Tax News
Posted: February 19th, 2008 @ 5:52pm
Source: AIPB's "The General Ledger"- February 2008
Taking write-offs too far. The taxpayer was an S corp and also a partner in a partnership. The S corp was solely owned by Dr. V.R. DeAngelis, MD, who formed a welfare benefits trust and made contributions to it. The trust used the contributions to purchase whole life insurance on his life. The insured could select the beneficiary. The IRS decided that the contributions were not ordinary and necessary business expenses and not deductible by the S corp- and that the premiums DeAngelis paid were includable in his gross income.
Held: Mostly for the IRS. The doctor argues that contributions to the trust were for dismissal wages and excludable under Reds. 1.162-10 (a) . The court ruled that the plan was a subterfuge to use corporate cash to buy investment life insurance that personally benefited the employee, so the premiums could not be deducted by the corporation. But the premiums were not taxable to the shareholder, because it was an S corp. Both denying the deduction and including the premiums in the employee’s income would amount to double taxation.
“Alternative vehicle” credit. Purchasers of certain large trucks, buses or other heavy vehicles that run on alternative fuel can claim a credit of up $32,000; certain large hybrid trucks and other heavy hybrid vehicles, up to $12,000.
To qualify for the Alternative Motor Vehicle Credit, the vehicles must be powered solely by alternative fuels, such as compressed or liquefied natural gas, liquefied petroleum, hydrogen, or any liquid at least 85% methanol. Vehicles that combine alternative and petroleum-based fuels may qualify for a reduced credit. New vehicles with special equipment, and those converted for alternative power may qualify. For a list of qualified vehicles (updated periodically), go to www.irs.gov and type QAFMV in the upper righthand search box.
