June 30, 2011 Optional Mileage Rate Increases The IRS announced the optional mileage allowance for owned or leased vehicles for the final six months of 2011 will increase to 55.5¢ per mile for all business miles driven from July 1, 2011 through December 31, 2011. In recognition of recent gasoline increases, the IRS, which normally updates mileage rates once a year, made the special adjustment. The IRS also increased the deductible medical and moving expenses by 4.5¢ to 23.5¢. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14¢ per mile. IRS Rev Proc 2010-51. IRS Scrutinizes Gifts of Real Estate The Internal Revenue Service has commenced a low profile but sweeping effort to use state land transfer records in order to obtain evidence of omission in reporting gifts of real estate to family members. Last December’s tax compromise created new tax rules which made big gifts to family members popular this year, as Congress raised the limit on how much a person can give in a lifetime to $5 million without having to pay a gift tax. However, anytime a gift to one person exceeds $13,000 in one year, donor is supposed to file a gift tax return. The details of the IRS effort were revealed in a request to a federal judge in California for a John Doe summons for data the IRS wanted to serve on that state’s State Board of Equalization, a taxing body. In the document, the IRS stated 323 taxpayers in the previous two years had been examined for failing to report possible gifts, another 217 were being examined, and 250 more were being considered for review. States that currently hand over information on gift-like transactions are Connecticut, Florida, Hawaii, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Virginia, Washington, and Wisconsin. A chart in the document indicated noncompliance rates of 60% in Connecticut, 90% in Florida, 60% in Nebraska, 100% in Ohio, 90% in Virginia, 80% in Washington, and 50% in Wisconsin. Wall Street Journal 5/26/11. If you think you may have to file a required tax return, please contact us for a consultation. Statute of Limitation Period Remains Open if excess ROTH IRA contributions are not reported on your tax return. Paschall 137 TC 2 (2011). Payment to Caregivers of Dementia Patients are Deductible The Tax Court has held that payments made to caregivers for providing physician ordered assistance and supervision to a patient suffering from dementia qualified as long-term care services under IRC 7702B(c). Although the caregivers were not licensed healthcare providers, and the payments to them were not for the diagnosis, cure, mitigation, treatment, or prevention of disease, the payments satisfied the requirement to be considered qualified long-term care services. The physician stated the patient suffered from severe dementia and required assistance with activities of daily living. The court found the caregivers’ 24 hour services qualified as maintenance or personal care services and that their presence was necessary to protect the patient’s health and safety from dementia related threats. Estate of Lillian Baral 137 TC 1 (2011). So Long Peter Falk Peter Falk, who died this month, brought rumpled panache to television as Columbo, a trench coat clad cigar-chomping detective whose earthly yet cerebral approach to crime solving entertained viewers over five decades. Prior to his debut as Columbo, a Los Angeles detective in 1968 in the television movie “Prescription Murder” he researched the part of the detective by coming to New York City and riding with detectives’ of Midtown North. He selectively adopted habits and attire from those whom he encountered. In 2005, when Mr. Falk returned to Ossining where he grew up, he was presented with a replica of his Columbo trench coat. One of those detectives who knew him well was our own Thomas McKenna, a retired New York City Detective and former Trustee of the New York City Detectives Endowment Association and author of Manhattan North Homicide. As always, if you have any questions about these or any other matters, do not hesitate to call us. Remember, We’re Here For You!