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Some Recent Court Cases You Should Know About…. | Tax Tip of the Week | No. 187 February 27, 2013

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , add a comment

Due-Diligence Reminders for Charitable Contributions

Several court decisions affirmed IRS denials of taxpayers’ charitable contributions because they failed to satisfy all of the requirements of Sec. 170 and the regulations. These cases serve as reminders for taxpayers to consider their due-diligence standards for charitable contributions. Give us a call any time for advice on how to make contributions that will be safe from IRS challenge. Here is a summary of the cases: 

Durden, T.C. Memo. 2012-140: Deduction for cash donations to church denied for lack of Sec. 170(f)(8) substantiation. First letter from church did not indicate whether the donor received anything of value in return for his donation and the second letter was not contemporaneous. 

Patel, 138 T.C. No. 23 (2012): A taxpayer gave a fire department the right to conduct training exercises and burn down the house and claimed a deduction of $339,504. No deduction was allowed per Sec. 170(f)(3), which denies deduction for partial interest in land. A license to use is not a donation of property, and the taxpayer did not transfer title to fire department. 

Mitchell, 138 T.C. No. 16 (2012): Qualified conservation contribution denied due to failure to comply with Regs. Sec 1.170A-14(g)(2) because the deed of trust on the easement was not subordinated to the easement deed. In a case of first impression, the court held that the taxpayer could not avoid meeting the strict requirement of the subordination regulation for the deed of trust by making a showing that the possibility of foreclosure on that deed of trust was so remote as to be negligible under Regs. Sec. 1.170A-14(g)(3). 

Rothman, T.C. Memo. 2012-163: Deduction for a historic façade easement was disallowed because of an improper valuation method. Substantial compliance was also not available because the appraisal failed to meet a number of other requirements. 

Dunlap, T.C. Memo. 2012-126: Deduction for façade easement denied because valuation submitted by experts was not credible. 

Mohamed, T.C. Memo. 2012-152: Taxpayers donated more than $18 million of real estate to charities in 2003 and 2004, but the deductions were denied because the taxpayers did not obtain qualified appraisals as required by the regulations. 

Cohan, T.C. Memo. 2012-8: Deduction was denied because of insufficient verification letter and appraisal. 

Kaufman, Nos. 11-2017, 11-2022 (1st Cir. 7/19/12): The court vacated and remanded part of a Tax Court decision because the Tax Court’s interpretation of a regulation under Sec. 170(h) was unduly restrictive.

 •Whitehouse Hotel L.P., 139 T.C. No. 13 (2012): In a 109-page ruling on valuation of qualified conservation contribution and application of penalties for overstatement, the court found the deduction was overstated and upheld the accuracy-related penalty. 

Minnick, T.C. Memo. 2012-345: Deduction for a conservation easement contribution was denied because the mortgage was not subordinated to the easement. 

As always, give us a call with any questions or concerns you may have. 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Don’t Be Late! | Tax Tip of the Week | No. 186 February 20, 2013

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Due Dates

It is never a good idea to file a tax return late.  The IRS, State of Ohio and virtually every municipality will assess penalties on returns filed past the due date.  If you simply run out of time, or don’t yet have all the needed information, it is perfectly fine to file for an extension. 

If you want to see a tax due date calendar for 2013 (for tax year 2012) we invite you to visit our web site at www.bradstreetcpas.com.  Click on any day on the calendar and the entire year of due dates will appear. 

For business owners, several dates have changed. Most notable the deadlines for the CAT return.  If you are an annual CAT filer, the due date is now May 10, 2013.  Quarterly CAT payment dates have also changed.  As always, corporations are reminded that the due date for Forms 1120 and 1120S is March 15, 2013. 

All business owners and those needing to file fiduciary returns only have until September 15, 2013 to file returns that were placed on extension. Individual tax returns placed on extension still have until October 15, 2013 to timely file.

The calendar on our web site also has due date reminders for sales tax, payroll, workers comp and other types of business returns. 

As always, give us a call with any questions or concerns you may have. 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Number of Correspondence Audits Increases | Tax Tip of the Week | No. 185 February 13, 2013

Posted by bradstreetblogger in : Tax Tip, Taxes, Taxes, Uncategorized , 1 comment so far

Expect to See More of These

In a recent report, the IRS says that in 2001 they closed 538,000 mail audits of individual tax returns and assessed about $1.4 billion in additional taxes. 

Ten years later, the IRS more than doubled the number of mail audits.  In 2011, they issued 1.2 million correspondence audits and assessed $8.7 billion in additional taxes. 

With such a high rate of return on the investment, the IRS will likely continue to use mail audits to close the tax gap. 

What is troubling, however, is over 50% of these audits are issued in error.  In the majority of times that clients bring these audits to us, we are able to eliminate the additional tax assessed or at least reduce the amount of additional taxes owed.  We suspect that too many taxpayers simply pay the additional tax on the audit notice without challenging the IRS. 

If you ever receive a notice from the IRS, Ohio, or any city, the first thing to do is relax.  There is a good chance the notice was issued in error.  The second thing to do is to bring us a copy of the notice right away! 

As always, give us a call with any questions or concerns you may have. 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

Filing Status | Tax Tip of the Week | No. 184 February 6, 2013

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How Are You Going to File?

Some tips are worth repeating—-a reminder we offer every year: 

If you were legally married on 12/31/12, the IRS considers you married for the entire year of 2012. 

You now must decide if you are going to file as Married Filing Jointly (MFJ) or Married Filing Separately (MFS).  Note, however, if you file MFJ it is an irrevocable election—you cannot go back and amend a MFJ return to MFS returns.  

The primary reason to file MFS is to pay less tax. This is particularly beneficial to save on the amount of Ohio taxes paid.  Another reason to file separately is to avoid joint liability. Each spouse who signs a joint return is responsible for the accuracy and tax liability on the return. 

Many times, for example, in a second marriage situation, we see couples who have a desire to maintain separate financial responsibilities.  While this is understandable, it could lead to paying several thousand dollars in additional taxes.  If you file MFS, you will lose the following:

 -Credits for child care, education credits, adoption credits and the EIC

-Student loan interest deduction, tuition and fees deduction, and savings bond interest deduction 

Other considerations when filing separately are: 

-If one spouse itemizes, or takes the standard deduction, the other spouse must do the same.  (That is, one cannot itemize and the other take the standard deduction). 

-A greater percentage of your Social Security benefits may be taxable 

-Your ability to contribute to traditional or Roth IRA will be greatly limited 

-Capital losses will be limited to a maximum of $1,500 

-Passive losses will be limited 

Before filing your return you need to look at both MFJ and MFS to see which lowers your tax burden the greatest.

As always, give us a call with any questions or concerns you may have. 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.