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The weekly tax update podcast is delivered by Lynn Nichols of Nichols Patrick CPE. Mr. Nichols, an award winning speaker, will be presenting a 4-hour webcast replay on “New Repair Regs" for the FICPA on March 21. For more information or to register go to http://ficpa.acpen.com/video/4154.
The podcast this week covers the following topics.
- Medicare Contribution Tax Applies to Sale of Partnership Interest
(Tax Notes Today; Article by Amy Elliott; 2/21/2012)
When partners dispose of their interests in a partnership, the new section 1411 Medicare contribution tax of 3.8 percent on net investment income applies a deemed sale concept, requiring partners to know the tax basis and fair market value of the partnership's assets to calculate the gain on the portion that flows to them, an IRS official said.
- Extended Deadline for Estates to Make Portability Election
(Notice 2012-21; 2012-10 IRB 1; 2/17/2012)
The IRS has granted qualifying estates a six-month extension to make a portability election under section 2010(c)(5)(A) when filing estate tax returns.
- Court Orders $400 Monthly Installments on $2.5 Million Tax Debt
(Ford T. Johnson Jr. v. United States; USDC MD; No. 8:98-cv-03050; 2/15/2012)
A U.S. district court granted a motion by the United States to order an individual to make monthly payments of $400 on his judgment debt plus interest and surcharge -- a total of more than $2.5 million -- finding that the order and the amount were appropriate.
- Owner of Single-Member LLC May Not Allocate Tax Items, Basis Among Disregarded Entity's Different Interests
(AM 2012-001; 2/9/2011; rel. 2/17/2012)
In generic legal advice, the IRS concluded that the 100 percent owner of a disregarded entity could not split his eligible entity interest into separate classes of interests and then allocate income, loss, deduction, credit, or basis among those classes.
- Countries for Which Income Exclusion Requirements Are Waived for 2011
(Rev. Proc. 2012-21; 2012-11 IRB 1; 2/17/2012)
Egypt, Libya, Syria, and Yemen are countries for which the foreign earned income exclusion eligibility requirements of section 911(d)(1) are waived for the 2011 tax year.
- Redemption of S Corporation Shares Is Treated as Distribution of Property
(LTR 201207002; 10/17/2011; rel. 2/17/ 2012)
The IRS ruled that the redemption of a shareholder's nonvoting stock in an S corporation will be treated as a distribution of property to which section 301 applies, except as provided under section 1368 for S corporations with accumulated earnings and profits. Tax result is distribution of AAA . . . non-taxable to the extent of shareholder’s basis in those shares.
- Form 1041 K-1 Should Be Provided to Beneficiary, Not Parents
(ECC 201207006; 1/27/2012; rel. 2/17/2012)
Section 6034A requires the fiduciary of a trust to provide a beneficiary with information concerning a distribution, even if the beneficiary is a minor.
- Abandonment Loss Deduction Possible Without Disposition of Asset
(ECC 201207009; 6/7/2011; rel. 2/17/2012)
In e-mailed advice, the IRS advised that a taxpayer may be allowed an abandonment loss deduction if the assets are held for salvage value, not market value.
- IRS Officials Explain New Temporary Repair Regs
(Tax Notes Today; Article by Shamik Travedi; 2/22/2012)
Citing the more than 100 examples in the recently issued temporary regulations on the treatment of tangible property, IRS officials said February 18 that the facts and circumstances approach the Service takes in the regs allows it to issue industry-specific rules through the use of industry issue resolutions.
- Flight Attendant Can't Claim Foreign Tax Credits or Exclude Income
(Christina Letourneau v. Comm.; T.C. Memo. 2012-45; No. 13457-09; 2/21/2012)
The Tax Court held that under section 911 and the France-U.S. tax treaty a U.S. flight attendant who was a permanent resident of France wasn't entitled to exclude more wages from her gross income than the IRS allowed, and that she wasn't entitled to claim foreign tax credits for taxes paid to France or taxes paid to the United Kingdom.
- Energy Tax Credit Options Available to Landlord
(INFO 2011-0091; 11/30/2011; rel. 12/30/2011)
The IRS advised that a lawmaker's constituent who plans to install a solar photovoltaic system on his residential apartment building may be eligible for three different types of energy credits, depending on his circumstances.
- Withholding of Employment Taxes for Caregiver
(INFO 2011-0100; 10/3/2011; rel. 12/30/2011)
The IRS provided a brief summary of what constitutes an employment relationship for purposes of determining whether withholding is required on amounts paid to an individual providing care to a disabled adult daughter.
- Value of Property In FLP Not Included in Decedent's Estate
(Estate of Joanne Harrison Stone et al. v. Commissioner; T.C. Memo. 2012-48; No. 23290-09; 2/22/2012)
The Tax Court held that the value of property a decedent transferred to a family limited partnership during her lifetime was not includable in her gross estate, finding that there was a legitimate nontax purpose for the transfer and that it qualified as a bona fide sale for adequate and full consideration.
- Salary S Corporation Paid Employee Was Unreasonable
(David E. Watson PC v. United States; No. 11-1589; 2/21/2012)
The Eighth Circuit, finding no error by a district court in allowing a government expert to testify on reasonable compensation, affirmed the court's holding that the salary an S corporation's sole employee received was unreasonable, that he actually received additional wages, and that the company was liable for a FICA tax deficiency.
LAST UPDATED 2/27/2012
