Olympics are unfair!!

[ChuckF]

Originally Posted by Jerome

Under obama-care the IRS now has power to decide if legal deductions are not allowed.

Are you talking about the economic substance doctrine? You know that's been around for, like, a long time, right? See, e.g. ACM Partnership v. Comm'r, 157 F.3d 231 (3d Cir. 1998), Lerman v. Commissioner, 939 F.2d 44 (3d Cir. 1991), Goldstein v. Comm'r 364 F.2d 734 (2d Cir. 1966).

Originally Posted by Jerome

This new power can be used on any tax payer arbitrarily.

Not new. Definitely not arbitrary. If anything, less arbitrary now that it's codified relative to when it was a common law doctrine. Welcome to administrative law!

And also, not on any taxpayer. See P.L. 111-152 § 1409, 124 Stat. 1068-9.

[Sauron]

Originally Posted by Jerome

Nope, this is different than the AMT. The AMT is spelled out exactly how one pays.

Wrong. The point of arbitrariness is not in *how* one pays, but *if* one has to pay in the first place.

This new power can be used on any tax payer arbitrarily.

The AMT can be used arbitrarily. It does not always kick in, even when situations are similar or identical.

Your move.

[Jerome]

Originally Posted by Sauron

The AMT can be used arbitrarily. It does not always kick in, even when situations are similar or identical.

This is not true.

[Jerome]

Let me know how your court fight with the IRS goes when they decide you were reducing your taxable income by following the tax laws.


Section 1409(a) of the Health Care and Education Reconciliation Act of 2010 (the “2010 Act”) codified a conjunctive economic substance test in new section 7701(o). The new statute defines the economic substance doctrine as the common law doctrine under which certain tax benefits are not allowable if the transaction does not have economic substance or lacks a business purpose and states that “[t]he determination of whether the economic substance doctrine is relevant to a transaction shall be made in the same manner as if [the legislation] had never been enacted.”

The statute further states that “in the case of any transaction to which the economic substance doctrine is relevant, such transaction shall be treated as having economic substance only if—

(A) the transaction changes in a meaningful way (apart from Federal
income tax effects) the taxpayer’s economic position, and
(B) the taxpayer has a substantial purpose (apart from Federal income tax
effects) for entering into such transaction.”

http://www.irs.gov/businesses/articl...242253,00.html

[Jerome]

You will have to pay attorneys the fight the government over the definitions of economic position and substantial purpose in regards your particular circumstance.

[Jerome]

Holy shit, 401Ks and IRAs are now fully taxable as income!!!


DOCTRINE MAY BE APPROPRIATE

The following facts and circumstances tend to show that application of the economic substance doctrine may be appropriate.

Transaction is promoted/developed/administered by tax department or outside advisors
Transaction is highly structured
Transaction includes unnecessary steps
Transaction is not at arm’s length with unrelated third parties
Transaction creates no meaningful economic change on a present value basis (pre-tax)
Taxpayer’s potential for gain or loss is artificially limited
Transaction accelerates a loss or duplicates a deduction
Transaction generates a deduction that is not matched by an equivalent economic loss or expense (including artificial creation or increase in basis of an asset)
Taxpayer holds offsetting positions that largely reduce or eliminate the economic risk of the transaction
Transaction involves a tax-indifferent counterparty that recognizes substantial income
Transaction results in separation of income recognition from a related deduction either between different taxpayers or between the same taxpayer in different tax years
Transaction has no credible business purpose apart from federal tax benefits
Transaction has no meaningful potential for profit apart from tax benefits
Transaction has no significant risk of loss
Tax benefit is artificially generated by the transaction
Transaction is pre-packaged
Transaction is outside the taxpayer’s ordinary business operations.


http://www.irs.gov/businesses/articl...242253,00.html

[Sauron]

Originally Posted by Jerome

Holy shit, 401Ks and IRAs are now fully taxable as income!!!

Oh, really?

Taxpayer’s potential for gain or loss is artificially limited
Transaction accelerates a loss or duplicates a deduction

Transaction has no meaningful potential for profit apart from tax benefits
Transaction has no significant risk of loss

Care to try again, hmmm?

[LadyShea]

Do you have a source for that?

[Stephen Maturin]

It's from the link in #54. Wasn't easy to spot, what with the selectivity in quoting and all.

[Jerome]

Last edited by Jerome; Today at 09:03 PM. Reason: Yes I have a link, it is from the same place a couple of posts ago, it is entered into the conversation damit.

[LadyShea]

Holy shit, 401Ks and IRAs are now fully taxable as income!!!

The source and citation doesn't seem to support this conclusion from my reading of the whole white paper, what with its extremely heavy use of weasel words and references to statutes and provisions found elsewhere. Can you explain to me how you arrived at it?

[Sauron]

Originally Posted by LadyShea

The source and citation doesn't seem to support this conclusion from my reading of the whole white paper, what with its extremely heavy use of weasel words and references to statutes and provisions found elsewhere. Can you explain to me how you arrived at it?

Let me make it easy for you: several of the particular conditions that Jerome's source listed above -- which I identified in red -- do not apply to 401Ks and IRAs.

Therefore, Jerome's claim is bullshit.
As usual.

[Jerome]

We shall see, they said they wouldn't tax social severity benefits too.

[ChuckF]

Originally Posted by Jerome

You will have to pay attorneys

Awesome.

[Jerome]

Originally Posted by Sauron

several of the particular conditions that Jerome's source listed above -- which I identified in red -- do not apply to 401Ks and IRAs.

Sure, but many many more conditions *do* exist which *do* apply, it is up to IRS discretion as to which of what list apply to what degree.

[Jerome]

Originally Posted by ChuckF

Awesome.

Most people will be bankrupt fighting the IRS, remember that they get to seize your assets first, before the court fight.

[Sauron]

Originally Posted by Jerome

We shall see, they said they wouldn't tax social severity benefits too.

Whether they tax social "severity" benefits or not is irrelevant.

Your claim for 401Ks and IRAs was based on the list of conditions you copied from your link.

The particular four that I identified above do not apply to retirement plans in the first place.


1. Taxpayer’s potential for gain or loss is NOT artificially limited - you can lose your entire 401k or IRA without any failsafe kicking in to stop it;

2. Transaction DOES NOT EVEN INVOLVE ACCELERATION of a loss or DUPLICATION of a deduction

3. Transaction has SUBSTANTIAL meaningful potential for profit apart from tax benefits - if it didn't, then nobody would invest in stock mutual funds;

4. Transaction has OBVIOUS significant risk of loss - see the recent implosion of retirement accounts during the economic meltdown.


These four conditions do not apply to retirement accounts, *regardless* of whether or not they one day become subject to taxation.

In other words, you didn't even read your (plagiarized) list of conditions before posting them, or else you wouldn't have made such a ridiculous claim.

[Sauron]

Originally Posted by Jerome

Sure, but many many more conditions *do* exist which *do* apply,

Feel free to list those conditions which you believe do apply to IRAs and 401Ks.

it is up to IRS discretion as to which of what list apply to what degree.

If you think that the IRS has the right to legally characterize an IRA or 401K in such a manner, then by all means - cite the legislation or the previous IRS action to support it.

[Jerome]

Either way, there are many more conditions which *do* apply, the law does not say all of the + conditions shall occur and none of the - conditions may occur.

It is to the discretion of the IRS.

From here it is your responsibility to prove your innocence sans any assets.

[LadyShea]

Jerome, it's not nearly as ominous as you are making it. In fact, I was surprised at the rather lengthy waterfall analysis required, which seems to me to clearly be an effort to prevent arbitrary or inappropriate (ie: out of control IRS examiners trying to bankrupt everyone!!!) application of the doctrine.

[Jerome]

Originally Posted by LadyShea

Jerome, it's not nearly as ominous as you are making it. In fact, I was surprised at the rather lengthy waterfall analysis required, which seems to me to clearly be an effort to prevent arbitrary or inappropriate (ie: out of control IRS examiners trying to bankrupt everyone!!!) application of the doctrine.

So far i have been audited twice, one came back even, the other came back that they owed me money.

[Jerome]

Shea, do you think all of the + conditions must occur and none of the - conditions may occur?

[LadyShea]

Originally Posted by Jerome

So far i have been audited twice, one came back even, the other came back that they owed me money.

How are your audits pertinent to the topic, were they due to this particular issue?

[LadyShea]

Originally Posted by Jerome

Shea, do you think all of the + conditions must occur and none of the - conditions may occur?

No I don't think that, and that's not how the guide reads.

[Jerome]

Originally Posted by LadyShea

How are your audits pertinent to the topic, were they due to this particular issue?

Well, concerning this particular issue, I would not have law to back up my arguments as the IRS now has discretion to determine if one's lawful tax deductions are taxable.