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Fort Lauderdale Tax Law Blog

Residents living on government land subjected to property tax

The Florida Supreme Court has ruled that 2,400 residential properties in our state are subject to taxation. The court also ruled that the county-owned land in which these properties were located also could be taxed.

One property appraiser had been advocating the taxing of improvements on beach leasehold property for some time. He also felt these individuals should be taxed for the land as well.  His own opinion was that the leaseholders should be contributing tax dollars to the school and county district. However, plaintiffs in the lawsuit had fought this property "ad valorem" taxation and maintained they should be instead paying intangible personal property taxes.

Deposits of less than $10,000 by store owners deemed suspicious

Though a father and daughter who co-owned a grocery store were not accused of any criminal wrongdoing and there were no allegations that they earned their money by improper means, they still had their business investigated and bank account proceeds seized by the Internal Revenue Service. The IRS did not back down upon their claims until the couple received help from a small public law firm that decided to represent them.

Under the Bank Secrecy Act, deposits of over $10,000 will need to be reported to federal government authorities.  The couple was told by the grocery store's insurer that only losses of less than $10,000 would be covered (apparently common among insurance companies) and therefore the father and daughter made frequent deposits that were less than $10,000.

IRS publication muddies the water concerning IRA rollovers

While an IRA rollover has been tolerated by the Internal Revenue Service, a U.S. Tax Court judge nevertheless penalized such a rollover made by a taxpayer in a recent decision.  This move raised red flags among a number of tax attorneys and they have submitted a friend of the court brief asking that the ruling be changed.

The amicus brief filed claims public confidence in the tax system has been undermined. The brief goes on to state that taxpayers following IRS guidelines could be subjected to "potentially catastrophic consequences."

Confusion over role of 501(c)(4) organizations at center of suit

There are often differences of interpretations when it comes to interpreting Internal Revenue Service rules and regulations. A recent dispute came about over wording that differs in tax statutes versus regulations concerning requirements for 501(c)(4) organizations.

The statute states that 501(c)(4) organizations are required to "exclusively" be involved in social welfare activities. The regulations, on the other hand, state that these groups should be "primarily" involved in social welfare activities. It is not considered to be a "social welfare" activity for organizations to engage in support or opposition to particular political candidates.

Florida lawmakers expected to reduce fees and taxes

Florida is expected to take in $150 million more than current estimates during the next 16 months. This is at a point when lawmakers had already set a goal to reduce fees and taxes by $500 million. Though the additional revenue may not drive this number any further up, this gives legislatures more room to maneuver.

We've already seen proposals in the Florida Senate and House to reduce vehicle registration fees. Sales tax may be lifted for a three-day period as well for clothing, electronics and school supplies. A plan by various committees would lead to cutting the sales tax in half that businesses pay for electricity.

The importance of representation in the event of an audit

Of tips presented that could help one most in the event of an audit, having someone to represent you is right at the top.  As one commentator tries to make clear, not being represented at an audit virtually assures the worst possible result.

 It’s always a good idea for attorneys representing clients to be thorough and credible when it comes to audits.  We don’t want to see mistakes made when it comes to negotiations because this can lead to taxpayers paying more in penalties than is necessary in the event of a tax controversy.

Number of convictions for tax crimes said to be on the increase

The Internal Revenue Service - Criminal Investigations Annual Report for 2013 reveals that there are "significant increases in enforcement actions" against individuals charged with tax crimes. It appears that there has also been an increase in convictions.

Of the 5,300 cases initiated by the IRS-CI in 2013, 4,300 of those matters were recommended for prosecution. This amounted to indictments of 3,800 people and convictions in 93 percent of the cases that have been closed.

The IRS loses on tax shelter matter in appellate court

The Eleventh Circuit Court of Appeals has recently ruled against the Internal Revenue Service and harshly criticized a Tax Court ruling. Close to a decade ago the IRS had ruled that the Economic Development Programs of the U.S. Virgin Islands were abusive tax shelters. Business operators involved in the program were subjected to audits and some individuals were also indicted (though the IRS apparently lost concerning these criminal cases).

The rulings resulted in a number of taxpayers filing claims in Tax Court. The IRS argued in Tax Court that taxes paid by individuals claiming residency in the U.S. Virgin Islands could not be used to offset taxes the IRS claimed were due.

GE sues the IRS over disputed tax bill

The U.S. Internal Revenue Service is being sued by General Electric Co. over claimed overpayments of taxes and interests related to losses sustained during the sale of ERC Life Reinsurance.  Another company acquired ERC from GE in 2003.  While GE claimed a capital loss of $2.2 billion due to the sale, the IRS refused to grant this claim.

The position of GE was that they should have been entitled to carry the loss back to the year 2000.  This would have resulted in refund of $439 million for overpaid taxes.  GE also requested a payment of $219 million in interest.  GE claims that the IRS's refusal to provide a refund was erroneous and illegal.  The IRS did not provide any comment concerning the lawsuit.

Federal lawsuit to be tried concerning like-kind exchanges

The largest nuclear power plant operator in the U.S. is in a dispute with the Internal Revenue Service regarding a $517 million tax claim, and the case is now scheduled to be tried in court. The dispute began in 1999 when a subsidiary of Exelon Corp. sold off some fossil fuel plants. Exelon then acquired three other power plants and wrote off the original sale of the fossil fuel plants as a "like-kind" exchange.

So long as a set of transactions are conducted in a particular period of time, taxpayers are permitted to sell off assets without paying capital gains taxes if the property replaced is a "like-kind" asset. Since Exelon leased these properties back to local governments during operation, however, the IRS claimed that no proper like-kind exchange actually took place.

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