Category Archives: Tax Law

BEWARE IMPENDING STATUTE EXPIRATION

Folks who may still be pondering what they did in their 2011 Federal income tax return, and whether it was right or not, or maybe even questionable, though now looking like there’s room for interpretation in their favor, had better get on the ball.

The statute of limitations on the 2011 tax year (for folks who extended their returns that year until October 15, 2012) will expire come this October 15, 2015.  So if you think you may need or want to file that 1040X (amended individual return) you had better get on the ball right away!

NO CAPITAL LOSS DEDUCTION AGAINST ANNUITY INCOME

In the recent Tobias decision, the Tax Court rejected a couple’s argument that they could offset the income they would otherwise have recognized on an annuity distribution by the capital loss they incurred when they sold securities in order to purchase the annuity in the first place.

In order to buy the annuity in 2003, the taxpayers sold securities for which they incurred a taxable loss of $158,000. Then in 2010, after the annuity contract had accrued substantial income, the taxpayers withdrew a portion of the annuity balance to fund the purchase of a residence, and did not report any of the annuity withdrawal as income.

They argued that the otherwise recognizable income was a capital gain and thus should be offset by their capital loss carryforward (remaining from the originally sustained $158,000 loss). The taxpayers thought much of the “income on the contract” likely resulted from capital gains realized by the insurance company that issued the contract and/or that IRS should look at the $158,000 capital loss from 2003 as part of the cost of the annuity purchase.

“No way,” concluded the Court.

NINTH CIRCUIT LIBERALIZES MORTGAGE INTEREST LIMITS FOR UNMARRIEDS

The Ninth Circuit recently reversed the Tax Court, concluding that the Code Section 163(h) limitations ($1 million of acquisition indebtedness and $100,000 of home equity indebtedness) should be applied on a per individual basis, and not on a per residence basis. As such, unmarried co-owners are subject to a maximum of $2.2 million in limitations, rather than $1.1 million. See Voss v. Comm.

RECENT CHANGE IN FBAR DUE DATE

Recent legislation will affect the due date for filing FinCEN Form 114. This is the annual form filed by folks with a financial interest in or signature authority over certain foreign financial accounts. Historically, the form has been due by June 30 following the end of the year in question.

Under the new law, for returns for tax years beginning after December 31, 2015, the due date will be the following April 15, with a six month extension available.

SOME IMPORTANT TAX PROVISIONS OF NEW HIGHWAY ACT

~Basis overstatement will hereafter be deemed the equivalent of omission of income for purposes of the 6 year statute of limitations. Thus, the Supreme Court decision to the contrary in Home Concrete & Supply LLC has now been superseded.

~Changes in filing deadlines for certain entities (effective for tax years beginning after December 31, 2015):

# (Calendar year) partnership filing date changed to March 15
# (Calendar year) “C” corporation filing date changed to April 15