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Federal Tax ADVISORY: Federal Tax Crimes

April 1, 2014 | Posted by Federal Tax Group | Topic(s): Penalties

Few taxpayers are aware of the operations of the Criminal Investigation Division of the IRS, and rightly so. Out of hundreds of millions of tax returns filed, only 3311 persons were convicted of tax crimes in the government’s FY 2013, according to the Report of the CI Division. Nevertheless, the small number masks the extreme seriousness of tax crimes to those involved.

The advisory is provided in PDF on the Alston & Bird website:   

Written by Federal & International TaxAlston & Bird LLP 

Federal Tax Advisory - Tax Officer Failed to Write His Own Opinion

October 1, 2012 | Posted by Jasper L. (Jack) Cummings | Topic(s): Penalties

This advisory discusses how the Tax Court applied the economic substance doctrine in Gerdau MacSteel, Inc., 139 TC No. 5 (August 30, 2012), and denied penalty relief in a liability management company “tax shelter” case because the company’s tax department failed to either obtain an outside opinion or write its own.

The advisory is provided in PDF on the Alston & Bird website:

International Tax Advisory: The Seventh Circuit Applies Required Records Doctrine to Foreign Bank Account Records, Overriding Claim of Fifth Amendment Privilege

September 17, 2012 | Posted by Edward Tanenbaum | Topic(s): Penalties

This advisory discusses a recent decision by the Seventh Circuit Court of Appeals, where the court held that the Required Records Doctrine (RRD or the “doctrine”) compelled production of subpoenaed foreign bank account records, which were required to be maintained under the Bank Secrecy Act. The district court had quashed the subpoena, concluding that it would violate the Fifth Amendment privilege against self-incrimination. The government appealed, and the court of appeals reversed the lower court’s order.

The advisory is provided in PDF on the Alston & Bird website:

International Tax Advisory - U.S. Treasury Releases Model FATCA Intergovernmental Agreement

In February 2012, Treasury issued a joint statement with France, Germany, Italy, Spain and the United Kingdom regarding plans for an intergovernmental approach to implement the Foreign Account Tax Compliance Act (FATCA). FATCA, a part of the Hiring Incentives to Restore Employment Act of 2010, provides for a withholding tax to enforce reporting requirements for certain U.S.-owned foreign accounts. Under FATCA, a withholding agent must withhold a 30 percent tax on any “withholdable payment” to a foreign financial institution (FFI) or nonfinancial foreign entity that fails to disclose required information to authorities on certain U.S. account holders (including U.S.-controlled foreign entities). On July 26, 2012, a model intergovernmental agreement (IGA), in reciprocal and nonreciprocal versions, was finally released. The model IGA, discussed in this advisory, reflects a serious and shared commitment to combating international tax evasion.

The advisory is provided in PDF on the Alston & Bird website:

Home Concrete Decided: Taxpayer Wins

On April 25, 2012 the Supreme Court ruled that the overstatement of the basis of property sold, resulting in a substantial understatement of gain, is not an omission from gross income, and so the three year and not the six year statute of limitations applied to the taxpayer’s assessment, meaning the assessment came too late. United States v. Home Concrete & Supply, LLP, 2012 U.S. LEXIS 3274, affirming, 634 F.3d 249 (4th Cir. 2011).

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Economic Substance Doctrine Defense Plan

September 16, 2011 | Posted by Jasper L. (Jack) Cummings | Topic(s): Corporate – Federal, Corporate – State, Penalties

Corporations have become very concerned about “best practices” and “risk management” in the wake of the Enron scandal and enhanced enforcement rules of government agencies and auditing rules of accountants. One way to address those concerns is for corporate boards to adopt guidelines for employees. One area in which such guidelines can be useful is in application of the economic substance doctrine.

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LB&I Directive Softens Economic Substance Doctrine

The new LB&I Directive on the economic subject doctrine (ESD) (dated July 15, 2011) probably could not be much better for taxpayers.

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Forced Combination Bill Enacted in North Carolina

On June 18, 2011 the General Assembly ratified and sent to the Governor House Bill 619 concerning corporate combined income tax returns.

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N.C. Forced Combination Bill

The North Carolina Senate Finance Committee used House Bill 619 as a vehicle for a proposed committee substitute bill on forced combination.

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International Update: FATCA, FBAR, Voluntary Disclosure

As has been previously discussed, the Foreign Account Tax Compliance Act (FATCA) enacted in March 2010 was designed to detect U.S. persons who may be evading U.S. tax by holding income-producing assets through accounts at foreign financial institutions (FFIs) or through other foreign entities (non-financial foreign entities or NFFEs).  The legislation implements a new 30-percent withholding tax on “withholdable payments” made to those FFIs and NFFEs that do not comply with certain requirements.

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First Time Home Buyer Credit Economic Substance?

June 3, 2011 | Posted by Jasper L. (Jack) Cummings | Topic(s): Controversies – Federal, Penalties

Rodriguez v. CIR, T.C. Memo 2011-122 (June 2, 2011) shows that (1) the IRS is on the case, and (2) the economic substance doctrine is not reserved to high flying taxpayers.

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Leveraged Partnership Fails and "Should" Opinion Did Not Prevent Penalty

August 16, 2010 | Posted by Jasper L. (Jack) Cummings | Topic(s): Partnerships, Penalties

In Canal Corp. v. Commissioner, 135 T.C. No. 9 (Aug. 5, 2010) the Tax Court ruled that a corporation in effect "sold" the business of its subsidiary when the subsidiary contributed the business assets to a partnership with another company that effectively wanted to "buy" the assets, and which effectively assumed complete liability for partnership borrowing used to pay cash to taxpayer amounting to a substantial part of the value of the contributed assets. More importantly, the court upheld a $36M penalty by ruling that taxpayer could not rely on a legal opinion, largely because of the large fee ($800,000) charged for the opinion.

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