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Lynn Nichols of Nichols Patrick CPE delivers the latest federal tax update. Mr. Nichols will be in Florida teaching the Advanced Tax Update for Experienced Practitioners in January 2012. Mr. Nichols is one of the best tax instructors in the country. The federal tax update this week covers the following:
- Patent Infringement Defense Fees to Be Capitalized
(FAA 20114901F; 9/14/2011, rel. 12/9/2011)
In heavily redacted field attorney advice, the IRS concluded that attorney fees incurred to defend actions for patent infringement and for investigatory patent research must be capitalized.
- Value Of Stock Transferred On Option Exercise Includable In Individual's Income, Deductible to Company
(Allen L. Davis et al. v. Commissioner; T.C. Memo. 2011-286; 12/12/2011)
Stock an individual received on exercise of his stock options in a payday loan company was transferred in connection with his performance of services and includable in his gross income; the court determined the value of the stock and held that the amount is deductible to the company as reasonable compensation.
- Guidance On Recurring Item Exception to All Events Test
(Rev. Rul. 2012-1; 2012-2 IRB 1; 12/13/2011)
The IRS has issued guidance (Rev. Rul. 2012-1) clarifying the treatment of some liabilities under the section 461(h)(3) recurring item exception to the economic performance requirement of the all events test. The guidance clarifies the "not material" and "better matching" requirements in the context of a one-year lease liability and a one-year service contract liability.
- Mandatory Use Of New Identification Number for Some Foreign Information Returns
(Tax Products Coordinating Committee Notice; 10/20/2011, rel. 12/13/2011)
Effective January 1, 2012, taxpayers who file forms 5471, 8858, and 8865 may provide a URI number for the foreign entity for which reporting is required. According to the notice, the use of a URI number is optional for tax years of foreign entities beginning in 2011, but will be required in subsequent tax years.
- Comments Requested On Abusive Preparer Reporting Form
(Comment Request for Form 14242; 76 F.R. 77592, 12/13/2011)
As part of a paperwork reduction effort, IRS has requested comments on Form 14242, "Reporting Abusive Tax Promotions or Preparers"; comments are due by February 13, 2012.
- Temporary Regs On Reporting Foreign Financial Assets
(T.D. 9567; 12/14/2011)
The IRS has issued temporary regulations relating to statutory provisions that require foreign financial assets to be reported to the IRS for tax years beginning after March 18, 2010.
Information Detailing Regs, Filing Requirements for Reporting Foreign Financial Assets
(Explanation of Sec. 6038D Temp. and Prop. Regs; 12/15/2011)
The IRS has released documents that explain recently issued section 6038D temporary and proposed regulations under the Foreign Account Tax Compliance Act and that provide questions and answers on who needs to file Form 8938, "Statement of Specified Foreign Financial Assets."
- Final Regs On Foreign Base Company Sales Income
(T.D. 9563; 12/15/2011)
The IRS has issued final regulations that provide guidance on section 954(d) foreign base company sales income for cases in which personal property sold by a controlled foreign corporation is purchased, sold, manufactured, produced, constructed, grown, or extracted by one or more branches of the CFC.
LAST UPDATED 12/19/2011