TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Thursday, December 31, 2009

The Top 10 Tax Stories of the Decade

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I think there's a common thread here: the increasing awareness that the income tax will not be sufficient to meet revenue needs, and the grudging awareness that some other "big picture" revenue sources is necessary.

Posted by: mike livingston | Jan 1, 2010 8:31:12 AM

IRS" Multi-billion Dollar Contribution to the Tax Gap

Current IRS instructions for line 8 on Form 6251 exclude from AMTI the recoveries of all tax refunds entered on lines 10 or 21 of Form 1040 regardless of whether the deduction of the tax overpayment provided a tax benefit in a year the regular tax was paid or in a year the AMT was paid. See page 2 of Form 6251 and track back to Schedule A for how the deduction of a tax overpayment could have provided a tax benefit in a year the AMT was paid. As a consequence of IRS instrucions, neither the income nor the refund related to the tax overpayment are taxed directly when the regular tax was paid in the tax overpayment year. Now here is the question.

How would the instruction for line 8 on Form 6251 (2009) change if section 56(b)(1)(D) of the Internal Revenue Code were amended to read as follows?

(D) Treatment of certain recoveries
(i) No recovery of any tax to which paragraphs (1), (2), or (3) of section 164(a) applied shall be included in gross income for purposes of determining alternative minimum taxable income.
(ii) Clause (i) shall not apply to the recovery of any tax that was allowable as a deduction in computing adjusted gross income.

Posted by: WD Kebschull | Jan 2, 2010 2:59:32 PM