Tax planning

Cono R. Namorato was appointed to head the Internal Revenue Service Office of Professional Responsibility in December 2003.The OPR investigates allegations of misconduct or negligence against tax practitioners, and enforces the standards of practice for those who represent taxpayers before the IRS. As director of the OPR, Namorato oversaw the service's increasing efforts to achieve compliance nationwide among tax practitioners with newly enhanced standards of conduct, and he also served as senior advisor to the Commissioner of Internal Revenue on complex enforcement matters.

In late May, the Internal Revenue Service produced interim guidance in the form of Notice 2006-9, describing the new credit for qualified hybrid vehicles. Spawned by the Energy Policy Act of 2005, the credit replaces the $2,000 clean-fuel vehicle deduction that was available in previous years.A hybrid vehicle is defined as a vehicle that must have both an internal combustion or heat engine and a rechargeable energy storage system. There are also emission requirements for the vehicles. Only new hybrid vehicles purchased on or after Jan. 1, 2006, qualify for the credit, which is based on a two-pronged system that incorporates calculations based on the weight and the estimated lifetime fuel savings of the vehicle.

Using cash in a like-kind exchange is similar to passing around the proverbial "hot potato" - you don't want to be the one holding the potato, i.e., the cash, at the end of the transaction. If you do so in a like-kind exchange, you are probably holding "boot" (non-qualifying property), which is taxable to the extent of any gain otherwise locked up in the relinquished property (i.e., the difference between its fair market value and basis).Sometimes, strategies that involve the use of cash to facilitate like-kind exchanges under Code Section 1031 begin to seem like shell games, in which labels matter a great deal. In the end, however, the only labels that have been successfully applied are those that have made sense within the basic framework of Section 1031.

For the next few months, the Internal Revenue Service's Statistics of Income Division will be testing a prototype SOI Table Wizard.The tool will allow users to create their own custom tables from SOI tabulated data in the 1999 and 2000 Corporate Source Books. If adopted, data from other forms could eventually be added, and the IRS is asking users to provide feedback on the new feature. The agency also warned that there are some limitations in the tables.

Nobody wants to be the bearer of bad news, but small business owners should be aware that the Internal Revenue Service is stepping up its examinations of companies' retirement plans this year, hoping to catch those that are cheating their workers or the government, or both, as well as to ensure that the plans meet federal regulations.Traditional pensions, 401(k) plans and profit-sharing plans are all on the agenda.

The ranking minority member of the Senate Finance Committee threatened to place a "hold" on President Bush's nomination for the top Treasury tax official, unless the department agrees to provide a comprehensive plan to close the tax gap by the end of September.

A federal judge has ruled that the Internal Revenue Service went too far in retroactively banning the "Son of Boss" tax shelter.

Some federal tax breaks for energy efficient hybrids will start shrinking this fall.

Avalara, a provider of Web-based sales tax compliance services for small-and-midsized businesses, announced that it has seen dramatic growth for the first half of 2006.

In response to a bill that would ban Internet poker, the nonprofit Poker Players Alliance has released a study making a case for the online games to be legalized and taxed by the federal government.

A federal judge in Greenville, S.C., has permanently barred Heather Alexander Ferguson from promoting an alleged tax-fraud scheme.

Thomson Tax & Accounting, part of The Thomson Corp., announced the upcoming release of its InSource WorkFlow Manager solution.

The Congressional Research Service, which provides nonpartisan public policy research, has released its review of the presidential advisory panel on tax reform's two major proposals.

The failure to get a revamped computer program online to screen for fraudulent 2006 tax returns will cost the federal government between $200 million and $300 million, the Internal Revenue Service has estimated.

A federal court has barred a Jackson Hewitt franchise from preparing federal income tax returns claiming an improper federal income tax exemption for casino proceeds paid to Native Americans.

The Internal Revenue Service has ruled that employer incentives encouraging their employees to purchase environmentally friendly hybrid cars, are considered taxable compensation.

The Senate Finance Committee pushed hard for answers from a tax policy nominee on when the Treasury Department will supply recommendations on an overhaul of the tax system, and how best to meaningfully improve the nation's tax compliance.

National Taxpayer Advocate Nina E. Olson has delivered a report to Congress outlining the priority issues her office will tackle in the coming fiscal year.

The government got a big victory in the U.S. Court of Federal Claims, winning a reversal of a 2004 decision in a case legal experts say will go a long way in defining what constitutes an illegal tax shelter by reestablishing the economic substance test.

Prosecutors are looking into Deutsche Bank's role in providing a lesser-known questionably tax shelter sold through a Silicon Valley firm, according to published reports.