FTB backs down: plus consequences of hiding assets during a divorce.

• Author: Williams, Leonard W.
• Position: CATax

John Woodford, chair of the Ca1CPA Committee on Taxation's subcommittee on Califionia taxes, applauded the FTB for backing off on its position of requiring the filing of amended tax returns to correct the tax difference caused by the 2 percent drop in half of the self-employment tax and opting for an FIB billing for taxes caused by the difference.

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This matter arose early in the filing season, and the software vendors corrected their programs accordingly A requirement of early filers having to amend their returns would have been an additional imposition on taxpayers.

Hiding Assets During a Divorce: Fail

This isn't a column on divorce proceedings, but this gem came tip in a recent discussion on TaxTalk.

The Marriage of Rossi (2001 90 Cal. App. 4th 34) is a great example of what can happen when one spouse attempts to hide marital assets during a divorce.

Denise Rossi unexpectedly filed for divorce in January 1997, but failed to tell her husband of more than 25 years that she had won S1,336,000 in a lottery pool just 11 clays earlier. She likewise omitted that data from the disclosure firms required by Califbrnia law The divorce became final later in 1997.

A couple of years later the ex-husband, Thomas, found in his mail a letter asking whether Denise might like a lump-sum buyout of her lottery winnings. He confirmed that Denise was the lottery winner, then hired an attorney who brought this information to court.'

Ordinarily in such a divorce, the lottery proceeds would have been split 50-50 as community property

Pursuant to Califbrnia Family Code See. 1101(h), the remedy for the breach of the fiduciary relationship between spouses by a spouse may include an award of 100 percent of the undisclosed asset to the other spouse. Accordingly the court. awarded Thomas 100 percent of the lottery winnings, and the Califbrnia Court of Appeal later affirmed.

Homeowner Itemized Deductions

There has been much confusion generated by an FTB position that most "special assessments" in homeowners' property tax bills don't qualify as itemized deductions on Schedule A of a personal tax return.

That created a problem in determining which special assessments qualify: The IRS was asked for guidance in this determination, and has issued Information Letter 2012-0018.

The Letter cites Rem Rul. 80-121, 19801 C.B. 43, which states that there is no statutory or regulatory requirement that a real property tax be an ad valorem tax to be deductible for...