Federal Tax Update - April 8, 2013

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Lynn Nichols from Nichols Patrick CPE delivers the tax podcast this week.  For all of your CPE needs, please go to www.ficpa.org/cpe.  The podcast covers the following this week:


(‘Doc’ numbers are citations to the listed item in Tax Analysts’ Tax Notes Today)

  1. Book Publisher's Activities Are Not Production Activities
    (ILM 201313020; 11/30/2012; rel. 3/29/2013)
    In a legal memorandum, the IRS ruled that a book publisher's activities did not constitute the manufacture, production, growth, or extraction of qualifying production property for purposes of the section 199 domestic production activities deduction.     [Doc 2013-7549]

  2. Reporting Requirements for Condemnation Payments
    (ECC 201313028; 6/5/2012; rel. 3/29/2013)
    In e-mailed advice, the IRS concluded that a state's transportation department that makes payments for property acquired through condemnation proceedings has a section 6045(e) reporting requirement and must issue Forms 1099-S reflecting the entire cash payments unless the transaction or recipient is exempt from the reporting requirement.     [Doc 2013-7557]

  3. AIG Loses Summary Judgment Motion in Economic Substance Dispute
    (American International Group Inc. et al. v. United States; USDC S NY; No. 1:09-cv-01871; 3/29/2013)
    A U.S. district court denied a corporation's motion for partial summary judgment in a dispute with the IRS on whether foreign transactions lacked economic substance, finding that the transactions would not have generated a profit without the tax savings they were structured to obtain.     [Doc 2013-7698]

  4. Final Report on Retirement Plan Questionnaire Results
    FINAL REPORT; 4/1/2013)
    The IRS has released the final report on the results of the section 401(k) compliance check questionnaire, which highlights compliance issues for plan sponsors.     [Doc 2013-7772]

  5. 2013 Allowable Living Expense Standards
    (Collection Financial Standards; 4/1/2013)
    The IRS has posted to its website the 2013 update to the allowable living expense standards, which are used to help determine a taxpayer's ability to pay a delinquent tax liability. http://www.irs.gov/Individuals/Collection-Financial-Standards      [Doc 2013-7797]

  6. Rental Losses Are Passive, Accuracy-Related Penalty Upheld
    (Mohammad Hassanipour et ux. v. Commissioner; T.C. Memo. 2013-88; 4/2/2013)
    The Tax Court, sustaining an accuracy-related penalty, held that a couple's losses from their rental activities were limited under section 469, finding that they failed to show that the husband was a real estate professional by proving that he spent more time on rental activities than at his full-time job as a research associate.     [Doc 2013-7895]

  7. a. CPA Firm Seeks Clarity In Proposed Net Investment Income Tax Regs
    (Tax Notes Today; 4/3/2013; letter from BKD LLP dated 3/5/2013)
    BKD LLP has commented on proposed regulations on the section 1411 net investment income tax, seeking further guidance on the application of section 1411 to income from grouped self-rental activities; what constitutes material participation for estates and trusts; and when real estate professional's activities constitute a trade or business.     [Doc 2013-7916]

    b. Net Investment Income Tax May Not Qualify for Foreign tax Credit
    (Tax Notes Today; 4/3/2013; letter from Moodys Gartner Tax Law, LLP dated 3/5/2013)
    Roy Berg of Moodys Gartner Tax Law LLP, commenting on proposed regulations on the section 1411 net investment income tax, has urged the IRS and Treasury to address in final regs whether foreign tax credits may be used to offset the 3.8 percent tax as an unearned income Medicare contribution.     [Doc 2013-7917]

  8. Sixth Circuit Affirms Enforcement of IRS Summons to Payroll Company
    (United States v. AS Holdings Group LLC et al.; CA 6; No. 12-1879; 4/3/2013)
    The Sixth Circuit, in an unpublished opinion, affirmed a district court decision that denied a group of entities' motion to intervene and dismiss an IRS summons and that enforced the summons issued to a payroll company for records in the IRS's investigation of another company's unpaid tax liabilities.     [Doc 2013-7958]

  9. Ninth Circuit Affirms Estate's Liability for Late-Filing Penalty
    (Peter Knappe et al. v. United States; CA 9; No. 10-56904; 4/4/2013)
    The Ninth Circuit, affirming a district court, held that an estate was liable for a late-filing penalty, finding no reasonable cause for the missed deadline because the executor failed to exercise ordinary business care and prudence by relying on the accountant's advice regarding the filing deadline, which was a non-substantive matter.     [Doc 2013-8078]

  10. Texas CPAs Say Repair Regs Fail to Reflect How Small Businesses Operate
    (Tax Notes Today; 4/5/2013; letter from Texas Society of CPAs)
    Carol Cantrell of the Texas Society of Certified Public Accountants has expressed concern that proposed regulations on deducting or capitalizing expenditures related to tangible personal property do not reflect the practical realities of how small businesses operate.      [Doc 2013-8059]