The US Supreme Court declined to review the Ventas case pertaining to LLC fees paid by LLC’s with income from both California and non-California sources.

According to the FTB, they will issue a notice sometime in the next few weeks with instructions on when and how to obtain refunds for LLCs that have income inside and outside the state of California and have filed protective claims for refunds.

LLC’s that had income outside of California in a year prior to 2007 should file a protective for refund as the statute of limitations of four years expires in 2009.

In this current economic climate, it is well known that credit sources have tightening up (if not completely dried up).  The Journal of Accountancy has six tips to consider before you talk to a lender:

1. Negotiate and monitor your ratios
2. Prepare to be audited
3. Watch out for positive cash flow covenant
4. Get ready for new rate structures
5. Be prepared for more stringent “personal guarantees”
6. Know what’s typical

Read the article here for a detailed explanation of each of these helpful hints.

IRS Revenue Procedure 2009-24 issued in April adjusted depreciation limits for considered “luxury automobiles” to $2,960 for the first tax year, $4,800 for the second tax year, $2,850 for the third and $1,775 for each year thereafter.

Spidell has reported that the California Franchise Tax Board will NOT assess penalties if a taxpayer subject to the new mandatory e-pay requirements pays by check instead of electronically during 2009.

The law currently states that all payments made by an individual on or after January 1, 2009, regardless of taxable year or amount, must be remitted electronically to the FTB after the individual has:

• Made a single estimated tax or extension payment greater than $20,000 for a taxable year beginning on or after January 1, 2009; or
• Filed an original return with a tax liability greater than $80,000 for a taxable year beginning on or after January 1, 2009

A recent study found that in 2007, small businesses were 41% more likely to be audited than in 2005, ,while companies with $250 million in assets or more were audited 40% less often.  In a recent hearing, law makers pressed the IRS to ease up on audits of small businesses.

Read the full story here:

http://www.webcpa.com/article.cfm?articleid=31216

The Congressional Research Service (CRS) has released a report analyzing the effects of a proposed increase in the net capital loss limitation.

Currently, noncorporate taxpayers can net capital gains and losses and can use up to $3,000 in capital loss to offset ordinary income for that tax year (IRC § 1211(b)). Net losses over the $3,000 limit can be carried forward and used in future tax years (IRC § 1212(b); Treas. Reg. § 1.1212-1(b)).

One effect of this treatment is that long-term capital gains are taxed at 15%, but net long-term losses can be used to offset income taxed at higher rates. The CRS notes that this allows taxpayers to “game the system” by selectively recognizing capital gains or losses in a particular year in order to minimize their overall tax burden. The loss limitation is designed to minimize this strategy.

The $3,000 limit has not increased since 1978, and from time to time proposals are made to increase it. On Feb. 13, Rep. Walter Jones (R-N.C.) introduced H.R. 1070, which would increase the limit to $10,000. That bill has been referred to the House Ways and Means Committee.

The CRS report (Hungerford and Gravelle, “An Analysis of the Tax Treatment of Capital Losses” (CRS 2009)) notes that several reasons have been advanced for increasing the capital loss limitation, including economic stimulus and restoring investor confidence. The report concludes that increasing the limit would have an uncertain and indirect effect on the economy and might even lower the stock market in the short term by encouraging investors to sell.

The report also notes that upper-income taxpayers have the most capital gains income. For example, in 2006, the top 3% of taxpayers earned 91% of capital gains reported on Form 1040, Schedule D (IRS, Statistics of Income Bulletin (2006)). The report assumes that upper-income taxpayers also have the most capital losses.

Middle-income taxpayers tend to hold onto their investments in retirement accounts, which are not affected by the net loss restrictions. Therefore, any increase in the capital loss limitation would mostly benefit wealthy taxpayers.

This report follows up on a similar CRS report from 2002 (Esenwein and Gravelle, “An Analysis of the Tax Treatment of Capital Losses” (CRS 2002)). The earlier report was released at a time when President Bush was proposing to increase the limitation to $20,000.

Under the old formula, a car buyer in Orange County paid $1,938 in taxes on a $25,000 car. The new formula means that buyer will pay $2,188, or $250 more.

On a new car valued at $25,000, the vehicle license fee will go from $163 (0.65 percent of the value) to $288 (1.15 percent of the value).

The IRS has released Revenue Procedure 2009-19, which provides guidance on net-operating-loss provisions for small businesses that were enacted in the economic-stimulus package. Under the new law, small businesses — those with less than $15 million in revenue — can elect to carry NOLs back five years instead of two. The IRS guidance describes how businesses can make the election.

The investors in Bernard Madoff’s monumental fraud can recover some of their losses as theft-loss deductions for 2008, including their original investments and "phantom" earnings that were reported to them but never really existed, the Internal Revenue Service says. If the deduction exceeds the taxpayer’s income for 2008, they may be able to carry the deduction back for either three or five years, depending upon their specific circumstances.

The Financial Accounting Standards Board (FASB) are calling on the SEC for additional study on the possible shift of US accounting standards to International Financial Reporting Standards (IFRS).  A comment letter from the organization said the SEC should allow limited early adoption of IFRS by US public companies only after there is a decision that all US public companies will ultimately be required to adopt IFRS.