LoTax wrote:

- quote -

As I recall, having run this down many years ago, for an
*extended* return it's the actual date of receipt. A timely
filed return is "deemed filed" on April 15 for purposes of
the statute, but extended returns tie in to when the IRS
received it.

- quote -

A "protective claim" is one where you ask the IRS not to
rule on the claim, but to hold it pending the outcome of
some case or another. As I recall, again from memory
<grin> , is that the IRS doesn't *have* to respect the
protective nature and can rule on the request--but they
normally don't.

--
Ed Zollars, CPA
Phoenix, Arizona

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:

<snip a bunch
- quote -

The IRS website seems to waffle on when the three year
statute runs out. At one place they say "three years from
when you filed" while at another place they say "three years
from the due date of" your return.

I'll be amending my 1999 return, for which I requested an
automatic extension to 08/15/00 and then also a
'nonautomatic' extension to 10/15/00, which was approved.
Do I therefore have until 10/15 of 2003 to make a claim
within the three-year statute?

If IRS rejects my claim, what have I got left except to
[threaten to] go to court? Have I bought some more time,
somehow? What does a "protective claim" get you, anyway?

--LoTax

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Drew Edmundson wrote:

- quote -

Contingent fees are *not* prohibited under Circular 230 for
amended returns if you expect the IRS will review the issue
in question--and, in this case, given it made the Wall
Street Journal and Tax Analysts (both of which the IRS
National Office is likely to read) that's pretty darned certain.

That said, the *practical* answer is that you are unlikely
to get far with an amended return unless you have the means
to take the IRS to court on it--and, frankly, since those
cases would be relatively few and far between, I have to
wonder if the IRS wouldn't cave there <grin> rather than
risk a loss.

However, considering the question involved is one of
*basis*, if your client still has the stock and later sells
it, the real benefit is taking the higher basis position on
that return. In that case, the IRS is unlikely to figure
out the issue is in play *and*, after following up on the
citations that Bill and Burgess (who are not associated with
refund site) give in their Tax Notes article, I think the
position is very strong. In fact, it's arguable that the
IRS's position isn't strong enough to meet their own
"reasonable possibility" standard <grin> .

Standard disclaimer: I do know Bill and was this past
summer on a panel with him at the Phoenix Tax Workshop.

--
Ed Zollars, CPA
Phoenix, Arizona

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"Drew Edmundson" <cfdaqw[at]nccpa.com> wrote:

- quote -

Nothing prohibited against making the fee a percentage of
the refund on an AMENDED return.

--
David M. Woods, EA
Boston, MA 02109

Postings here are general information only and not to be
relied upon as advice.

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I looked at this site. I didn't read everything but I
noticed his fee structure for amended returns. Apparently
he wants a cut of the refund. I thought this was not
allowed by IRS Regulations but I am too lazy (or trying to
get those 9-15 extensions done) to look it up.

If his fee structure is illegal, and that is a big *IF*,
then it cast doubt on his research and conclusions, at least
in my mind.

Drew Edmundson, CPA (NC)
e-mail is my first name at nccpa dot com

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LoTax wrote:

- quote -

There is one very interesting lesson to take form this--it
shows the danger of concentrating on "the answer" as opposed
to understanding why an answer purports to be correct when
handling a tax matter. I suspect most preparers (both paid
and do it yourselfers) simply accepted what the insurance
company told them about the tax consequences--especially
when they noted the IRS had ruled on the consequences.

It also illustrates the hierarchy of authorities and, that
from time to time, the IRS makes some interesting "leaps of
faith" in rulings <grin> , which is what they appeared to do
this time.

In reality, the *practical* issue is that if you take this
position initially (basis goes to the stock up to the FMV at
the date of demutalization) then you aren't likely to have a
problem since a) the IRS rarely questions basis and b) it
would appear you have no "special" disclosure issue (your
law analysis is better than theirs <grin> ).

If you have previously used a zero basis and recognized a
gain on sale, then it's a bit tougher. Now you have to file
a claim for refund (otherwise known generally as a 1040X
<grin> ) and explain your position to a real IRS employee
looking at the issue. In that case I think you are likely
to get a denial of the claim, especially if it's clear that
the amount in question would not make it feasible to mount a
U.S. District Court or Court of Claims challenge.

In that case, I suspect the best route is to wait until the
statute is about to run and *then* file the claim--that will
at least buy you time, during which you hope a case actually
gets taken to trial on this one that the IRS loses.

--
Ed Zollars, CPA
Phoenix, Arizona

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lawrencepmueller[at]yahoo.com (Larry Mueller) wrote:

- quote -

I've read Raby's article, and it certainly seems to present
a convincing argument for not paying tax on the entire
proceeds from demutualization. The article is especially
interesting when it points out how pitifully weak IRS's
position is on the issue.

You other mtm'ers should read this article. Yes, it's a
long article, and yes, you'll have to read it carefully, but
to my mind it presents a carefully reasoned and researched
position that could save thousands/millions/billions for
affected taxpayers.

Besides, this issue affects *my* tax return, and I'm looking
for free opinions and gratuitous insights. How much blunter
can I be???

--LoTax

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This is a complex tax issue. The IRS's position (and that of
the recently demutualized insurers) on the proper tax
treatment, is being challenged.

See www.demutualization.org for an informative article on
this subject written by a well-respected tax attorney,
William Raby. The issue affects millions of taxpayers and
billions of dollars are involved.

Professor Joe Belth
http://www.theinsuranceforum.com/editor.html has also
written an article on this subject challenging the IRS's
position. That article is available upon request from The
Insurance Forum.

For further details, contact C. D. Ulrich, CPA, P. 0. Box 2568,
Baxter, MN 56425, telephone (218) 828-4289. His e-mail address is
cdu[at]charter.net.

Mr. Ulrich did months of tax research and then called this
issue to the attention of the Professor Belth and Mr. Raby.

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