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November 2015

Procedures for Requesting Copies of Fraudulent Tax Returns

An identity theft victim, or an authorized representative, may now request a redacted copy of a bogus return that was filed and accepted by the IRS using the victim’s name and Social Security number. Copies of the current and six previous tax years are available. Names, addresses and identifying numbers will be partially or fully blocked for privacy protections. However, returns should provide clues as to how much of a victim’s personal and financial details were stolen.

IRS: Internet Domain Names must be Capitalized

Chief Counsel Advice, CCA 201543014, provides that the cost incurred in acquiring an Internet domain name must be capitalized under Treas. Reg. Sec. 1.263(a)-4, even if the name is generic. The CCA memorandum specifies that the capitalized amount for domain names qualifies as an amortizable intangible governed by Reg. Sec. 1.197-2(b)(10) and Reg. Sec. 1.197-2(b)(6).

Land Development Costs Not Qualified for the Completed Contract Treatment

In Howard Hughes Co. LLC v. Commissioner, No. 14-60915, the Fifth Circuit Court of Appeals confirmed a 2014 Tax Court decision that disallowed the use of the completed contract method of accounting. The company, in selling land it owned, agreed to prepare the lots for the construction of residential properties, but did not actually build the homes. The court concluded that the taxpayer would only qualify under IRC Section 460 if “the taxpayer builds, constructs, reconstructs, rehabilitates, or installs integral components to the dwelling units or real property improvements directly related to and located on the site of such dwelling units.”

TX Society of CPAs Urges Immediate Action on Tax Extenders

In a recent letter to leaders of the U.S. Senate Finance and House Ways and Means Committees, the Texas Society of CPAs expressed that failure to act soon on tax extenders will likely delay the 2015 tax filings. A compressed filing season would make things more difficult and costly for the government, tax professionals and taxpayers.

Majority of Taxpayer Correspondence Still Contains Social Security Numbers

An Office of Management and Budget mandate required the IRS to remove the unnecessary use of Social Security Numbers by March 2009. According to a recent TIGTA report, the IRS has masked or fully eliminated SSNs from only 2 percent of taxpayer letters, 13 percent of forms and 48 percent of notices. The IRS suspended the scrub project in 2011 due to limited funding. TIGTA was also concerned that the IRS cannot accurately measure its progress because it does not maintain a complete inventory of how many correspondence documents actually exist.