Click here to listen to the audio. Alternatively, you may download the file to your computer by right clicking your mouse, choosing "Save Target As", then selecting a location on your computer to save the file.

Lynn Nichols provides the latest update on federal tax issues from the prior week.  If you or your clients have been impacted by identity theft issues, you may want to tune into the FICPA webinar, Identity Theft and Fraudulent Tax Returns on August 8 by registered here http://www.ficpa.org/Public/Catalog/CourseDetails.aspx?courseID=12TBCAST5.

The update this week covers the following:

1. When to Withhold FICA Taxes on Distributions From Non-Account Balance Plan
   (INFO 2012-0032; 4/2/2012; rel. 6/29/2012)
   The IRS advised that an employer properly withheld and paid FICA taxes on the present value of an employee's nonqualified deferred compensation benefits in the year the employee began receiving distributions under the plan.
   
   
2. Self-Employment Taxation of Rental Payments for Farmland
   (INFO 2012-0035; 5/8/2012; rel. 6/29/2012)
   The IRS addressed an inquiry on self-employment taxation of rental payments farmers receive for farmland and explained its position that rental payments are subject to self-employment tax when there is an agreement that the lessors materially participate in farm production.
   
   
3. Where to Find Details of Losses to Ponzi Schemes
   (INFO 2012-0041; 6/19/2012; rel. 6/29/2012)
   The IRS provided information about what tax code provision covers a loss of money in criminally fraudulent investment schemes, along with revenue rulings and procedures that give more information on these types of losses.
   
   
4. Debtor in Bankruptcy is Liable for Religious Organization's Unpaid Taxes
   (Gilbert Vaughn et ux. v. IRS; USDC E NC E div; No. 4:ll-CV-222; 7/16/2012)
   A U.S. district court affirmed a bankruptcy court decision, finding no error in its determination that the debtor -- who was president and CEO of a religious organization -- was a responsible person for purposes of paying the group's employment taxes.
   
   
5. Organization Is Denied Exemption
   (LTR 201229010; 10/25/2011; rel. 7/20/2012)
   The IRS denied tax-exempt status to an organization established to engage in economic development, provide hospital and medical care, and provide other services after concluding the organization would operate in a commercial manner and benefit its founder and the founder's for-profit organization.
   
   
6. Testamentary Power of Appointment is Not “General Power of Appointment”
   (LTR 201229005; 3/26/2012; rel. 7/20/2012)
   The IRS ruled that a testamentary power of appointment granted to an individual in a trust was not a general power of appointment under section 2041(b)(1) and (2) and would not cause the value of the property in the trust to be included in the individual's gross estate under section 2041(a).
   
   
7. Will Organization Risk Losing Its Tax-Exempt Status Due to Oil and Gas Lease ?
   (INFO 2012-0023; 5/1/2012; rel. 6/29/2012)
   The IRS provided information on whether a section 501(c)(3) tax-exempt organization risks losing its exemption because of an oil and gas lease and whether royalties received under the lease are taxable.