Tax Headlines

1827

Noncustodial Parent Denied Dependency Exemption and Child Tax Credit Despite Satisfying Arbitration Award Requirement to Take Exemption and Credit; Accuracy-Related Penalty Not Imposed (Armstrong, TC)

A noncustodial parent was denied a dependency exemption for his minor child even though he was current with his child support payments and the arbitration award agreement between the taxpayer and his former wife permitted him to take the exemption if he was current with his payments.

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White House Promises Veto for Boehner’s Millionaire Tax Bill

House legislation that would extend the Bush-era tax cuts to those with annual incomes of up to $1 million drew a veto threat from President Obama on December 19. Offered by House Speaker John Boehner, R-Ohio, the legislation would provide $3.9-trillion in tax cuts for individuals and businesses, including provisions to make permanent the child tax credit, marriage penalty relief, small business expensing and alternative minimum tax (AMT) relief.

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New York ~ Multiple Taxes: Tax Department Allows Late Filings, Provides Support to Businesses

New York Gov. Andrew Cuomo has announced that the Department of Taxation and Finance will allow taxpayers affected by Hurricane Sandy to have their tax returns considered as timely filed even if they file late. In addition, businesses temporarily relocating to New York to help with recovery efforts will not have to pay several state taxes, and employers will be granted a tax exemption for the value of leave they donate to Hurricane Sandy relief efforts.

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Kentucky ~ Multiple Taxes: Commission on Tax Reform Issues Recommendations

The Kentucky Blue Ribbon Commission on Tax Reform, chaired by Lt. Gov. Jerry Abramson, has issued a report of its findings and recommendations to Gov. Steve Beshear. The recommendations include, among other tax changes, a reduction in corporate and individual income tax rates, modification of the corporate income apportionment formula and sales factor sourcing rules, and a reduction in the individual income tax pension exclusion. I

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3.8-Percent Tax on Net Investment Income Can Apply to Trusts or Trust Beneficiaries, Practitioner Indicates

The new 3.8-percent tax on net investment income (NII), slated to take effect January 1, 2013, applies to certain categories of trusts, or to their beneficiaries, if applicable thresholds are exceeded, a practitioner stated on December 18. Tracy Stone, a specialist in estates, gifts and trusts for KPMG LLP’s Washington National Tax practice, explained that the tax applies to the lesser of the trust’s “undistributed NII” or the excess of adjusted gross income (AGI) over a threshold.

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Overpayment Interest Calculated from Date Cash Bonds Converted to Tax Payments (Ford Motor Company, CA-6)

A corporation’s claim for additional overpayment interest calculated from the date it made deposits in the nature of a cash bond to the date it converted those deposits into tax payments was properly denied. The Code Sec. 6611 waiver of sovereign immunity was not clearly discernible from the statutory text in light of traditional interpretive tools;

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Virginia ~ Corporate Income Tax: Change in Filing Status Was Not Permitted as a Result of Merger

The taxpayer, an out-of-state corporation that owned a number of subsidiaries, including two that operated in Virginia, was not permitted to change its filing status and file consolidated Virginia corporate income tax returns as a result of a merger of two groups because the merger did not meet the standard for eligibility to make a corporate filing status election pursuant to the Virginia Department of Taxation’s policy with regard to the merger of equal corporations.

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