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§ Billionaires join Gates and Buffett in charity pledge
Microsoft co-founder Bill Gates and billionaire investor Warren Buffett have enlisted 40 other wealthy families and individuals in a pledge to donate at least half of their fortunes to charity. After a six-week campaign, Buffett released the first list of billionaires who signed the "giving pledge." The Washington Post (8/5) 
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§ N.Y. Fed might try to force banks to buy back bad securitized loans
Major investors have long said banks should be required to repurchase defaulted loans that they securitized, and the Federal Reserve Bank of New York is taking the same position. The New York Fed’s stance is part an effort to improve the value of its Maiden Lane portfolio. CNBC/Reuters (8/4) , Nasdaq.com/Dow Jones Newswires (8/4)
§ Basel III could shift banks from trading to lending, Dugan says
Banks could respond to the Basel Committee on Banking Supervision’s proposed rules on capital and liquidity by shrinking their trading and becoming more active in lending, said Comptroller of the Currency John Dugan. "To the extent that some bank shrinks those activities instead of bearing the increased capital charge, that may not be the worst thing in the world," he said. Bloomberg (8/5)
§ Upturn in service firms’ hiring eases fears of a job-market downturn
The U.S. labor market is at a reduced risk of slipping into another downturn, with companies in the service industry adding employees at a faster rate than expected, economists said. Nonmanufacturing businesses, which account for 90% of the economy, expanded and increased hiring in July, according to the Institute for Supply Management. The institute’s index moved up from 53.8 in June to 54.3 in July. Bloomberg (8/4) , WebCPA (8/4) 
§ GAO: Disability fraud costs Social Security billions a year
Tens of thousands of workers, including 1,500 federal employees, are collecting disability checks worth billions of dollars a year from the Social Security Administration despite being healthy enough to hold down full-time jobs, according to a report by the Government Accountability Office. The SSA should do more to weed out fraud from its disability rolls, the report says. The SSA issued a stinging response to the report. "The GAO study is hopelessly flawed. It has no useful data, and has no actual recommendations for change," said Social Security Commissioner Michael Astrue. CNBC (8/4)
§ Other News
· Analysis: Bad commercial real estate loans threaten U.S. banks
CFO.com (8/4)
· U.S. bankruptcies were up 9% in July, but down in South
NPR.org/Planet Money blog (8/4)
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§ IRS international division to be renamed and reorganized
As part of its increased attention to international tax compliance issues, the Internal Revenue Service is reorganizing its Large and Mid-Size Business division to centralize its international tax compliance program. The division will be named the Large Business and International division as of Oct. 1. JournalofAccountancy.com (8/4)
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§ Midterm election might put derivatives rules at risk, Sen. Dodd says
Sen. Christopher Dodd, D-Conn., chairman of the Senate banking committee, said he is worried that the midterm election will create an opportunity for lobbyists to weaken rules on derivatives that are part of the financial-regulatory overhaul. Industry lobbyists opposed the rules, putting them "in some jeopardy," he said. Bloomberg (8/4)
§ Commentary: How historic is the Dodd-Frank act?
The Dodd-Frank act will make many changes, but it isn’t, as some argued, the most sweeping overhaul of financial regulation since the Great Depression, columnist David Weidner writes. The Glass-Steagall Act, the Securities Act of 1933 and the Securities Exchange Act of 1934 laid the foundation for recovery and the decades of prosperity that followed. The Gramm-Leach-Bliley Act of 1999 destroyed that reform, and with the Dodd-Frank act, the government passed up many opportunities to achieve true reform, Weidner argues. The Wall Street Journal (8/4)
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§ New guide reflects changes in CPA exam
The AICPA Examinations Team has released a guide to the major developments that will be new and different on the Uniform CPA Examination, effective Jan. 1. Major developments include content updates, structure, time allocations, scoring weights and functionality. Download the guide today.
The IRS will require annual renewals of Preparer Tax Identification Numbers (PTIN),
Leann Ruf, communications project lead, IRS, said on August 4, 2010. There is also no de minimis rule for obtaining a PTIN, Karen Hawkins, director, Office of Professional Responsibility, IRS, added. The new PTIN rules are part of the IRS’s multi-pronged return preparer oversight initiative that includes competency testing and continuing professional education (CPE) for unenrolled preparers (IRS News Release IR-2010-1; TAXDAY, 2010/01/05, I.1). Hawkins and Ruf spoke during a teleconference sponsored by the American Bar Association Section of Taxation. The IRS also posted updated materials on the initiative on its website (www.irs.gov).
PTINs
The first prong of the IRS initiative is PTIN registration. For purposes of PTIN registration, a tax return preparer is an individual who, for compensation, prepares all or substantially all of a federal tax return or claim for refund, the IRS explained.
Hawkins added that reports of a de minimis threshold for PTIN registration are incorrect. "If you prepare one [federal] return and get paid you must obtain a PTIN."
Practitioners who already have PTINs will be required to refresh their PTINs, Ruf reported. As long as the IRS can validate the ownership of the existing PTIN, the same number will be reassigned once the appropriate information is provided and the user fee is paid.
"PTINs will be renewed every year," Ruf said. The one-year renewal period is a change from the original proposal of a three year renewal period, she noted. "Renewals will be due on the anniversary date of registration," Ruf added. "A person who registers on October 1, 2010, will need to renew on October 1 each year thereafter."
Proposed regulations (NPRM REG-139343-08; TAXDAY, 2010/07/22, I.2; IRS News Release IR-2010-86; TAXDAY, 2010/07/23, I.2) would establish a PTIN registration fee of $50 and provide for an additional fee to be charged by the third-party vendor selected to operate the new online system. PTIN fees will be paid online and practitioners will be able to pay by credit or debit card, Ruf explained.
The IRS expects to launch the online registration system in September 2010. "We do not have a firm start date," Ruf said. Individuals who currently have a PTIN will be notified by letter when the new system is online, she added.
Competency Testing
The second prong of the initiative is competency testing for unenrolled preparers (individuals who are not CPAs, EAs or attorneys and, in certain cases, licensed public accountants). Enrolled actuaries and enrolled retirement plan agents will be exempt from the competency test requirement if they only prepare returns within their limited practice areas.
Return preparers who have PTINs before testing becomes available will have until December 31, 2013, to pass the competency testing. After testing becomes available, new return preparers will be required to pass the competency testing before they can obtain a PTIN, the IRS explained on its website.
CPE
The third prong of the initiative is CPE for unenrolled return preparers. Generally, unenrolled return preparers will be required to successfully complete 15 hours of CPE each year. The beginning date of the CPE requirement has not yet been determined. "When it [CPE] will begin is an open question," Hawkins said.
By George L. Yaksick, Jr., CCH News Staff
The sole shareholder of a corporation that constructed "spec" houses received a constructive dividend that was required to be included in gross income when the corporation transferred a lot and improvements to the shareholder by quitclaim deed.
The taxpayer argued that only the transfer of the lot was a constructive dividend because he owned the improvements on the lot in the form of a new home individually since he paid for the construction materials and labor himself rather than through the corporation. However, the shareholder did not provide any evidence other than his own self-serving testimony that he owned the improvements.
The corporation was on record as the sole owner of the lot and improvements on blueprints, permits, and assessor’s records. Neither the shareholder nor the corporation kept adequate records of amounts paid for the improvements. Moreover, there was no agreement between the shareholder and corporation for the construction of a new home on the lot and the corporation offered both for sale to third parties.
As a result of the transaction, the corporation was required to recognize taxable income to the extent of the fair market value of the lot and improvements since it did not provide any evidence of its adjusted basis in the property.
Both the shareholder and corporation were also liable for accuracy-related penalties for understatement of tax. The taxpayer was liable for understatement due to negligence because he failed to maintain adequate records to substantiate his claims and he did not seek out professional tax advice. The corporation was liable for a substantial understatement of tax as it presented no defense against the penalty.
R.V.J. Cezar Corp., TC Memo 2010-173, Dec. 58,295(M)
A farming operation actively operated by a son whose father handled the financial aspects and contributed the initial farm land was an equal partnership between father and son for federal income tax purposes.
The father and son argued that the farming operation was a joint venture between two individual proprietorships. That argument lacked merit since both parties had access to the one farm bank account, the farm was held out as a partnership to their insurance agent, and the farming business was registered with the state as a partnership.
Furthermore, even if the farming operation were a joint venture, it would create a separate entity with two members that would be treated as a partnership unless the members elected corporate status, which they did not do in this case. Since the father and son failed to present credible evidence in support of an allocation of partnership interests, the presumption of equal interests controlled.
There was no reasonable explanation offered for the disproportionate allocation of farm expenses to the father that allowed him to shelter some unrelated CPA income; therefore, the accuracy-related penalty was imposed against him based on his negligent expense allocation.
R.W. Holdner, TC Memo. 2010-175, Dec. 58,297(M)
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Mystery creates wonder and wonder is the basis of man’s desire to understand."
–Neil Armstrong, |
