Recent Developments

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Parents
of disabled children should be able to exclude reimbursements for non-public
school services from their income according to a recent IRS announcement. Information
Letter 2009-0124. The general tax rule, which should come as no surprise, is
that reimbursement of any personal expense is taxable as income unless a
special rules provides to the contrary. A board of education may be required to
pay for non-public education services obtained by a parent for a child if: (1)
the services offered by the board are inadequate; (2) the services the parent
secures are appropriate; and (3) equitable considerations support the parent’s
claim. If these conditions are met, the school board must pay for the cost of
the non-public education in order to satisfy its legal obligation to provide a
free appropriate education.

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Single
member LLCs are disregarded for tax purposes, but that doesn’t mean they don’t
have a tax consequence as taxpayers recently learned in New Jersey. Kaplan v.
Director Division of Taxation, Docket No. A-3758-07T3, 2/11/09. The taxpayers
held commercial real estate in single member disregarded LLCs. These generated
losses to be reported (since the LLCs were disregarded) on their personal 1040
which would not be deductible. So the taxpayers tried to report income realized
on other rental real estate partnerships (RELPs) as rent income to offset the
LLC losses. NJ headed that one off at the pass. So the taxpayer tried to argue
that the single member LLCs were actually tenant in common interests and hence
the losses were reportable as partnership results that would offset the RELP
income.  The court held that the
attempts to transmute income into whatever category seemed to provide a tax
benefit wasn’t cricket.

■ Income from artistic performances isn’t
subject to sales tax. Strippers doing a pole dance were found to be part of the
dramatic arts so that the sales tax exemption under Sec. 1105(f)(1) applied.
The judge found that: “The pole maneuvers in particular are no small feat to
accomplish…” Neither was such legal reasoning!  Matter of 677 New Loudon Corp d/b/a Nite Moves 821458.
NYLJ  3/26/09.