Per the U.S. Supreme Court, every citizen has every right to save taxes legally

Per the U.S. Supreme Court, every citizen has every right to save taxes legally

 

The U.S. Supreme Court decision, that it is every taxpayer’s right to legally save taxes, has been around for one hundred forty years.

“The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.”  United States v. Isham, 84 U.S. 496, 506, 21 L. Ed. 728 (1873); Gregory v. Helvering, 293 U.S. 465, 469, 55 S. Ct. 266, 267 (1935); Superior Oil Co. v. Mississippi, 280 U.S. 390, 395, 396, 50 S. Ct. 169, 74 L. Ed. 504 (1930); Jones v. Helvering, 63 App. D.C. 204, 71 F.2d 214, 217 (D.C. Cir. 1934).

Almost one hundred years ago, the Supreme Court held further that “A taxpayer may resort to any legal methods available to him to diminish the amount of his tax liability.”  Bullen v. State of Wisconsin, 240 U.S. 625, 630, 36 S. Ct. 473, 60 L. Ed. 830 (1916). In Iowa Bridge Co. v. Comm., 39 F.2d 777, 781 (8^th Cir. 1930), the Eighth Circuit said: ‘In fact, it is held that even thought the transaction is a device to avoid the burden of taxation, or to lessen that burden, it is not for that reason alone illegal.‘

So with this holiday season upon us, keep in mind that it is perfectly legal to choose transactions tax favorably.

 

Swiss banks likely to cave and disclose U.S. accounts to U.S. authorities

Switzerland's private banks are deciding whether to disavow centuries of secrecy and bow to U.S. pressure to disclose accounts of U.S. persons.  The Swiss banks are otherwise going to have to face fines and possible criminal prosecution.

Most of the smaller banks are expected to participate but are wrestling with the risk of customer backlash if they concede and disclose customer confidentiality.

Back in 2009, Switzerland's largest bank, UBS was fined $780 million and handed over the names of its U.S. customers to avoid facing criminal charges.

If you are a U.S. person with an account in Switzerland and have not properly reported same, you should seriously consider entering the voluntary offshore account program offered by the Internal Revenue Service.

Internal Revenue Service extends deadline for abused innocent spouses to apply for relief from 2 years to 10 years

Internal Revenue Service extends deadline for abused innocent spouses to apply for relief from 2 years to 10 years

 

To help victims of domestic violence and others, the Internal Revenue Service has proposed rules to extend from 2 years to 10 years, the amount of time taxpayers can apply for "innocent spouse" relief.

Every year approximately 50,000 people apply for innocent spouse relief and some of them are involved in domestic disputes or physical abuse.

IRS said it would stop enforcing a two-year deadline to file an innocent spouse relief application in 2011. The recent proposal would make the 10-year deadline permanent in law.

The proposed rules also stop the IRS from demanding unpaid taxes while the innocent spouse application is being processed.

 

Recent Tax Court Case outlines the factors in determining whether the Commissioner’s determination of a fraud penalty should be upheld against a taxpayer omitting income

Recent Tax Court Case outlines the factors in determining whether the Commissioner’s determination of a fraud penalty should be upheld against a taxpayer omitting income

 

In McClellan v. Comm., T.C. Memo. 2013-251 (Oct. 31, 2013), Tax Court Judge Laro discussed the nine factors for whether to impose the 75% penalty found in I.R.C. Sec. 6663.  They are referred to as nonexclusive “badges of fraud” from which the Court may infer a taxpayer's fraudulent intent.  They are: (1) understating income, (2) maintaining inadequate records, (3) failing to file tax returns, (4) giving implausible or inconsistent explanations of behavior, (5) concealing assets, (6) failing to cooperate with tax authorities, (7) engaging in illegal activities, (8) attempting to conceal illegal activities, and (9) dealing extensively in cash.  Bradford v. Comm., 796 F.2d 303 (9^th Cir. 1986).  Here, there were six of the nine present: 1, 2, 4, 5, 6 and 9.  The court therefore determined that the Commissioner had proven fraud by clear and convincing evidence.

 

This case highlights how fraud cases are dealt with currently by the Tax Court.