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Lynn Nichols of Nichols Patrick CPE delivers the latest updates in the federal tax area. Begin planning for your tax training by looking at www.ficpa.org/cpe. The podcast this week covers the following:
- 1. Medicare Premiums Paid by Self-Employed Individuals Are Deductible
(ILM 201228037; 5/1/2012; rel. 7/13/2012)
In a legal memorandum, the IRS concluded that Medicare is insurance that constitutes medical care under section 162(l); Medicare premiums may be deducted for coverage of a self-employed individual and the individual's spouse, dependent, or child; and individuals who didn't deduct the premiums for prior years may file an amended return.
- 2. Leasing of Aircraft Is a Change in Use for Depreciation Purposes
(ILM 201228036; 3/16/2012; rel. 7/13/2012)
In a legal memorandum, the IRS determined that the leasing of an airplane by a partnership to a certified air carrier in the business of chartering aircraft constituted a change in the use of the airplane for purposes of depreciation under section 168.
- 3. Nonresident Alien May Offset Effectively Connected Income w/ NOL Carryforward
(LTR 201228013; 4/17/2012; rel. 7/13/2012)
The IRS ruled that an individual may use unexpired net operating losses from his wholly owned limited liability company while he is a nonresident alien to offset gross income effectively connected with business in the United States.
- 4. Deed Conveying Conservation Easement Substantiated Charitable Contribution
(Gayle O. Averyt et al. v. Comm; T.C. Memo. 2012-198; 7/16/2012)
The Tax Court, in consolidated cases, held that a group of individuals who claimed charitable contribution deductions for the donation of a conservation easement substantiated the contribution, finding that the deed conveying the easement was a contemporaneous written acknowledgment that met the requirements of section 170(f)(8).
- 5. IRS to Refocus Preparer Visitation Program on High-Risk Preparers
(TIGTA Report 2012-30-068; 6/29/2012)
The IRS return preparer visitation program will be scaled back in 2013 and will focus on only the highest-risk preparers, according to a Treasury Inspector General for Tax Administration report released July 17.
- 6. C Corporation In Consulting Business Can Not Claim Deductions for Cat Breeding
(DKD Enterprises et al. v. Comm.; CA 8; Nos. 11-2526, 28, 29, & 30; 7/17/2012)
The Eighth Circuit affirmed the Tax Court's holdings that the expenses of breeding cats did not result in deductible losses and that paying those expenses resulted in constructive dividends to a corporation's sole shareholder, but the court remanded on the question of whether the corporation could deduct contributions to a retirement plan.
- 7. Commuting Expenses Are Not Deductible
(Kristopher R. Saunders et ux. v. Comm.; T.C. Memo. 2012-200; 7/17/2012
The Tax Court held than an individual was not entitled to deduct the unreimbursed automotive expenses he incurred in commuting between his home and worksites, finding that he and his wife failed to establish that they met an exception to the general rule that commuting expenses are nondeductible personal expenses.
- 8. Individual Can Deduct Expenses Related to Product Development
(David Brian Smith v. Comm.; T.C. Summ. Op. 2012-71; 7/18/2012)
The Tax Court, in a summary opinion, held that an individual substantiated and was entitled to deduct additional business expenses related to the development and manufacture of a back-washing device, which entitled him to claim a larger Schedule C loss on his return.
- 9. 2012 Canada-U.S. Competent Authority Agreement Available
(COMPETENT AUTHORITY MUTUAL AGREEMENT; 7/19/2012)
The Canadian and U.S. competent authorities signed an agreement June 26 that clarifies provisions for determining business profits attributable to a permanent establishment under Article 7 of the 1980 Canada-U.S. income tax treaty.
LAST UPDATED 7/23/2012