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New Legislation

This chapter covers tax legislation that was enacted since the 2007 National Income Tax Workbook went to press in September 2007. It also includes a table of the effective and sunset dates for selected provisions in new and prior legislation.

Rulings and Cases

This chapter summarizes selected rulings and cases that were issued from September 2007 through August 2008 to give participants an update on issues that are being addressed by the IRS and the courts. The rulings and cases are organized under topic headings that match the other chapter titles.

Individual Taxpayer Issues

This chapter covers a variety of income tax issues that affect individual tax payers. Topics include:

· Sale of a vacation home following rental property treatment

· Stock options and AMT

· Foster care

· Adoption and surrogate mother

· Reverse mortgages

· Energy credits

· Sabbaticals

Business Issues

Tax issues that that arise in operating a business are discussed in this chapter. Topics include:

· Business use of home: planning—tax effect of claiming the business use of home deduction including the effect on listed property and the effect on sale of home

· Cell phones and land lines as fringe benefits;

· Internet and computers

· Passive loss

· Constructive receipt and expense deduction (checks at end of year)

· I.R.C. § 179 deduction income limit

· Energy credits/provisions

Agricultural Issues

Topics of current interest to practitioners who prepare farm income tax returns are discussed in this chapter. Topics include:

· Conservation easements: qualifications for the farmer provision

· Income tax treatment of paying back property taxes for land taken out of agriculture

· Sale of carbon credits

· Prepaid expenses

· Land improvements purchased with CREP payments

· Tax issues for farmland owners who rent their land

· Fertilizer containment structures

· Soil and water districts

· Table of eligibility for I.R.C. § 179 for assets used in farming

Business Entities

This chapter is the fourth in a series of four. The first chapter (2005) covered formation of an entity, using an LLC as the example. The second chapter (2006) covered the operation of an entity using an LLC as the example. The third chapter (2007) covered termination of a single-member entity, using an LLC as the example. This year’s chapter covers the termination of a multiple-member entity using an LLC as the example.

IRS Issues

This chapter covers issues the IRS targets as key issues for practitioners. Topics include:

· EITC due diligence

· Notices from more than one campus for the same taxpayer and the same tax year

· Substitute for returns

· Transferring collection cases to local offices

· Tax audits: explanation of the different types of audit

· How to communicate with IRS to fix problems

· How to perfect a general power of attorney

Retirement

This chapter focuses on the tax consequences of distributions and the options for those distributions. It includes topics such as:

· Pension plan start up credit

· Qualified plans

· Contribution requirements and limits

Financial Distress

This chapter explains the income tax consequences of financial distress. It covers transfer of property, debt forgiveness, the new law on home mortgages and abandonment of property.

Ethics

This chapter examines the AICPA’s Statements on Standards for Tax Services; the IRS’s Circular 230; and relevant penalty provisions in the Internal Revenue Code affecting both tax professionals and their clients and suggests ways for the tax professionals to strengthen their ethical awareness.

Investment Issues

This chapter discusses issues that affect taxpayers who have investments. Topics include:

· Basis of mutual funds and other investments

· Form 1041: expenses subject to the 2% of adjusted gross income floor

· Sales of royalties and working interests

· Stock options and credits

· Real Estate Issues; financial distress; I.R.C. § 1031 exchanges; and easements

Automobiles

The tax rules that affect claiming deductions for the cost of owning and operating a vehicle are covered in this chapter. Topics include:

· Standard mileage rate and recapture

· Passenger automobile limits

· I.R.C. § 179 deduction

· Partial business use of automobiles

· Leasing an automobile

· Trade-in of vehicle

· Employee use of vehicle

· Reimbursement of employee for vehicle use

· Entity versus employee ownership of vehicles

· Safe harbor for farmers

· Recapture provisions

· Energy credits

Loss Deduction Limits

This chapter gives a comprehensive explanation of the complex rules that affect a taxpayer’s deduction of losses. Topics include:

· Hobby losses and vacation home limits

· Basis limitation

· At risk rules

· Passive activity losses

· Net operating losses

· C Corporations

Military

Because of the large number of reservists called to active duty in recent years, many may find themselves dealing with issues associated with the military. The goal of this chapter is to provide background information on basic issues as well as updated information resulting from recent changes and clarifications to the law. Topics include:

· Military pay

· Combat zones (timing of bonuses)

· Financial distress issues

· Family issues

· Schedule A (Form 1040) deductions

· Basic return filing information

· Retirement issues

· Educational assistance

Restaurant and Hospitality Businesses

Taxpayers who operate a restaurant or hospitality business face the usual income tax issues for a small business as well as some issues that are unique to their industry. These issues are discussed and illustrated with examples. Topics include: depreciation; smallwares; tips; and other labor issues.

Tax Rates and Useful Tables

This chapter reports the updated income tax rates and other income tax rates and thresholds that adjust each year. New topics this year include: 2008 Medicare part B premiums; the depreciation component of the standard mileage rate; allowance for day care meals; and a table of recovery periods for common assets.