Social Security Taxable Maximum Increased to $118,500

The maximum amount of earnings subject to Social Security tax will rise to $118,500 in 2015, from the current $117,000, the Social Security Administration announced today.

OVDP: Definition of Willful Left Broad

Jennifer Best of the IRS stated that the IRS has deliberately refrained from offering a lot of examples about what constitutes willful failure to disclose offshore assets.  Taxpayers are only allowed to use the Internal Revenue Service's streamlined offshore voluntary disclosure program when they have failed to report foreign income or foreign financial accounts or assets, if they can certify that their failure to do so was non-willful.  Every taxpayer has a unique set of circumstances, therefore, definition of the term of "Willful" was intentionally left broad.

WSJ Article: U.S.'s Tax Competitiveness

http://online.wsj.com/articles/were-number-32-1410729349?mod=trending_now_1

Dow Chemical Loses Appeal on Royalty and Depreciation Expenses

The Fifth Circuit ruled today on appeal that Dow Chemical was not entitled to royalty and depreciation expenses related to two partnerships that were designed by Gold Sachs.  The Court had found that the transactions related to the partnerships were shams or tax shelters.  The total tax benefit that was lost by Dow was approximately $2.0 billion.  The Appeals court remanded it back to the District Court to determine whether the substantial valuation and gross valuation misstatement penalties were appropriate.  

South Carolina DOR Gives Guidance on $300 Sales Tax Cap

South Carolina Department of Revenue issued Rev. Ruling 14-2 stating the utility trailers that are capable of being pulled by an automobile, minivan or pick-up truck are not subject to the $300 sales tax cap, but instead, are subject to the 6% sales tax rate, plus any local additions.  Utility trailers are trailers that are not recreational vehicles, fire safety education trailers or horse trailers.

http://www.sctax.org/NR/rdonlyres/AF3D4D34-9902-460A-9AA4-89B4E4E9ED19/0/RR142.pdf

S Corporation Conversion from C Corporation Tax Benefit Made Permanent

On June 12th, the House agreed to make permanent an expired tax provision that allows an S corporation after it converts from a C corporation to recognize the built in gains over a five (5) year period from the conversion date.  Without this provision, S corporations had to wait 10 years before it could sell its business assets in order to avoid the built in gain tax.

Supreme Court Rules that Inherited IRAs Not Exempt from Bankruptcy Creditors

In the case of Clark v. Rameker, Trustee, Justice Sotomayer penned an unanimous opinion finding that inherited IRAs are not afforded protection under the Bankruptcy Code against creditors. The Court found that inherited IRAs are not "retirement funds" within the meaning of  Section 522(b)(3)(C) of the Bankruptcy Code.  There were three primary factors that lead the Court to this conclusion that inherited IRAs are not "retirement funds" within its ordinary meaning. (1) the holder of an inherited IRA may never invest additional money into the fund; (2) the holder must make withdrawals from the IRA no matter how close to retirement; and (3) the holder can withdraw the whole amount at any time.

In light of this decision, a person may wish to carefully weigh the benefit of holding assets in an inherited IRA from a tax benefit perspective and an asset protection point of view.  This determination will be heavily driven by a person's risk profile.