Arthur Kamlet wrote:
- quote -

only bound to follow decisions of the Court of Appeals for the
Federal Circuit (this is where appeals would go). The IRS has not
announced whether they intend to appeal.

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- quote -


Is the jurisdiction of this court nationwide?
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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On Sep 14, 10:10�am, cpabake...[at]yahoo.com wrote:
- quote -

"Tax pros say it's safe to use the stock's value on the date of
distribution as the basis. And they say you can rely on the decision
to report sales on 1040s filed in the future."

I'm pretty sure that not all tax pros would say this; frinstance, I'm
a tax pro, and I don't think you would automatically get to use the
stock value on the date of distribution -- especially, and
specifically, if your tax basis in the insurance policy/contract is
less than that amount !!!

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On Sep 12, 10:58�pm, gindie <gin...[at]hotmail.com> wrote:
- quote -

Seems to me you should use the $27.50 per share or your basis in the
contract, whichever was less, at the time of the deumutualization.
That's what the court case concluded, best I can tell. No, maybe
not...
Q: Is [was] there a taxable gain from the demutualization if your
basis in the contract at that time was less than $27.50 per share?

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On Sep 12, 10:58*pm, gindie <gin...[at]hotmail.com> wrote:
- quote -

I believe the opening price was $37.50?

More on IRS' loss in court on taxing sales of demutualization
insurers' stock

You should file a protective refund claim if you haven't done so
already and the three year statute of limitations hasn't run for the
year you sold the stock.If you sold the stock in 2004, you're shut out
unless you filed for a extension to October 17, 2005. All subsequent
tax years remain open.

File Form 1040-X with the IRS and write "Protective Refund Claim Do-
Not-Process" on top of the form. The Service should hold the claim in
abeyance until the upcoming appeal is decided.

The Court didn't establish the basis for the stock that policyholders
got. It said only that folks who immediately sold shares received in
the demutualization didn't have any gain because the proceeds didn't
exceed their tax basis in the policy.

Tax pros say it's safe to use the stock's value on the date of
distribution as the basis. And they say you can rely on the decision
to report sales on 1040s filed in the future.

http://tinyurl.com/592hr2

Milt Baker CPA

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On Sep 12, 7:58 pm, gindie <gin...[at]hotmail.com> wrote:

- quote -

It seems that you would owe the additional tax but not any interest or
penalties. But I'm being expansive in my reading of 6404. Abatements
(f), namely expanding "written advice for the Internal Revenue
Service" below to mean "written advice by the courts". It seems
reasonable that in view of the courts ruling, the IRS would change
their statutes to reflect the new rule, but if they appeal and win,
then you can always say you were relying on the written advice of
their published statutes (wonder where they are), so interest and
penalties should be waived.

<Quote source="http://www.law.cornell.edu/uscode/26/6404.html"
(f) Abatement of any penalty or addition to tax attributable to
erroneous written advice by the Internal Revenue Service
(1) In general
The Secretary shall abate any portion of any penalty or addition to
tax attributable to erroneous advice furnished to the taxpayer in
writing by an officer or employee of the Internal Revenue Service,
acting in such officer’s or employee’s official capacity.

</Quote
I do hope that the IRS does not appeal, or if it does then it loses.

Also, if income is under-reported by more than 25%, then the statute
of limitations is 6 years, not 3. So if these mutual fund shares
would result in your tax increasing by more than 25% if you use the
cost basis as zero, and the IRS wins its appeal, then they have 6
years to assess tax.

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I have shares of Prudential, issued at $27.50 (I believe) at the time
of demutualization.

In light of the court decision, should I use that as the basis if I
sell this year (assuming no other decisions this year)? What happens
if the IRS appeals and gets an overturn of the decision within 3
years? or after 3 years?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >