail purporting to be from IRS Criminal Investigation falsely states that the person is under a criminal probe for submitting a false tax return to the California Franchise Board. The e-mail seeks to entice people to click on a link, or open an attachment, to learn more information about the complaint against them. Both the e-mail link and attachment contain a harmful program that can take over the computer hard drive and allow someone to have remote access to the computer.

Federal prosecutors will not bring criminal charges against Ernst & Young for the firm’s sale of legally questionable tax shelters -- although that news probably brought little comfort to the four current and former partners of the Big Four firm who were indicted on charges of tax fraud conspiracy.

The Canada Revenue Agency will appoint a new independent tax ombudsman by the fall -- creating a post similar to the Internal Revenue Service’s National Taxpayer Advocate for the first time.

A memo issued by the Internal Revenue Service’s Office of Chief Counsel could possibly eliminate a tax-saving strategy used by some investors with brokerage accounts.Wrap accounts charge a flat percentage fee instead of a commission, and for tax purposes, the annual fees that investors pay are often treated as miscellaneous itemized deductions. But under a provision, some taxpayers can instead opt to add the fees to the cost basis of the securities, which could reduce potential capital-gains taxes (or enhance potential losses).

The Free File Alliance has sent a letter to the Senate Finance Committee, expressing concerns about a proposed government-funded Web portal that the alliance says is aimed at eventually providing tax preparation and e-filing services.

The supplemental budget legislation signed into law on May 25 did more than just give the green light to funding for the ongoing war effort in the Middle East.

Two bills circulating on Capitol Hill are looking at different ways to generate tax revenue from the Internet.

A U.S. appeals court told the judge overseeing the KPMG tax shelter cause that if he believes federal prosecutors violated the rights of former KPMG employees he should toss the entire case.

The Internal Revenue Service announced that the commissioners of the Australian, Canadian, U.K., and U.S. tax administrations will open a second office of the Joint International Tax Shelter Information Center in London this fall.The commissioners have said that exchanging information in real-time is making a significant difference to the complex task of tracking tax avoidance and abusive cross-border transactions. In recent months, center members have identified and challenged the following fraudulent arrangements:

National Taxpayer Advocate Nina E. Olson announced that the Internal Revenue Service has awarded almost $8 million in matching grants to Low-Income Taxpayer Clinics for the 2007 grant cycle.

Federal prosecutors won’t pursue the Texas law firm of Sidley Austin LLP for its part in signing off on sketchy tax shelter structures.

There’s no real question that something needs to be done about the fate of the alternative minimum tax.