Masonry Magazine January 1974 Page. 27
TAXES
By MIRIAM McD. MILLER
PROPOSED LEGISLATION
Tax legislation is certainly keeping up with the times. The Senate has passed a bill (S. 2589) which is called "The National Energy Emergency Act." The bill provides that an itemized deduction of up to $1,000 for any taxable year would be allowed for any ordinary or necessary expense paid or incurred for repairs or improvements designed to reduce heat loss in winter and heat gain in summer. Should this bill become law, then regulations would be provided for the election to take this deduction.
The type of expenses that the Senate bill contemplates would be those incurred for the installation of storm windows, attic insulation, caulking around doorways, installation of humidifiers and just about any device that is designed to make use of natural energy. These devices would have to meet the performance standards established by the National Bureau of Standards.
Please note that this $1000 deduction would not be available unless incurred in a taxable year that ends after the date of the enactment of the bill into law.
Another tax bill passed by the Senate is the Social Security Amendments of 1973. This bill provides for a general increase in the benefits. The increase in benefits would be financed by upping the tax rate from 5.85% to 5.9% and increasing the tax base from $12,600 to $13,200 in 1974. This tax base would be further increased as the cost of living rises.
UNION MEMBERS
No single statement can be made concerning the deductibility of payments made by labor unions to its members or of payments to the union by its members. Deductibility depends on the nature of the payment. Both union initiation fees and annual dues are deductible as business expenses, provided, of course, that the taxpayer itemizes all of his deductions.
Many unions maintain an old-age pension fund and in order to retain his union job, a member will be assessed a certain amount for the union's old age pension. The IRS has ruled that, provided the union member acquires no vested interest in the fund through his contribution, he may deduct the amount paid to support the union's old age pension.
On the other hand, the IRS has ruled that assessments to provide health, accident, and death benefits for union members are not deductible. These payments are regarded as personal expenditures. When payments are made out of a union fund to its members, and such payments are regarded as sickness and accident benefits, then they may be deducted.
In order for strike and lockout benefits to be deductible four conditions must be present: 1) such benefits must be given to both member and nonmember strikers; 2) the benefits paid must be dependent upon individual need; 3) the benefits must be dependent upon the unavailability of unemployment compensation or local public assistance, and 4) there can be no conditions attached to the receipt of the benefits.
PENSION BILL
The House Ways and Means Committee, under the leadership of its Acting Chairman Ullman, continues to hack at the Pension Reform Bill. One of the areas that the committee staff is working on concerns "bad boy" clauses. Such clauses refer to employees who go to work for competitors, steal trade secrets, or otherwise misbehave. "Bad boy" clauses would cause such employees to forfeit their pension rights. It is believed by many that such clauses as these are effective in lessening the undesirable practices.
STREET GIFT
Taxpayers evidently cannot decide by themselves to pursue a certain course with the intention of taking a charitable deduction on their tax return. The IRS may just move in and say that there was no gift because there was not enough "donative intent" present.
A taxpayer who had an automobile dealership was interested in obtaining several acres of land. However, the land was zoned residential and the taxpayer wanted to use the land for commercial purposes. Pursuant to an agreement between the local governmental body and the taxpayer, the property was subsequently rezoned for commercial use. The taxpayer then purchased the land and paved a road through it, which he then dedicated to the city. The taxpayer took the position that he ought to be allowed to take the cost of the dedicated roadway ($10,758) as either a business expense or as a charitable contribution deduction.
Both the Tax Court and the Commissioner believed that the contribution involved did not have the requisite charitable nature. Rather, it was felt that the taxpayer made the gift with the expectation of receiving certain direct economic benefits within the power of the city to bestow.
The Court further ruled that this was no ordinary and necessary business expense. The cost of the street represented part of the cost of acquiring and rezoning the tract of land and was a capital expense. Such a capital expense should be added to the basis of the taxpayer's remaining land. (T.C. Memo 1973-224.)
FAILURE TO PAY
Cases are continually being reported concerning the imposition of a penalty because of a taxpayer's failure to collect and/or pay over taxes due from withholding and FICA taxes. Quite often the question arises as to who was the person responsible to collect and pay over to the Government the taxes involved.
A plumbing service corporation consisted of three shareholders a father and his two sons. The father owned 40% of the corporation's stock and the sons each held 30%. The corporation contracted to perform plumbing services exclusively for a particular builder. In defending itself against the Government's allegation that it had willfully failed to pay over tax money, the taxpayer al