Showing of needs stopped accumulated earnings tax
Article Abstract:
Gustafson's Dairy, Inc, a family-owned dairy farming business in the US, was found liable for accumulated earnings tax (AET) by the IRS after it failed to implement its capital expenditures projection plans. The IRS also charged that Gustafson's was founded to avoid shareholder-level income tax. When sued, the taxpayer argued that its accumulated earnings do not exceed the reasonable needs of its business and that his inclusion of language similar to AET statutory language in the financial plans is not designed to protect it from the AET penalty. It likewise clarified that the trust it formed in 1988, which was financed through shareholder contributions and some $4 million from retained earnings, was not a ploy to circumvent the AET. These arguments led the court into ruling that the firm was not formed to avoid shareholder-level income and was not, therefore, liable for AET.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Saved by the bell (or left at the station): limitations periods count
Article Abstract:
The Internal Revenue Code contains provisions on statutes of limitations that restrict the period within which a particular tax-related action may be made. Contrary to the commonly held belief of tax professionals, there exist more than one limitations period in taxation. The truth is that the Code features different statutes of limitations that interact with one another. Some impose limitations on the taxpayers while others put limitations on the IRS. Major limitations periods are targeted at assessments, Tax Court petitions, collections, refund claims, refund suits and criminal tax prosecution. Most of these statutes include a general rule and exceptions. Tax professionals should have an understanding of these limitations and their interaction. The particular rule and exceptions to the aforementioned statutes are discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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IRA benefits endangered by penalty exposure
Article Abstract:
Individual retirement accounts (IRAs) enable employees and self-employed persons to establish a simplified tax-qualified retirement plan that will generate income for them and their nonworking spouses when they retire. These accounts can minimize taxpayers' current taxes and serve as an emergency fund. However, taxpayers may lose many of the benefits of IRAs if they incur penalties on excess contributions, premature withdrawals, minimum distributions, and excess distributions and accumulations. Fortunately, these penalties can be avoided through careful planning. When setting up their IRAs, taxpayers should be mindful of the maximum deduction rules under Sec. 219, the minimum distribution regulations under Sec. 401(a)(9), the premature withdrawal rules under Sec. 72(t), and the rollover rules under Sec. 408(d)(3).
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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