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Lynn Nichols of Nichols Patrick CPE provides this week’s update on federal tax issues.  With only a few more weeks until your CPE hours are due, go to www.ficpa.org/cpe to find the last minute classes you need to complete your CPE requirements. 

The podcast covers the following:

1. When Circular 230 Conflicts With Tax Return Disclosure Rules - (Tax Notes Today; Article by Kip Dellinger; 5/1/2012)
   Kip Dellinger discusses the problems that may arise when section 7216 conflicts with practitioner responsibilities under Circular 230 and other regulations.
   
   
2. Permanent U.S. Resident's Wages From Foreign Government Not Exempt From Taxes - (Rosemarie E. Harrison v. Comm.; 138 T.C. No. 17; 5/1/2012)
   The Tax Court held that the wages a permanent U.S. resident received as an employee of a German governmental entity were not exempt from federal income taxation under either section 893(a) or the North Atlantic Treaty Regarding the Status of Their Forces.
   
   
3. Bailey v. Commissioner: Was It 'Real Property Trade or Business'? - (Tax Notes Today; Article by Tom Daley; 5/2/2012)
   Tom Daley discusses Bailey v. Commissioner and argues that the Tax Court misapplied the complex passive loss limitations to a simple fact pattern and therefore arrived at an incorrect conclusion. 
   
   
4. Effective Dates for Reporting by Brokers for Debt Instrument, Options Transactions - (Notice 2012-34; 2012-21 IRB 1; 5/2/2012)
   The IRS has announced it will delay by one year the proposed effective dates for information reporting by brokers for transactions related to debt instruments and options. 
   
   
5. Noncustodial Parent Allowed to Claim Exemption Deduction Based on Separation Agreement - (Gary L. Scalone v. Comm.; T.C. Summ. Op. 2012-40; 5/2/2012)
   The Tax Court, in a summary opinion, held that a noncustodial father was entitled to a dependency exemption deduction for his child, finding that the separation agreement he and his former wife signed, which stated that he could claim the exemption, met the requirements of section 152(e)(2) even though it didn't include Social Security numbers.
   
   
6. IRS Shifting Resources for Greater Passthrough Compliance - (Tax Notes Today; Article by Shamik Trivedi; 5/4/2012)
   The IRS plans to increase its efforts to ensure compliance of passthrough entities and also will expand and modify the voluntary classification settlement program, Faris Fink, commissioner of the IRS Small Business/Self-Employed Division, said May 3.
   
   
7. Ninth Circuit Affirms Sentence for Willful Failure to File Returns - (United States v. Scott K. Haynes; CA 9; No. 10-30345; 5/3/2012)
   The Ninth Circuit, in an unpublished per curiam opinion, affirmed the sentence an individual received after pleading guilty to five counts of willful failure to file income tax returns, finding no error in the court's tax loss calculation or in its finding that his crime involved sophisticated means. 
   
   
8. Court Dismisses Untimely Refund Claim - (Shangara Rahal et al. v. United States; USDC E CA; No. 1:11-cv-02083; 5/1/2012)
   A U.S. district court dismissed a couple's suit for a tax refund after the IRS disallowed an S corporation's deductions for amounts paid to them as consultants, finding that their refund claim was untimely and that under the Internal Revenue Code's mitigation provisions they were not entitled to proceed.