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This week, Lynn Nichols of Nichols Patrick CPE delivers the latest federal tax news. The FICPA 27th Annual Accounting Show has a significant focus on tax issues this year including 5 different tax tracks and both keynotes will focus on tax related issues including the tax implications of health care reform. The podcast this week covers the following topics:
- Success-Based Fee Allocation Safe-Harbor Does Not Apply to Milestone Payments
(ILM 201234027; 7/16/2012; rel. 8/24/2012)
In a legal memorandum, the IRS concluded that nonrefundable milestone payments made to an investment banker for activities performed in connection with a business acquisition or reorganization under reg. section 1.263(a)-5(e)(3) do not qualify for a safe harbor for allocating success-based fees.
- 2. Vineyard Owners May Expense Certain Costs When Property Is Placed in Service
(ILM 201234024; 5/9/2012; rel. 8/24/2012)
In a legal memorandum, the IRS concluded that individuals who planted a vineyard in 2005 and placed it in service in 2009 may elect to expense all or part of their costs in 2009 because the vineyard met all the requirements of section 179(d)(1) and therefore qualifies as section 179 property.
- 3. Disproportionate Distributions Did Not Terminate S Corp Election
(LTR 201234001; 5/7/2012; rel. 8/24/2012)
The IRS ruled that a company's S corporation election was not terminated by disproportionate distributions made to shareholders because the distributions didn't create a second class of stock.
- 4. Required Records Doctrine Applies to Production of Foreign Bank Records
(In re: Special February 2011-1 Grand Jury Subpoena; CA 7; No. 11-3799; 8/27/2012)
The Seventh Circuit reversed a district court order that quashed a grand jury subpoena, holding that the required records doctrine applied and an individual was required to produce foreign bank account records subpoenaed in the IRS's investigation into his use of secret offshore bank accounts to evade payment of federal income taxes.
- 5. Shareholder/Employees Had Income From Rollout of Split-Dollar Life Insurance
(G. Steven Neff v. Comm.; T.C. Memo. 2012-244; 8/27/2012)
The Tax Court held that two individuals, shareholder/employees of a closely held corporation had unreported taxable income for 2003, finding that their split-dollar life insurance arrangements were cancelled that year and that they realized an accession to wealth equal to the payouts owed to them less the premiums they paid; the court did not sustain accuracy-related penalties due to the complex nature of the issues.
- 6. Social Security Benefits Offset by Worker's Comp. Are Taxable: IRC Sec. 86(d)(3)
(Ronald Moore v. Comm.; T.C. Memo. 2012-249; 8/28/2012)
The Tax Court sustained an IRS deficiency determination against a couple, holding that they were liable for taxes on the full amount of Social Security disability benefits the wife received before offset by worker's compensation payments that reduced the amount payments attributable to Social Security disability.
- 7. Extenders Bill from Senate Finance Would “Cost” $205 Billion
The Family and Business Tax Cut Certainty Act of 2012, as approved by the Senate Finance Committee on August 7, 2012, would cost $205 billion from 2013 to 2022, according to Joint Committee on Taxation estimates released August 29.
( FULL TEXT at . . . http://www.govtrack.us/congress/bills/112/s3521/text )
- 8. $38 Million Capital Loss Denied, Tax Court Upholds 20 Percent Accuracy- Related Penalty
(Gerdau MacSteel Inc. et al. v. Commissioner; 139 T.C. No. 5; 8/30/2012)
The Tax Court held that a corporation and affiliated subsidiaries weren't entitled to deduct approximately $38 million in capital losses from a contingent liability shelter or to deduct related fees, finding that the transactions lacked economic substance; it also held them liable for the 20 percent accuracy-related penalty under section 6662.
[ Doc numbers are citations to Tax Notes Today, published by Tax Analysts, the tax professional’s most reliable source of information and informed commentary on Federal tax matters. www.taxanalysts.com ]
LAST UPDATED 9/4/2012