Federal Editorial Materials
Practical Tax Strategies
Volume 84, Number 01, January 2010
ROUNDUP OF SIGNIFICANT INCOME TAX DEVELOPMENTS IN 2009, Practical Tax Strategies, Jan 2010
ROUNDUP OF SIGNIFICANT INCOME TAX DEVELOPMENTS IN 2009
Besides far-reaching legislation, recent tax developments include guidance on Ponzi losses, mortgage
interest, discharge of debt, compensation, and the work product privilege.
Author: MATTHEW A. MELONE
MATTHEW A. MELONE, J.D., CPA, is an associate professor of law at Lehigh University in
This past year has been noteworthy due to the continuing effects of the economic meltdown that occurred in 2008
and the recovery, albeit slowly, of business and consumer confidence. Among the more significant developments
Tax incentives included as part of the massive stimulus legislation in early 2009.
Favorable rules for persons grappling with Madoff-related Ponzi scheme losses.
Favorable court decisions interpreting the passive activity loss rules.
A federal circuit court decision that has potentially far-reaching implications for audit procedures undertaken
with respect to income tax exposures.
On 12/2/08, President Bush signed the Worker, Retiree, and Employer Recovery Act.
This legislation, in addition to
making several technical corrections to the Pension Protection Act of 2006, provides that qualified plan participants
and IRA owners are not subject to the required minimum distribution rules for 2009. In general, account owners must
begin taking minimum distributions by April 1 of the year following the year in which the taxpayer attains age 70 1/2.
Failure to do so subjects the owner to a 50% excise tax pursuant to Section 4974.
In light of the performance of financial markets in 2008 there has been widespread concern that the requirement to
take distributions could create hardships for many taxpayers. The IRS refused to eliminate the requirement for 2008.
The legislation also mandates, effective in plan years after 2009, that qualified retirement plans offer nonspouse
beneficiaries the option to roll over inherited accounts into an IRA established for such purpose. Prior to the
effective date of the change, plans may, but are not required to, offer this option.
President Obama signed the American Recovery and Reinvestment Act of 2009 on 2/17/09.
This law, part of the
massive stimulus legislation, contains several tax incentives for business. Among them are the following:
Expansion of additional first-year 50% depreciation allowances for qualified property.