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Lynn Nichols of NicholsPatrick CPE delivers the latest federal tax updates in this week’s podcast. The podcast covers the following:

1. Federal Court Strikes Down IRS Return Preparer Regulations
   (Loving v. IRS; 1:12-cv-00385-JEB; 1/18/2013)
   A federal judge in an unexpected decision late January 18 held that the IRS does not have the authority to institute new tax return preparer regulations that were years in the making and permanently enjoined the agency from enforcing them.  Full-Text PDF
   
   
2. Inflation-Adjusted Amounts for 2013
   (Rev. Proc. 2013-15; 2013-5 IRB 1; 1/11/2013)
   The IRS has updated inflation-adjusted items for 2013. [Doc 2013-778]
   
   
3. New Applicability Date for Temporary Regs on Deduction and Capitalization of     Tangible Assets
   (Announcement 2013-7; 2013-3 IRB 308; 1/14/2013)
   The IRS has announced the amendment of temporary regulations (T.D. 9564) on the deduction and capitalization of tangible assets, moving the applicability date from tax years beginning on or after January 1, 2012, to tax years beginning on or after January 1, 2014. [Doc 2013-685]
   
   
4. “On-Site Sale” Requirements Illustrated by Examples
   (ILM 201302018; 11/20/2012; rel. 1/11/2013)
   In a legal memorandum, the IRS concluded that a sale is an on-site sale if the retail customer is physically present at a sales facility at any point during the sales transaction. [Doc 2013-728]
   
   
5. 5. Lack of Transmission Line and Reduced Operation Does Not Affect Placed-in-Service Date
   (LTR 201302007; 10/11/2012; rel. 1/11/2013)
   The IRS ruled that the unavailability of a transmission line and not operating wind  turbine generators at full capacity does not preclude the generators from being treated as placed in service for depreciation deductions as long as the generators are ready and available for use and producing commercial output regularly.  [Doc 2013-717]
   
   
6. Executor Treated as Fiduciary Even if State Says Estate Is Closed
   (ECC 201302026; 9/28/2012; rel. 1/11/2013)
   In e-mailed advice, the IRS stated that the executor of a taxpayer's estate as named in the taxpayer's will should be treated as the estate's fiduciary for federal income tax purposes regardless of whether the estate remains open for state law purposes.  [Doc 2013-736]
   
   
7. Employee Compensation Was Unreasonable; Excise Tax Imposed
   (Thousand Oaks Residential Care Home I Inc. et al. v. Commissioner; T.C. Memo. 2013-10; 1/14/2013)
   The Tax Court held that compensation to the daughter of employee-owners of a corporation was unreasonable and nondeductible. Compensation to the employee-owners was reasonable under one test, but not under the “independent investor test.” Part of their compensation was disallowed.  Section 4972 excise tax applied to  nondeductible contributions to pension plan that were based on disallowed compensation, but penalty was abated due to reasonable cause. [Doc 2013-923]
   
   
8. Ninth Circuit Affirms Tax Court's Grant of Innocent Spouse Equitable Relief
   (Karen Marie Wilson v. Commissioner; CA 9; No. 10-72754; 1/15/2013)
   The Ninth Circuit, affirming the Tax Court's decision to grant equitable innocent spouse relief to an individual, held that the court properly reviewed new evidence outside the administrative record and applied a de novo standard of review in determining the individual's eligibility for relief under section 6015(f). [Doc 2013-996]
   
   
9. Simplified Option for Claiming Home Office Deduction Available in 2013
   (IR-2013-5; 1/15/2013)
   The IRS has announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. [Doc 2013-1016]
   
   
10. QCDs Made in January May Be Applied to 2012 Tax Year
    (IR-2013-6; 1/16/20130
    The IRS has announced that IRA owners age 70-1/2 or older have until January 31 to make tax-free transfers to eligible charities and report them as 2012 qualified charitable distributions. [Doc 2013-1063]
    
    
11. Individual Denied Child Tax Credits for Children Who Lived With Her
    (La Tashia Gentry v. Commissioner; T.C. Memo. 2013-16; 1/16/1013)
    The Tax Court held that an individual was entitled to dependency exemption deductions for her cousin's two children who lived with her because they were her qualifying relatives but that she wasn't entitled to child tax credits because they didn't meet the definition of qualifying children for purposes of the child tax credit. [Doc 2013-1140]
    
    
12. Final FATCA Regs Provide Certainty, Reduce Burdens
    (Tax Notes Today Article; Arora, Coder, Parillo, and Trivedi; 1/18/2013)
    On January 17 Treasury released final regulations for the Foreign Account Tax Compliance Act, providing numerous clarifications on topics such as payments not subject to withholding, the treatment of investment entities, and account identification and verification procedures. [Doc 2013-1256]
    
    
13. Litigation Expenses Were Loans, Accounting Adjustment Was Proper
    (Humphrey Farrington & McClain PC v. Comm.; T.C. Memo. 2013-23; 1/17/2013)
    The Tax Court sustained an IRS determination that expenses advanced by a law firm incurred in litigating cases on a contingent fee basis were nondeductible loans and held that the IRS's determination was a change in accounting method that made its section 481 adjustment proper; the court declined to impose an accuracy-related penalty. [Doc 2013-1247]