Practice Management

The Internal Revenue Service has issued proposed regulations for determining when a transfer of consideration to a partnership by a partner and a transfer of consideration from that partnership to a different partner constitute a disguised sale of a partnership interest. In response to a recommendation of the Joint Committee on Taxation in its "Report of Investigation of Enron Corporation and Related Entities Regarding Federal Tax and Compensation Issues, and Policy Recommendations" (February 2003), the regulations generally would extend the existing disclosure requirement for disguised sales of property from two years to seven years. The same disclosure requirement would be incorporated for disguised sales of partnership interests. "These proposed rules benefit both the taxpaying community and the Internal Revenue Service," said IRS chief counsel Don Korb. "The rules provide taxpayers and tax practitioners with guidance on how to structure partnership contributions and distributions without getting caught up in the disguised sale rules. They also provide for a longer disclosure period that will facilitate the examination of questionable transactions involving partnerships." The proposed regulations provide, generally, that where a transfer of consideration to partner A by a partnership would not have happened "but for" the transfer of consideration to the partnership by partner B, the transfers are treated as a sale of all or a portion of partner A's interest in the partnership to partner B for all purposes under the Internal Revenue Code. Where the transfers to and from the partnership do not occur on the same date, the transfers are treated as a sale only if the later transfer is not dependent on the entrepreneurial risks of partnership operations. The proposed regulations provide that these determinations are made based on all of the facts and circumstances.

Carr, Riggs & Ingram, a strong Southeastern accounting and business consulting firm headquartered here, has fortified its presence in the Alabama and Florida markets, merging with local Birmingham-based Mackle, Splawn, Tindall & McDonald, and Weathersby, D'Aoust, Harris & Lynn of Panama City, Fla.The mergers became effective Oct. 1. Terms were not disclosed.

AICPA adopts outsourcing ethics

The American Jobs Creation Act of 2004, at least in terms of the tonnage it adds to the Internal Revenue Code, is one of the biggest tax laws to come along since the 1986 Tax Reform Act. Some contend that it has no rival in terms of complexity.Its main focus is on business and, within that focus, many provisions require quick decisions to be made. Add to these deadlines the fact that another tax year is about to close for most taxpayers and the immediacy of this new law becomes even more urgent.

IRS INVESTIGATING OVER 60 CHARITIES ON POLITICAL ACTIVITIES; FUROR OVER NAACP PROBE: More than 60 charities, churches and other tax-exempt groups have been contacted by the Internal Revenue Service about alleged improper political activities, the agency disclosed.

The Internal Revenue Service warned consumers against bogus claims by promoters that tax debts can be settled for "pennies on the dollar" through the Offer in Compromise Program.

With the dust finally settling on the American Jobs Creation Act of 2004, tax professionals are studying its voluminous sections and clauses to map out optimum strategies.

Reminiscent of donor-advised funds, the Internal Revenue Service has ruled that contributions can qualify as charitable deductions for both income and gift tax purposes even if the donor retains the right to manage the investment for the charity.

The Internal Revenue Service has raised the standard business mileage rate for automobile expenses for 2005 by three cents -- the largest one-year rise ever.

Tax reform under a second Bush Administration will most likely take the form of piecemeal tax cuts, according to panel participants at a conference of the Council for Electronic Revenue Communication Advancement, a government-private industry trade association.