FTB meeting: annual COT-FTB meeting covers trending issues.

• Author: Williams, Len
• Position: CATax - Committee on Taxation and Franchise Tax Board

There's (rood news and bad news. The good news is to thank you for all of the many kind comments received about the last article. The bad news is that there was an error in the article. The item about a $2.000 FTB penalty for corporate returns not filed within 60 days of a FTB request isn't new; it has been around for a while. The actual change is that the penalty now applies to LLCs. Thanks to Kitty Wright for the correction.

Annual COT/FTB Liaison Meeting

Our Oct. 24 meeting with the FIB in Sacramento included many of the top managers within FTB operations, including Selvi Stanislaus, the executive officer. These meetings have proved to be mutually productive over the years because everyone has a problem-solving attitude.

A follow-up email to the Committee on Taxation listed the following as being the top issues from last year's FTB audits:

Corporations:

* Sales factor (nexus, cost of performance, tangible sales, throwback sales, etc.)

* Business/nonbusiness income, credits, filing method, and water's-edge issues.

Estates & Trusts:

* Apportioning, credits, deductions, charitable remainder trusts

Individuals:

* Sec. 1031 transactions, still looking for drop & swap transactions

* Lots of audits of private annuities. (Not in the memo. but a verbal comment by a FTB person).

* Real estate losses. (Not in the memo: Many self-prepared returns don't reflect the fact that California doesn't have the real estate professional break that the federal government has.

* Schedule D transactions

* Residency

* Federal revenue agent reports

* Head of Household

* Federal/state adjustments

Partnerships:

* Real estate dispositions

* Sale of partnership interests

* Tax shelters

* Final year

* Gains/losses

S Corporations:

* Basis

* Taxable distributions

* Credits

* Liquidations

* Built-in gains

Fraudulent Returns

The FIB has the same problem that the IRS has when, to its surprise, the number of fraudulent returns has increased dramatically. It has stepped up its attempts to detect such returns and share information with the IRS. It has intercepted about S50 million in Fraudulent refunds.

Pending/Possible Service Improvements

* There's a pending Power of Attorney form with a "Super" box, which will authorize its holder to represent all open wars, plus three years into the future. Estimated time of implementation is early 2013.

* An...