Federal Tax Update - Nov. 4, 2013

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Lynn Nichols from Nichols Patrick CPE delivers the weekly podcast on federal tax issues.  For all of your CPE needs, please go to www.ficpa.org/cpe.  This week’s podcast covers the following topics:

  • Up-Front Incentive Payments Are Currently Deductible
    (LTR 201341031; 10/11/2013)
    The IRS ruled that one-time, upfront payments that an electric utility made as incentives to customers who agreed to buy, install, and maintain eligible systems were currently deductible as ordinary and necessary business expenses and did not need to be capitalized.
  • Reinsurance Company's Exempt Status Revoked
    (LTR 201341036; 10/11/2013)
    The IRS revoked the tax-exempt status of an organization whose purpose was the reinsurance of credit insurance contracts, vehicle service contracts, and certain other service contracts, finding that it failed to operate in accordance with the provisions of section 501(c)(15).
  • Termination of S Corp Election Inadvertent
    (5 more with same problem on same day received favorable rulings)
    (LTR 201341019; 10/11/2013)
    The IRS ruled that a company's subchapter S election was inadvertently terminated when its trust became an ineligible shareholder and that it will continue to be treated as an S corporation if the trustee files an electing small business trust election and the beneficiaries of two other trusts file qualified subchapter S trust elections.
  • Status of TIGTA's Recommended Actions for IRS's Exempt Organization Division
    (Exempt Organizations (EO); Recommended Actions; October 24, 2013)
    The IRS has released a table that shows the October 24 status of recommended actions for its Exempt Organizations Division from the Treasury Inspector General for Tax Administration's report on the IRS's tax-exempt application process.
    [Doc 2013-24818]
  • Portion of Employment Discrimination Settlement Is Excludable From Income, (Kathleen S. Simpson et vir v. Commissioner; 141 T.C. No. 10; 10/28/2013)
    The Tax Court held that the amount an individual received in settlement of an employment discrimination suit wasn't excludable from income as paid under workers' compensation acts, but a percentage was excludable as received for physical injuries or sickness; the court allowed her claimed deduction for attorney fees and court costs.
  • Prohibited Transaction Resulted in Taxable Deemed Distribution
    (Terry L. Ellis et ux. v. Commissioner; T.C. Memo. 2013-245; 10/29/2013)
    The Tax Court, sustaining an accuracy-related penalty and 10 percent addition to tax, held that an individual engaged in a prohibited transaction when he caused a business that was owned by his IRA to pay him compensation, resulting in the account no longer being an IRA and generating a taxable deemed distribution to him.
  • Inflation-Adjusted Tables for 2014
    (Rev. Proc. 2013-35; 2013-47 IRB 1; 10/31/2013)
    The IRS has released inflation-adjusted items for 2014, noting increases in some tax benefits.
  • 2014 PTIN Renewal Period Opened 10/31/2013
    (IR-2013-85; 10/31/2013)
    The IRS has announced that the preparer tax identification number system is ready to accept applications for 2014, reminding federal tax return preparers that all current PTINs will expire on December 31 and that they must renew their PTINs for 2014.
  • Updated FAQ on Net Investment Income Tax
    (Questions and Answers on the Net Investment Income Tax; 8/13/2013)
    The IRS has updated a list of frequently asked questions on the section 1411 net investment income tax, which imposes a 3.8 percent tax on some net investment income of individuals, estates, and trusts that have income above the statutory threshold amounts; the update includes corrections and information on the form used to report the tax.
LAST UPDATED 11/4/2013