About: Jeffrey A. Quinn

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IRS Clarifies IRA Rollover Ground Rules

Taxpayers have long been allowed to withdraw funds from an IRA, and not be taxed on the distributions as long as the sum was paid back to an IRA within a 60 day period – and this sort of transaction has only been allowed only once per year.

Proposed IRS regulations and IRS Publication 590 provide that this limitation is to be applied on an “IRA by IRA” basis, although the recent Tax Court decision (Bobrow v. Commissioner) stands for the notion that this limitation is to be applied on an “aggregate” basis, in cases where a taxpayer has multiple IRAs in place.

So, IRS recently notified taxpayers (Announcement 2014-15) that it will follow Bobrow, and accordingly intends to withdraw the proposed regulation and revise Publication 590.

As a timing matter, IRS will not apply Bobrow, however, to any rollover occurring before January 1, 2015.

What is a Principal Residence?

A very recent New York District Court decision (Cohen v. U.S., 2/28/14) provides a lot of good narrative for taxpayers wondering how Internal Revenue Code Section 121 (Exclusion of Gain From Sale of Principal Residence) truly works.  The taxpayers here sought a refund of taxes paid arising from the sale of certain real estate which they claimed was their principal residence, albeit the facts of the case included complications related to the use of the property by children and other family members.

Indeed, the Court notes “The central question in this case (is):  whether (the property) was used by the Cohens as their ‘principal residence’ during the period David and Nicole (son and daughter-in-law) were living there,” and the fact that the regulation discussing this term sheds little light on how it should be interpreted, providing only that whether property is used by a taxpayer as his principal residence depends upon all of the surrounding facts and circumstances.

The Court goes on to state that it is not “aware of any cases that discuss the term in factual circumstances similar to what has been presented here.”

Unfortunately, the taxpayers’ arguments were insufficient to carry the day in this case (to include securing the government’s agreement that the accuracy-related penalty should not apply).  But the discussion will be enlightening to folks whose living arrangements may not be quite so clear-cut relative to whether the Section 121 exclusion may be available to them.

Keep IRS Posted on Your Address

Folks sometimes wonder how important it is to keep IRS informed of your current address. Short answer: it is important – don’t overlook it.

Most importantly, some IRS communications are time sensitive, and bad things can happen if you don’t respond within a certain time frame. Thus, you don’t want their letters to you laying around in an old, perhaps unattended mail box, or returned to the “dead letter” department at the Post Office, where they may languish for many moons.

There are several ways to notify the IRS of an address change, including:

  • The filing of an annual (or other periodic) tax return, reflecting your current, new address
  • Submission of a Form 8822, or other written notification
  • Electronic notification – some taxpayers submit their new address information through one of the secure applications found on the IRS website, such as Where’s My Refund?

IRS Taking a Bite Out of Crime

So says the recent annual report of the IRS criminal division. Notwithstanding budget cuts (of something like 5% in agent resources), IRS touts its 2013 record on crime:

  • 12.5% increase in investigations initiated compared to 2012
  • 18% gain in prosecution recommendations

Identity theft continues to rankle the IRS — the criminal investigation unit initiated over 1,400 investigations and recommended prosecution of over 1,250 individuals in fiscal year 2013.

Further, IRS criminal investigations included activity on a range of tax money laundering, public corruption, terrorist financing and narcotics trafficking during the year.

Global Tax Reform on the Horizon

The United States has joined the international effort to make global tax reform a goal of the “Group of 20” (G20) countries, seizing on the perception that multinational companies are abusing perceived “loopholes” to avoid taxation.

“The G20’s work on tax cooperation is among our most important new initiatives,” says Treasury Secretary Jack Lew, who also thinks that all nations should adopt the automatic exchange of information as a global standard.

“This is not against multinationals,” quoth Organization for economic Cooperation and Development Director-General Angel Gurria. However, “Multinationals have to have legal assurance that they’re not going to be double-taxed, but they have to contribute; their fair share has to be put on the table.”

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