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Lynn Nichols from Nichols Patrick CPE delivers the federal tax update this week.  In addition to the weekly podcasts, Nichols Patrick CPE presents seminars for the FICPA.  You can find all of their courses in Florida by clicking here or for information on all of the FICPA CPE offerings, you can go to www.ficpa.org/cpe.  This week's podcast includes:

• Losses From Investment In Funds That, In Turn, Invested In Ponzi Scheme Are Theft Losses
• Long-Term Care Rider Will Be Treated as Insurance Contract
• Conversion Costs of Underperforming Slot Machines Deductible As Maintenance Expense
• Individual Required to Report Amount No Longer at Risk as Income
• Cost Segregation Professionals Group Comments on Proposed 'Repair' Regs
• Foster Care Income Exclusion Not Available to Natural Parent of Disabled Child
• Chief Counsel Establishes Economic Substance Advice Procedures

CITATIONS

1. Losses From Investment In Funds That, In Turn, Invested In Ponzi Scheme Are Theft Losses - (ILM 201213022; 12/8/2011; rel. 3/30/2012)
   In a legal memorandum, the IRS concluded that taxpayers' losses resulting from investments in funds that were used to operate a Ponzi scheme are theft losses under section 165, even though the taxpayers invested through individuals other than the perpetrator of the scheme, because the perpetrator intended to steal from the taxpayers.
   
   
2. Long-Term Care Rider Will Be Treated as Insurance Contract - (LTR 201213016; 12/20/2011; rel. 3/30/2012)
   The IRS ruled that a long-term care rider added to a single premium deferred fixed annuity contract offered by a stock life insurance company will be treated as an insurance contract under section 7702B and that the long-term care benefits paid under the rider are excludable from gross income.
   
   
3. Conversion Costs of Underperforming Slot Machines Deductible As Maintenance Expense - (ILM 201213023; 12/21/2011; rel. 3/30/2012)
   In a legal memorandum, the IRS concluded that expenses incurred by a casino operator for slot machine conversions do not have to be capitalized under section 263(a).
   
   
4. Individual Required to Report Amount No Longer at Risk as Income - (Roy Zeluck v. Comm.; T.C. Memo. 2012-98; 4/3/2012)
   The Tax Court held that under section 465(e) an individual was required to report income in the year an oil and gas partnership terminated in an amount equal to that of a note he used to invest in the partnership, finding that no genuine indebtedness existed at that time; the court also held him liable for an accuracy-related penalty.
   
   
5. Cost Segregation Professionals Group Comments on Proposed 'Repair' Regs - (Tax Notes Today published on 4/3/2012 a letter dated 2/24/2012)
   American Society of Cost Segregation Professionals comments on proposed regulations on deducting or capitalizing expenditures related to tangible personal property, asking IRS to recognize the group's minimum quality standard procedures as an appropriate method of determining the cost basis of a building and its structural components.
   
   
6. Foster Care Income Exclusion Not Available to Natural Parent of Disabled Child - (INFO 2012-0009; 1/12/2012; rel. 3/30/2012)
   The IRS provided information on qualified foster care payments that may be excluded from income, explaining that it has taken the position in litigation that payments to parents for the care of their children are not for foster care.
   
   
7. Chief Counsel Establishes Economic Substance Advice Procedures - (CC-2012-008; 4/3/2012)
   In a chief counsel notice, the IRS has spelled out how counsel intends to interact with the IRS and Justice Department for issues involving common law economic substance and codified economic substance claims.