Possible Penalties for Disallowed Return Positions in Simple Situations: A Six-Level Construct
Joel E. Miller
This article will set forth some thoughts about certain penalties that might be imposed on a taxpayer and its advisor or advisors (if any) under the Internal Revenue Code if a position taken in an income tax return is ultimately held to be incorrect. In order to keep the discussion within limits, we will assume that no tax shelter was involved, that there was neither negligence nor fraud, that there was no reckless disregard of applicable rules, that there was no valuation misstatement, that the taxpayer kept proper records, and that (except for the position in question) the return was in all respects proper.
Bioenergy Program Payments to Producers Not Excludible Under §118(a)
The IRS recently issued a Coordinated Issue Paper1 in which it concluded that certain bioenergy program (“BEP”) payments by the United States Department of Agriculture (“USDA”) to commercial bioenergy producers to compensate the producers for certain operating costs did not qualify as nontaxable contributions to capital pursuant to §118(a) of the Internal Revenue Code (the “Code”). The conclusion adds more controversy to this confusing area.
Recent passage of a major real estate bill in the House of Representatives, the American Housing Rescue and Foreclosure Prevention Act of 2008, could lead to the creation of significant changes in real estate tax incentives in the near future.
