Federal Tax Update - May 28, 2013

Printer Friendly
Text Size: A A A A

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 of NicholsPatrick CPE presents the federal tax update podcast for this week.  The FICPA can meet all of your CPE needs, for more information please go to www.ficpa.org/cpe.  The podcast covers the following topics this week.

  1. Fraternal Society's Sale of Insurance Policies to Nonmember Spouses Is Unrelated Trade or Business
    (TAM 201320023; 2/20/2013; rel. 5/17/2013)
    In technical advice, the IRS concluded that an entity's sale of life insurance policies to nonmember widows of deceased insured members, under which the widow can name as a beneficiary someone other than a dependent of the member, isn't substantially related to the entity's exempt fraternal purposes.     [Doc 2013-12151]
  2. Hawkins Says Tax Practitioners Don't Need Definitions of “Competence”
    (Tax Notes Today; 5/20/2013; Article by Jeremiah Coder)
    Karen Hawkins, director of Treasury’s Office of Professional Responsibility, said May 16 that she is not inclined to offer examples of competency under the new proposed Circular 230 section 10.35 because providing definitions encourages tax practitioners to "look for wiggle room and gray areas to squeak out of it." Besides, she says, both AICPA and ABA already have rules relating to competency.    [Doc 2013-12236]
  3. Termination of S Corp Election Inadvertent, IRS Requires Corrective Actions
    (LTR 201320008; 1/7/2013; rel. 5/17/2013)
    The IRS ruled that a company will be treated as continuing to be an S corporation from the date on which its subchapter S election was inadvertently terminated due to excess passive income.     [Doc 2013-12136]
  4. Eleventh Circuit Affirms Stock Option Received for Performance of Services
    (Allen L. Davis et al.; CA 11; No. 12-10916; 5/16/2013)
    In a complex case involving S corporation shares transferred in a divorce, reacquired by the corporation, then transferred to a shareholder pursuant to an option assigned to him from his ex-wife, the Eleventh Circuit affirmed that the individual received the stock option in connection with his performance of services for the S corporation, making the value of the shares includable in his income; the court also affirmed that the Tax Court didn't err in valuing the shares and the value (+/- $36 million !) was deductible by company shareholders under section 83(h).     [Doc 2013-12256]
  5. Broadcaster's Promotional Service Fees Earned as Independent Contractor
    (Juan A. Ramirez et ux.; T.C. Summ. Op. 2013-38; 5/20/2013)
    The Tax Court, in a summary opinion, held that talent and remote fees paid to a broadcaster for his appearance and promotional services were earned by him as an independent contractor and should be reclassified as Schedule C gross receipts and that his related work expenses are deductible on Schedule C.     [Doc 2013-12330]
  6. Bankrupt QSub Did Not Have Property Interest in its QSub Status
    (Majestic Star Casino LLC et al. v. Barden Development Inc. et al.; CA 3; Nos. 12-3200, 12-3201; 5/21/2013)
    The Third Circuit, vacating a bankruptcy court decision, held that a debtor company did not have a property interest in its status as a qualified subchapter S subsidiary and thus lacked standing to challenge the loss of its QSub status caused by the revocation of subchapter S corporation status by its non-debtor parent corporation. [Doc 2013-12434]
  7. Tax 'Glitch' Disallowing Traders' Losses Is Proving Hard to Resolve
    (Tax Notes Today; 5/23/2013; Article by Amy Elliott)
    The IRS is having trouble deciding how to resolve an unintentional glitch in the proposed section 1411 net investment income tax regulations (REG-130507-11) that can mean a larger tax liability for commodity traders and other taxpayers by taxing gross gains from trading while not allowing offset for some losses.     [Doc 2013-12611]
  8. Other Responsible Person's Payment Should Reduce Individual's Liability for Trust Fund Recovery Penalty
    (Joel I. Beeler; T.C. Memo. 2013-130; 5/22/2013)
    The Tax Court, in a case remanded by the Second Circuit, sustained the IRS's proposed collection action against an individual, but for a reduced amount, finding that a payment made by another party also held to be a responsible person for a trust fund obligation should offset the individual's liability for the trust fund recovery penalty. The original assessment was in 1986, and the matter was mishandled by the IRS, which failed to maintain clear records of collection actions.    [Doc 2013-12627]
  9. Treasury Preparing Transition Rules for Proposed Disguised Sale Regulations
    (Tax Notes Today; 5/24/2013; Article by Amy Elliott)
    The government is developing proposed regulations under sections 707(a)(2)(B) and 752 that will modify the disguised sale rules and address bottom guarantees, and is now considering transition rules, according to Craig Gerson, attorney-adviser (partnerships), Treasury Office of Tax Legislative Counsel.     [Doc 2013-12737]
LAST UPDATED 5/28/2013