Bus. 225K - Advanced Individual Taxes

Introduction to the course

Introductory quiz (no point value) - complete this before you listen to the audio file!

Audio file - click here (I had hoped for video but we just have audio)  (59 minutes)

Interest Expense Limitations

Review the IRC sections and other materials noted below before watching the video. You should stop the video when you need to review the IRC, regulations or Notices being referred to. You will most likely want to watch all or portions of the video more than once and be sure to read the materials.

Video  (72 minutes) +   Powerpoint file    [quiz is on Desire2Learn]

• IRC §163
• Joint Committee on Taxation, Blue Book of the Tax Reform Act of 1986, text pages 262-270
• Interest Tracing Regulations and Preamble - §1.163-8T
• Notice 89-35 and FSA 200011025 on 1.163-8T
• IRS Pub. 535 - Business Expenses (just look at pages 10 - 15 on interest expense)
• IRC §221 - Interest on Education Loans
• Investment Interest Limitations - §163(d)
  • Form 4952 - Investment Interest Expense Deduction
  • Reg §1.163(d)-1 - elections
  • IRS Pub. 550 - Investment Income and Expenses (just read pages 31-34)
  • Rev. Rul. 93-68
  • Rev. Rul. 95-16
  • Rev. Rul. 2008-12 - limited partner    +   amplified by Rev. Rul. 2008-38

Home Mortgage Interest & Personal Interest - §163(a), §1.163-9T, §1.163-10T

Video (82 minutes*) + Powerpoint file   [quiz is on Desire2Learn]  * it will take longer than 82 minutes to watch the video because you should pause it when questions are listed on the slide so you can come up with an answer before listening to the answer.

• IRS Pub. 936 - Home Mortgage Interest Deduction (only need to print pages 1 - 12; or read online)

• Legislative history to the Revenue Reconciliation Act of 1987 that changed the mortgage interest deduction rules

• Personal Interest and Home Mortgage Regulations and Preamble - §1.163-9T & §1.163-10T

• Notice 88-74

• Revenue Ruling 2010-25 on mortgage interest limitations

  • Pau, TC Memo 1997-43 - debt over $1 million to acquire home (but also see §163(h)(3) definitions and Pub 936 (although not binding authority))

• Sophy, 138 TC No. 8 (2012) - debt limitations are per residence, not per taxpayer (read the case to find out why)

• Form 1098 (look at pages 4 - 6)

• Rev. Rul. 87-22 on points

• Rev. Proc. 87-15 on points

• Rev. Proc. 94-27 on points

• Rev. Rul. 92-91 on treatment of refund from adjustable rate mortgage

• Information on home equity loans from the FDIC (skim)

• Joint Committee on Taxation report - Present Law, Data, and Analysis Relating to Tax Incentives For Homeownership, 9/30/11 (reference only)

  • In 2009, $421 billion of itemized deductions for home mortgage interest were claimed on about 36.5 million tax returns.

  • In the U.S. about 65% of homes are owner-occupied. In 2010, it is estimated that the homeownership rate in the US was 67%. It was 68% in Canada (2006) and averaged 73.5% (2009) in the EU. Most countries do not have as generous tax provisions for home ownership as in the US.  "The United States and many other countries have favorable tax treatment for homeownership, though the extent of tax preference varies across countries. Among the 33 countries that are members of the Organization for Economic Cooperation and Development (“OECD”), 18 provide a deduction for mortgage interest. Only nine impose some form of taxation on imputed rental income on owner-occupied housing. Every country except Switzerland provides some special treatment under the income tax for capital gain on the sale of a principal residence." (pages 25-26)

• GAO July 2009 report - Home Mortgage Interest Deduction (reference only)

Passive Activity Loss Limitation - §469

Presentations: (The time indicated below for the length of the videos does not include the time you'll need in pausing the video periodically to delve deeper into the primary authority mentioned in the video. To get the best understanding of the passive activity loss limitation rules, you need to read and re-read the regulations as supplemented by the preamble to the 1988 regulations (see link in list below)).

• Presentation 1  -  ppt file     Video (73 minutes)  [+ quiz]

• Presentation 2 - ppt file  Video  (44 minutes)

• Additional reading to assist in understanding §469 - preamble to TD 8175 (1988) which included the bulk of the regs, but was issued prior to §1.469-4 on "activity." The TD 8175 regs were slightly modified, which is why some regs do not have a "T" for temporary. That is, regs modifying a few parts of the TD 8175 regs were issued after 1988 when the 3-year expiration date for temporary regs went into effect. You will find that the preamble provides helpful background to understanding information on the first two videos and it will help with subsequent videos as well.  TD 8175 preamble

• Presentation 3 - ppt file    Video (57 minutes)   [+ quiz]

• Presentation 4 - ppt file    Video  (85 minutes)   [+ quiz]

• Presentation 5 - ppt file    Video  (38 minutes) + Example from IRS Pub 925 (2009) - a review of some of the rules and more on Form 8582

• IRS Pub. 925 - Passive Activity and At-Risk Rules (only need to print pages 1 - 23; or read online) (provides broad overview to Passive Activity Loss rules, but there are no references to the substantive law)
• IRC §469
• Regulations (obtain from RIA Checkpoint or CCH)
• Joint Committee on Taxation, Blue Book of the Tax Reform Act of 1986, text pages 208-254
• 1993 legislative history to IRC §469(c)(7) on real estate professionals
• Form 8582 - Passive Activity Loss Limitations: (1) form   (2) instructions
• Rev. Rul. 92-92 on treatment of COD income under §469
• Rev. Proc. 2010-13 on info to provide to IRS for regrouping of activities (reference only)
• Article: "Taxation of LLC Members as General Partners" The Tax Adviser, Sept. 2010 - on Desire2Learn
• Material participation and trusts – TAM 200733023
• Avoiding the Self-Rental Trap by Anthony Constantine, AICPA Corporate Taxation Insider, 8/28/07
• IRS Audit Technique Guide on 469 (skim) [note that there are some errors in this]

Alternative Minimum Tax - §§53 - 59

Video (30 minutes)  +  Powerpoint    [quiz is on Desire2Learn] 

• IRC  §§53-59
• Joint Committee on Taxation, Blue Book of the Tax Reform Act of 1986, text pages 429-473 (skip the part on the corporate adjustments)
• Form 6251 - Alternative Minimum Tax - Individuals:  (1) form   (2) instructions
• Form 8801 - Credit for Prior Year Minimum Tax: (1) form   (2) instructions
• Rev. Rul. 2005-11 - home mortgage refinancings
• IRS online calculator tool  (fyi only)
• CBO Issue Brief on the Individual AMT (1/10) (skim)
• CRS, The Alternative Minimum Tax for Individuals (9/20) - overview and issues of the lack of "AMT Patch" (read)

Net Operating Losses - §172

Video  (37 minutes)  +   Powerpoint file   [quiz on Desire2Learn]

• IRS Pub 536 - Net Operating Losses (NOLs) for Individuals (only need to print page 1 - 17; or read online)
• IRC §172 (excerpt)
• The Tax Adviser, "NOL Carryback Claims Can Unlock Closed Statute of LimitationYears" (March 2010) - article is posted to D2L
• NOL Carryovers: Loophole or Legit? AICPA Tax Insider, 12/11/08 (reference)

Miscellaneous Topics

• Student presentation topics - view all prior to the final exam
• Chieck-in video #2 - on D2L
  • Course topics updates
  • California differences
  • Comprehensive federal tax reform

Course Review Information (to prepare for final exam)

• Q&A from prior class for review
• Interest expense outline and ppt that you may find useful for review - on D2L