Tax Headlines

1827

Discharge of Debt Resulted in Income to Debtor; Penalty Imposed (Zeluck, TCM)

An individual who signed a subscription note as part of an investment received income in the amount of the note when the debt became nongenuine and was thus discharged. The taxpayer invested, in the form of cash and a subscription note, in a partnership that became involved in an oil-drilling operation. The note, with similar notes from other investors, was used to secure a turnkey note from the partnership to a drilling company who would drill wells for the partnership, and the taxpayer assumed personal liability on that turnkey note to the extent of his liability on the original note. During the next year, the taxpayer made interest payments as required by the note. The partnership dissolved at the beginning of the third year and liquidated, paying a distribution to the taxpayer of his capital share. No attempt to collect on the note was made then or later, with respect to the taxpayer or any of the other investors.

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Grant of Easement Was Not Qualified Conservation Contribution; Not Perpetually Protected; Accuracy-Related Penalty Did Not Apply (Mitchell, TC)

The grant of a conservation easement failed to qualify for a charitable deduction because it did not meet all the requirements to be a qualified conservation contribution. For the grant to be a qualified conservation contribution, it had to have been made exclusively for conservation purposes. To be exclusively for conservation purposes, it had to be enforceable in perpetuity. If there was a mortgage on the property, the mortgagee had to subordinate his rights to the donee organization.

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Washington ~ Business and Occupation Tax: Imposition of Seattle B&O Tax on Auto Manufacturer’s Wholesale Sales to Dealerships Upheld

The federal Import-Export Clause did not prohibit the city of Seattle from imposing its business and occupation (B&O) tax on an automobile manufacturer’s wholesale sales of imported vehicles to dealerships in the city. The Washington Court of Appeals analyzed three factors under Import-Export Clause case law and determined first that the tax does not burden or interfere with federal government regulation or commerce.

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Maine ~ Personal Income Tax: Senate Revives Tax Rate Bill

The Maine Senate has passed a revised version of a bill that, if enacted, would gradually reduce personal income tax rates in the future until there is a single rate of 4%. The rate reductions would be funded by excess revenue deposited into the Tax Relief Fund for Maine Residents. The bill was previously passed by the Maine Senate (TAXDAY, 2012/03/20, S.14), but then rejected by the Maine House of Representatives (TAXDAY, 2012/03/30, S.8). Under the latest Senate amendment, the percentage of excess revenue that is transferred to the Tax Relief Fund for Maine Residents would be lowered from 40% to 20%.

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FinCEN Issues Guidance on Filing New Currency Transaction and Suspicious Activity Reports (FIN-2012-G002)

The Financial Crimes Enforcement Network (FinCEN) has issued guidance on filing the new currency transaction report (CTR) and suspicious activity report (SAR). The guidance clarifies certain inquiries posed by industry regarding the new reports. FinCEN’s new CTR and SAR are designed to accommodate all the different types of industries that will file the reports. As such, the new SAR contains certain sections of suspicious activity characterizations that will generally be most relevant to a specific industry. When the filing institution’s industry is selected, those sections specific to other industries will automatically be noted as not applicable by being grayed out.

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County Employee’s Disability Retirement Payments Determined by Length Service Not Entirely Excluded from Gross Income; Individual Not Liable for Accuracy-Related Penalty (Sewards, TC)

The portion of a county government employee’s disability retirement benefits that was based on the length of his service was not excludable from gross income. The payments were taxable to the recipient to the extent that they were determined by reference to his age or length of service even if his retirement was the result of an occupational injury. The statute authorizing payments to the employee was in the nature of a worker’s compensation act; therefore, only the benefit that exceeded the guaranteed amount was not excludable from the taxpayer’s gross income.

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Vermont ~ Corporate Income Tax: House Passes Bill That Would Increase Corporate Minimum Tax and Update IRC Conformity Date

The Vermont House has passed a bill that, if enacted, would update the state’s conformity with federal income tax laws for Vermont personal and corporate income tax purposes and increase the corporate income minimum tax for corporations with gross receipts in excess of $2 million. If enacted, the legislation would increase the $250 current minimum tax for corporations, other than small farm corporations and digital business entities, to $500 for corporations with gross receipts over $2 million and to $750 for corporations with gross receipts over $5 million. The increase would be effective beginning with the 2012 tax year.

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