Masonry Magazine March 1971 Page. 40
Taxes
(Continued from page 10)
ing, which he has purchased at some earlier time, he is entitled to a demolition loss regardless of whether the building is replaced. The Tax Court, on the other hand, rejected this position. This Court (and others that follow it) take the position that if the purpose of the demolition was primarily to clear the area for the erection of a new building, then the remaining undepreciated basis of the old building must be added to the basis of the new building that replaces it.
In somewhat reversing their positions, the Tax Court allowed a demolition loss where a residential dwelling was replaced by a professional office building. The taxpayer in the case was an attorney who had purchased two pieces of property. Each piece of property contained a residential dwelling which the taxpayer leased. A few years after purchasing the buildings the attorney had them razed in order to build a professional office building. Now the Commissioner of IRS has acquiesed in this decision of the Tax Court, thus, perhaps resolving the long-standing conflict. (Canelo III, 53 T.E. 217)
ESTIMATED TAX BILLS
The IRS has announced that beginning in 1971, it will discontinue issuing separate notices proposing the penalty for underpaying individual estimated income tax (including self-employment tax) for the previous taxable year. Now, the underpayment penalty will be assessed and will be included in a bill to be issued immediately after the taxpayer's Form 1040 has been audited. Prior to 1971 such notices were sent during income tax season and later for underpayment of taxes and then again toward the end of the calendar year a notice for the estimated tax penalty was sent. Now the IRS will be issuing an all inclusive bill for all known liability for a given tax period after every tax return is processed.
Should a tax bill include an underpayment penalty, it would be accompanied by a "stuffer" explaining the general requirements for paying estimated taxes and a blank Form 2210 which may also be used to request a reconsideration of the assessed underpayment penalty. One final note, these bills will also include the amount of any penalty assessed for failure to pay a tax when due. The IRS believes that this change in billing procedures will benefit taxpayers, practitioners, and the IRS. IRS Release, No. 1096
FOREIGN BANK ACCOUNTS
The IRS evidently intends to put an end to American taxpayers' escaping tax liability by placing money in foreign bank accounts. You will notice that on your Form 1040 there is a question as to any financial interest in or signature authority or other authority over a bank securities or other financial account in a foreign country. This is one of few changes in Form 1040 from last year.
TRAVEL EXPENSES
An employee may deduct traveling expenses, including food and lodging, if he is on an assignment of work that is temporary. These expenses may be deducted from the gross income even in cases where the employee takes the standard deduction. The question of the deductibility of the traveling expense often hinges on the question whether the work assignment is of a temporary nature. Obviously, if the work is regarded as permanent then the cost of traveling between the job site and the principle place of abode becomes a personal expense and not a deductible business expense. This area of the tax law came into focus in a recent Tax Court case. A pipe fitter had worked for some 25 years in his hometown. However, when the number of construction projects declined in his hometown, he obtained a job in another area with a pipe contractor on a nuclear power plant under construction. When the pipefitter began his work on the power plant the estimated completion date was about 4 months. However, the complexity of the power plant and the construction difficulties caused the work of the taxpayer-employee to last 31 months. During this time, he rented an apartment near the job site. On weekends he traveled home where his wife continued to live.
It was the opinion of the Tax Court that the pipefitter's job was temporary at its inception. Further, it was found that the taxpayer's job did not lose its temporary status until the end of the 1st year or for some 8 months. Therefore, the court held that the taxpayer could deduct such expenses incurred away from home as a business deduction for those first 8 months. Brown vs. Com'r T. C. Memo 1971-7
Japan to Manufacture Wedge Blocks
Wedge Block, Inc., St. Louis manufacturer of a mortar-less system of block construction, announced it has completed negotiations with Nippatsu Jitsugyo Ltd. of Osaka for that firm to manufacture Wedge Blocks in Japan on a franchise basis. Although the Japanese blocks will be produced in 10, 12 and 15 centimeter widths and be 33% longer than their American counterpart, the patented double-vee grooves and tapered keystone design will remain the same.