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Showing posts from December, 2018

What Happens to the IRS during the Shutdown

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We're now into the third shutdown of federal offices this year. The other two were brief closures back in January and February. Will this latest federal government shutdown, which began at midnight today (Saturday, Dec. 22) be similarly short-lived? Maybe, but closure #3 of 2018 already is the longest of the year, with the January shutdown lasting three days and the one in early February technically shutting federal doors for just a few hours. Nothing is expected to happen until after Christmas. Some are predicting the impasse will continue into the new year. Temporary funding for the IRS was enacted in the Continuing Appropriations Act, 2018, Division D of P.L. 115-56, and extended up to Dec. 22 by P.L. 115-90. Congressional negotiators are currently working on a continuing spending resolution that would fund the federal government through Feb. 8.
In anticipation of a lapse in funding, Treasury in late November issued a fiscal year 2019 “Lapsed Appropriations Contingency Plan” th…

The 2017 Tax Cut and Jobs Act and foreign real property taxes

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While the cap on the deductibility of state and local taxes (SALT) under Sec. 164 imposed by P.L. 115-97, known as the Tax Cuts and Jobs Act of 2017 (TCJA), has generated much controversy and even a lawsuit by several states (see "Tax Matters: States Sue Over SALT Deduction Cap," JofA, Oct. 2018), another of its changes to Sec. 164, denying any deduction for foreign real estate taxes paid, has been treated almost as a footnote. Yet this provision increases taxable income of the many taxpayers owning foreign real estate. This column describes how certain of these taxpayers living in a foreign residence and earning wages abroad may be able to nonetheless claim an exclusion from gross income for foreign real estate taxes they pay or incur.
The TCJA added Sec. 164(b)(6) limiting the SALT deduction to $10,000 per year. Specifically, Sec. 164(b)(6)(B) states that for individuals in tax years 2018 through 2025, "the aggregate amount of taxes taken into account under paragraphs…

The pros and cons of LLCs

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The use of the limited liability company (LLC) has mushroomed in popularity over the past two decades. IRS statistics show a 66% increase in domestic LLCs between 2005 and 2014, and in 2004 LLCs were already popular entities. The core reasons for their attractiveness for a wide range of business purposes are well-known: chiefly, passthrough tax treatment while offering their owners limited liability similar to that of a corporation. CPAs may be less familiar, however, with some of the other nontax features of LLCs and instances in which forming one may not be advisable. What follows is an overview of some of these features that help explain the ascendancy of LLCs but also their limitations, as well as some innovative uses of the form that are still developing.


LLCs are entities formed under state law that give the owners liability protection while avoiding the double taxation inherent in C corporations and the ownership restrictions of S corporations. Where partnerships have partners a…

Supreme Court abolishes physical presence requirement for sales tax collection

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On June 21, 2018, the U.S. Supreme Court overturned decades of established law that required vendors to have a physical presence in a state before that state could require them to collect and remit sales tax on purchases by customers within the jurisdiction. The Court overturned its 1992 decision, Quill Corp. v. North Dakota,1 with its recent decision in South Dakota v. Wayfair, Inc., noting that "the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause."2 While it will take some time to completely understand the full effects of this decision, it is safe to say that this is the most important development in the sales tax world in at least 25 years. Decades of precedent

Before it issued its Wayfair decision, the Court had established the physical presence standard in several landmark state tax cases. In 1967, the Court decided National Bellas Hess v. Department of Revenue of Ill.,3 in which it held that bot…