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First Quarter 2009 Developments While the new law tax changes in the American Recovery and Reinvestment Act of 2009 were the most significant developments in the first quarter of 2009, many other tax developments may affect you and your family. Following is a summary of those developments. Getting maximum advantage from the homebuyer credit. In two separate pieces of guidance, the IRS has explained how to take maximum advantage of the credit for first-time homebuyers. The credit is the lesser of 10% of the purchase price or $8,000 for a qualifying 2009 purchase ($7,500 for a qualifying 2008 purchase). The credit is refundable, meaning you get it even if you don't owe taxes. The credit has to be paid back for a home purchased in 2008 but generally not for one purchased in 2009. A credit for a 2009 purchase can be claimed on the 2008 return. In a news release, the IRS has explained the several different ways that individuals who recently purchased a home or are considering buying one in the next few months can claim the up-to-$8,000 credit for 2009 home purchases including getting an extension, filing now and amending later, amending a previously filed 2008 return or claiming the credit on a 2009 return where higher income in 2008 would reduce the credit under so-called phaseout rules. In separate guidance, the IRS explained how unmarried co-owners can get the maximum credit amount. New guidance for victims of Madoff-type investment schemes. Just days after Bernard Madoff's guilty plea, the IRS issued comprehensive guidance for the many investors caught in his (and similar) notorious Ponzi-style fraud. The guidance takes an extremely generous, pro-taxpayer position, allowing the losses to be claimed as theft losses against ordinary income and even allowing a net operating loss generated by Madoff-style losses to be treated as sole proprietorship losses potentially eligible to be carried back 3, 4, or 5 years under a business-style tax break enacted by the American Recovery and Reinvestment Act of 2009. The guidance consists of a revenue ruling dealing with specific tax issues that victims of Madoff-type schemes must confront and a revenue procedure providing safe harbors for determining the proper time and amount of loss. Trademarks and the like may qualify for tax-free swaps. A like-kind exchange is a popular way for a taxpayer to dispose of qualifying appreciated property without paying a current tax. The IRS now says that intangibles such as trademarks, tradenames, mastheads, etc., that can be valued separately and, apart from goodwill, qualify as like-kind property that can be exchanged without incurring a current tax. Furthermore, the IRS says that except in rare and unusual situations, intangibles such as trademarks, tradenames, mastheads, and customer-based intangibles can be separately described and valued apart from goodwill. Of course, to qualify for a like-kind exchange, various statutory and regulatory rules have to be satisfied. Vehicles qualifying for the hybrid credit. On its website, the IRS has listed 2009 and 2010 model year hybrid vehicles that qualify for the hybrid credit. Due to a production-based limitation, not all hybrids qualify for a full credit. For example, the credit for qualified Toyota and Lexus vehicles was eliminated for purchases on or after Oct. 1, 2007. The phaseout of the credit for qualified Honda vehicles began for purchases on or after Jan. 1, 2008 and the credit was completely eliminated for purchases on or after Jan. 1, 2009. The phaseout of the credit for qualified Ford and Mercury vehicles began for purchases after Mar. 31, 2009. More investment flexibility for 529 plans. Section 529 Education Plans are tax-advantaged savings plans that can be used to pay qualified education expenses. In recent guidance, the IRS has determined, that for calendar year 2009 only, 529 plans may permit accounts to change their investment strategy twice (as opposed to once under prior rules) during the year, as well as upon a change in the designated beneficiary of an account. This new flexibility was prompted by concerns from 529 plan sponsors that in today's market environment the lack of flexibility in switching investments could imperil many 529 accounts. To comply with the requirements of IRS Circular 230, we must inform
you that the information discussed above is not intended or written
to be used, and cannot be used by the recipient or any other taxpayer,
for the purpose of avoiding penalties that may be imposed under
the Internal Revenue Code or any other applicable tax law, or to
promote, market or recommend to another party any transaction, entity,
investment plan, arrangement or other matter. |
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