Articles Posted in Sales and Use Tax

The accuracy-related and fraud penalties under Cal. Rev. & Tax. Code Section 19164 are generally determined in accordance with federal law. The federal counterparts to Section 19164 are I.R.C. Sections 6662-6665. Defending against the accuracy-related and fraud penalties can be difficult and requires a solid understanding of the applicable exceptions to the imposition of such penalties. Moreover, counsel should also be aware of the enhanced accuracy-related penalty (40 percent instead of 20 percent) for potentially abusive tax shelter items and the modified exceptions to the imposition of such penalty.

(The remainder of this article can be accessed in the June 2006 edition of Lexis California Tax Practice Insights.)

Cal. Rev. & Tax. Code Section 24425 operates to prevent taxpayers from deducting expenses incurred to generate nontaxable income.

Analysis
Expense attribution has become an important issue in California in light of the Ceridian, Farmer Brothers, and Abbot Laboratories decisions in which the dividends received deduction treatment under Cal. Rev. & Tax. Code Sections 24410 and 24402, were held to be unconstitutional. Practitioners are well advised to follow the changing landscape with regard to expense attribution under Section 24425.