Why isn't it just as likely that the IRS news release is flat out wrong or are you now arguing the Service doesn't make errors. In any case Old WD why not a request a change in method of accounting for taxes on your 1040 to switch from cash to accrual for taxes. That would appear to cure your tax benefit problems with state and local tax refunds. And while I realize that that they probably don't let you have anything sharp, last I looked the Service will accept a Form 3115 filed out in crayon. Also, I have seen the good Professor's article (Why heck, I've read it which is more, I can say from your posts, than you have done) and even he concedes that: In the absence of congressional adoption of the proposed principles, the Internal Revenue Service and the courts must ultimately decide whether the proposed principles fit within the confines of the Internal Revenue Code. Strong arguments exist on both sides of this issue. Face it the government has at a minimum a strong argument for the position it has taken but no, I have no doubt you'll whine on. Cheers!

Also, I have seen the good Professor's article (Why heck, I've read it which is more, I can say from your posts, than you have done) and even he concedes that: In the absence of congressional adoption of the proposed principles, the Internal Revenue Service and the courts must ultimately decide whether the proposed principles fit within the confines of the Internal Revenue Code. Strong arguments exist on both sides of this issue. Face it the government has at a minimum a strong argument for the position it has taken ... You should have read Professor Matthew Barrett's article to the end. His conclusion was that section 111(a) of the IRC supports my position.   We have been over this before.  Did you forget? Cheers, WDK

Forget, Old WD, not I. I was the one that pointed out that your statements that that the Service had no defensible position was a flat out lie. I was the one that pointed out that even an individual (i.e., the good professor) who supports some of the positions you are espousing admits there are strong arguments on the other side. Old WD, to strongly advocate for your position is one thing but to pretend, as you have, that there is not another side well . . . that's. . . that's . . . . - oh, what is the word - yes, duplicity. That is what you have been at a minimum, duplicitous. Cheers.

Forget, Old WD, not I. I was the one that pointed out that your statements that that the Service had no defensible position was a flat out lie. I was the one that pointed out that even an individual (i.e., the good professor) who supports some of the positions you are espousing admits there are strong arguments on the other side. Old WD, to strongly advocate for your position is one thing but to pretend, as you have, that there is not another side well . . . that's. . . that's . . . . - oh, what is the word - yes, duplicity. That is what you have been at a minimum, duplicitous. Frank: The Office of Chief Counsel respondent who wrote me in June 1996 apparently felt that I had gutted any strong arguments that IRS had because he was compelled to misrepresent my positions and make demonstrably false statements in an attempt to prop up IRS's bogus interpretations of sections 56(b)(1)(D) and 111(a). Let me state it a little more succinctly, the IRS respondent could defend IRS's position with the truth so he lied.  The IRS then release the lies for publication.  That, my friend, is duplicity.  And I don't remenber you exposing any of IRS's lies in the letter to me that you posted.  Did you fail to recognize the IRS respondents lies (demonstrably false statements) or were you simply being duplicitous? BTW, I am still waiting for you to complete your assignment with respect to reconciling section 111(a), Revenue Ruling 78-194, IRS News Release NJ-2002-09, and IRS instructions for the tax treatment of itemized deduction recoveries in Form 1040 instructions and related publications. Cheers, WDK

Let's suppose Old WD, you are right (God what a leap of faith!), then it must follow that Counsel lied? Counsel could not of been in error in their understanding of what you posted? No that's right when you state something in error it's an honest mistake but if another does it's a lie. Now there is no problem with the revenue ruling - it postulates a payment and recovery in the same year. Rev. Rul. 78-194 . . . Held, the homestead tax rebate for property tax due and payable on the dwelling house for 1977 is includible in the gross income of the taxpayer in computing federal income tax for 1977 only to the extent it exceeds the property tax for the dwelling house actually paid by the taxpayer in 1977. This conclusion applies whether or not the taxpayer itemizes deductions. However, a taxpayer who itemizes deductions must reduce the deduction for property tax paid on the dwelling house by the amount of the rebate. Compare Rev. Rul. 70-86, 1970-1 C.B. 23, which consider the federal income tax treatment for property taxes paid under California law. (See Rev Rul 70-86 below.) Was this an oversight on your part - Nah, it must have been a flat out lie. Now the Notice from New Jersey, perhaps you'll point me to where this item is posted as the official position of the Internal Revenue Service. At least you can show me the authoritative weight it has, I mean while at least a letter ruling or technical advice has some binding effect between the Service and the person receiving the ruling (Damn little effect but some - section 6110(k)(3) - Unless the Secretary otherwise establishes by regulations, a written determination may not be used or cited as precedent. ), what law, or rule of law, states that a notice from an Area Director has any precedence at all. Must be Old WD you don't know what you're talking about. (Now why doesn't that surprise!) Cheers Rev. Rul. 70-86 , 1970-1 C.B. 23 Illustrative situations are set forth relative to the tax treatment of rebates of the California real property tax on personal residences for the fiscal year 1968-69 as a result of the November 5, 1968, amendment of Section 1(d), Article XIII, to the California Constitution. Advice has been requested concerning the treatment to be accorded, for Federal income tax purposes, to rebates of California real property taxes under the situations described below. The November 5, 1968, amendment, Section 1(d), Article XIII, to the California Constitution provides, in pertinent part, that for the 1968-1969 fiscal year only, $750 of the assessed value of a dwelling will be exempt from real property taxes and this exemption will be effected by a relief payment of $70 in June of 1969 to eligible taxpayers who file claims for the real property tax relief payment in 1969. The relief payment is payable on property used as a personal residence by a taxpayer. Accordingly, practically all taxpayers affected will file their income tax returns on the cash receipts and disbursements method of accounting and on a calendar year basis. In the State of California, real property taxes become a lien on the first Monday in March preceding the beginning of the fiscal year (July 1-June 30) and are payable during the fiscal year in two installments due on November 1 and February 1 following the lien date. 24. The entire tax may be paid at the due date of the first installment. It is not necessary to pay the tax in order to receive the relief payment since any unpaid tax is a lien on the real property. Section 111(a) of the Internal Revenue Code of 1954 provides the general rule that gross income does not include income attributable to the recovery during the taxable year of a bad debt, prior tax, or delinquency amount, to the extent of the amount of the recovery exclusion with respect to such debt, tax, or amount. Section 1.111-1 of the Income Tax Regulations provides, in part, that the term recovery exclusion means an amount equal to the portion of prior taxes which, when deducted or credited for a prior taxable year, did not result in a reduction of any tax of the taxpayer. Section 111(b)(2) of the Code defines the term prior tax as a tax on account of which a deduction or credit was allowed for a prior taxable year. Section 164(a) of the Code provides, in part, the general rule that, except as otherwise provided, State and local, and foreign, real property taxes are allowable as a deduction for the taxable year within which paid or accrued. Revenue Ruling 56-447, C.B. 1956-2, 102, holds, in part, that recovery during the taxable year, by a cash method taxpayer, of previously deducted State income tax is excludable from gross income to the extent that the prior deduction did not result in a tax benefit for the year of deduction. Furthermore, where the tax table or standard deduction is used in lieu of itemized deductions in the computation of a taxpayer's Federal income tax liability for a taxable year in which he had paid State income tax, the refund of all or any part thereof is not includible in his gross income in the year received. It is held that, for purposes of a taxpayer who uses the cash receipts and disbursements method of accounting, who has paid the tax and who files his Federal income tax return on a calendar year basis, the $70 relief payment in 1969 is a recovery of the tax previously paid that is excludable to the extent that the underlying real property tax deduction did not result in a tax benefit for the year 1968. It is further held that where the real property tax is paid in two installments, one in each of the years 1968 and 1969, the $70 relief payment is attributable to each such year in a manner proportionate with the installments made during such years. In the case of a taxpayer similarly situated except that the tax has not been paid, the relief payment is in the nature of a reduction of the amount of tax to be paid. Application of the foregoing holdings is illustrated in the situations, and solutions thereto, that follow: Situation 1. - Deductions are itemized in 1968 and 1969, and (a) The entire real property tax is paid in 1968. (b) The real property tax is paid 1/2 in 1968 and 1/2 in 1969. (c) The real property tax is unpaid. Situation 2. - The standard deduction is used in 1968 and 1969 under conditions (a), (b), and (c) of Situation 1. Situation 3. - The standard deduction is used in 1968 and deductions are itemized in 1969 under conditions (a), (b), and (c) of Situation 1. Situation 4. - Deductions are itemized in 1968 and the standard deduction is used in 1969 under conditions (a), (b), and (c) of Situation 1. With respect to Situation 1. - (a) Since the entire real property tax for the fiscal year 1968-1969 was paid in 1968, the entire $70 relief payment relates to the calendar year 1968 and the taxability of the entire amount is determined under the provisions of section 111 of the Code and the principle set forth in Revenue Ruling 56-447 with respect to itemized deductions. Therefore, such relief payment is includible in the taxpayer's gross income for 1969 to the extent of the 1968 tax benefit resulting from the deduction of the real property tax payment made in that year. (b) Since one-half of the entire real property tax for the fiscal year 1968-1969 was paid in 1968 and one-half in 1969, one-half of the $70 relief payment is attributable to the calendar year 1968 and the balance to 1969. The one-half portion attributable to calendar year 1968 is subject to the same tax treatment as Situation 1(a). The remaining one-half portion attributable to the calendar year 1969 is not includible in the taxpayer's gross income for 1969 but, rather, serves to reduce the 1969 allowable tax deduction provided by section 164 of the Code for real property taxes paid in 1969 on real property qualifying for the relief payment. (c) No part of the $70 relief payment is includible in the taxpayer's gross income since the relief payment is in the nature of a reduction of the real property tax imposed for the fiscal year 1968-1969 on the property qualifying for the relief payment. Thus, when the 1968-1969 fiscal year real property tax is paid, the maximum amount deductible pursuant to section 164 of the Code in any year subsequent to 1969 is the amount of real property tax paid reduced by the $70 relief payment. With respect to Situation 2. - (a) Pursuant to the principle set forth in Revenue Ruling 56-447 with respect to the use of the standard deduction, no part of the $70 relief payment is includible in the taxpayer's gross income since there was no tax benefit for 1968. (b) The portion of the $70 relief payment attributable to the one-half portion of the real estate tax payment made in 1968 is not includible in gross income since the tax payment in that year did not result in a Federal income tax benefit. The portion of the $70 relief payment attributable to the one-half portion of the real estate tax payment made in 1969 is also not includible in gross income. See holding in Situation 1(b) above. 25 (c) The $70 relief payment is not includible in the taxpayer's gross income since it is an offset to the tax to be paid as set forth in Situation 1(c) above. With respect to Situation 3. - (a) The $70 relief payment is not includible in taxpayer's gross income for the reasons set forth in Situation 2(a) above. (b) The one-half portion of the $70 relief payment attributable to the calendar year 1968 is not includible in gross income as in Situation 2(a) above, and the remaining one-half portion attributable to the calendar year 1969 is not includible in gross income as in Situation 1(b) above. (c) The $70 relief payment is not includible in gross income and limits the otherwise deductible tax as in Situation 1(c) above. With respect to Situation 4. - (a) The $70 relief payment is includible in gross income to the extent of the 1968 tax benefit as in Situation 1(a) above. (b) The one-half portion of the $70
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