Internal Revenue Bulletin: 2005-14
April 4, 2005
Table of Contents
Alternative minimum tax; refinanced mortgage interest. Interest paid on a home mortgage that has been refinanced more than one time is deductible as qualified housing interest for purposes of the alternative minimum tax to the extent the interest on the mortgage that was refinanced is qualified housing interest and the amount of the mortgage indebtedness is not increased.
Frivolous tax returns; Social Security refund. This ruling emphasizes to taxpayers and to promoters and return preparers that there is no right to a refund of, or a deduction for, Social Security taxes paid based on arguments that a taxpayer has waived the right to receive Social Security benefits or has donated Social Security taxes or benefits to the government. These arguments have no merit and are frivolous.
Frivolous tax returns; altering the jurat. This ruling deals with taxpayers who attempt to reduce their federal tax liability by striking or altering the written declaration (the jurat) that verifies that a return, declaration, statement or other document is made under penalties of perjury. The ruling emphasizes to taxpayers and to promoters and return preparers that striking or altering the jurat in a manner that negates its validity invalidates the return.
Frivolous tax returns; constitutionally based arguments. This ruling emphasizes to taxpayers and to promoters and return preparers that a taxpayer cannot avoid income tax by making frivolous constitutionally based arguments.
Frivolous tax returns; protesting government programs or policies. This ruling emphasizes to taxpayers and to promoters and return preparers that liability for federal taxes does not depend on whether the taxpayer agrees with the government programs or policies that are funded with tax receipts. Any argument that taxpayers may refuse to report income or claim deductions because they oppose particular government programs or policies is frivolous and has no merit.
Frivolous tax returns; use of “straw man” to avoid tax. This ruling emphasizes to taxpayers and to promoters and return preparers that a taxpayer cannot avoid income tax on the erroneous theory that the government has created a separate and distinct entity or “straw man,” in place of the taxpayer and that the taxpayer is not responsible for the tax obligations of the “straw man”. This argument has no merit and is frivolous.
Proposed regulations provide that a transaction will qualify for nonrecognition treatment under sections 332, 351, or 368 of the Code only if there is a transfer and a receipt of net value. The proposed regulations also provide guidance on the circumstances in which and the extent to which a creditor of an insolvent corporation may be treated as owning a proprietary interest in the target corporation for the purpose of satisfying the continuity of interest requirement. With respect to section 332, the regulations clarify that this section applies only to those cases in which the recipient corporation receives at least partial payment with respect to each class of stock which it owns in the liquidating corporation.
This notice sets out some of the most common frivolous arguments and schemes that taxpayers use to avoid their tax obligations. It also identifies civil and criminal penalties that the Service may impose against taxpayers who engage in abusive tax-avoidance schemes. Notice 2004-22 modified and superseded.
State and local general sales tax deduction. This notice provides guidance to taxpayers who elect to deduct state and local general sales taxes in lieu of state and local income taxes under section 164(b)(5) of the Code.
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