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Get ready for the upcoming tax season! In this comprehensive course you will learn what’s new and what has changed in the federal individual income tax arena. It brings up-to-the-minute guidance on the latest tax legislation, court decisions, and IRS pronouncements. Gain practical insights and valuable taxsaving strategies from AICPA’s seasoned tax pros who know what the new laws, rules and court decisions can mean for real-world taxpayers. With the ever changing tax laws and their increased complexity, you can’t afford to miss out on this course.
Objectives:
Prerequisite: Familiarity with federal tax issues for individuals
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Excerpt from previous edition. Please check back for updates.
Chapter 0 - Introduction
This update will review sections of multiple laws passed since last year's update. They are labeled in the update as follows:
In addition to these laws this course will discuss guidance from both the executive and judicial branches. Given the volume of statutory, administrative and judicial guidance that is issued every year, it is impossible to cover all items. The goal of this course is to provide insight into the areas deemed most likely to affect CPAs in general individual tax and financial planning practice. The table of contents lists the topical coverage of this course.
In addition to formally published guidance, this update includes some cases that are listed as unpublished opinions by the various courts. These cases are not included in the update to be used as precedent. Legal advice should be sought before such use is made. They are included, however, to provide the participant in this course with knowledge of how the courts are interpreting matters of interest. Likewise, private rulings issued by the Service, while only binding with regard to that particular taxpayer, are useful to practitioners in identifying the Service's opinion of various issues for which higher levels of administrative guidance have not been issued.
Throughout the text, references made to the Service should be taken by the reader to mean the Internal Revenue Service (IRS) unless otherwise noted. Similarly, in some cases in which the statutory guidance refers to either the Secretary or Commissioner, the author may have substituted the term Service. This is done for simplicity since the Service is the designee of the Secretary in the case of tax matters. Use of the word Section (at the beginning of sentences or paragraphs) or the § symbol (within sentences) throughout the course should be taken to mean the relevant section of the Internal Revenue Code unless otherwise noted.
It is important to note that as of the time this manual went to print, many expiring provisions have not yet been extended to cover 2008. It will be important that practitioners watch for changes in this area prior to filing 2008 returns. Some of the major provisions not yet extended for 2008 include:
Chapter 1 - Income
Learning Objectives
After completing this chapter you should be:
Mortgage Forgiveness Relief
The Mortgage Forgiveness Debt Relief Act of 2007 (hereafter Mortgage Act) was signed by the President on December 20, 2007. The first item in the Mortgage Act was a provision to relieve taxpayers of forgiveness of debt income related to their homes.
Background
Ordinarily, income from the discharge of debt is taxable income unless it meets one of the exceptions under §108. These exceptions under §108(a)(1) are applicable when
When one of these exceptions is met, the taxpayer will generally reduce certain tax attributes by the amount of the discharge per §108(b). Technically there is a difference between recourse and nonrecourse debts in terms of how they affect the borrower. However, the House Committee Report 110-356 (which is not an official committee report for reference purposes) example, which is reproduced below, really describes recourse debt treatment. An example is not provided that specified whether the debt is recourse or nonrecourse.
House Committee Report 110-356 Example
Assume a taxpayer who is not in bankruptcy and is not insolvent owns a principal residence subject to a $200,000 mortgage debt. If the creditor forecloses and the home is sold for $180,000 in satisfaction of the debt, the debtor has $20,000 income from the discharge of indebtedness which is includable in gross income. Likewise, if the creditor restructures the loan and reduces the principal amount to $180,000, the debtor has $20,000 includable in gross income.
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