Federal Tax Update - July 1, 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:

  1. Repair Regs' Transition Guidance Will Give Taxpayers Flexibility
    (Tax Notes Today; 6/24/2013; Article by Jaime Arora)
    Transition guidance for the coming final regulations on the capitalization of tangible assets -- the so-called repair regs -- will give taxpayers flexibility regarding when they adopt the new rules, Alexa Claybon, attorney-adviser, Treasury Office of Tax Legislative Counsel, said June 21.
    [Doc 2013-15228]
  2. Application of Sale Proceeds to Pay Down Credit Line Not Fatal to Like-Kind Exchange
    (ILM 201325011; 9/10/2012; rel.
    In a legal memorandum, the IRS ruled that a taxpayer did not have actual or constructive receipt of sales proceeds from relinquished property under reg. section 1.1031(k)-1 because a qualified intermediary was required to use the proceeds to pay down lines of credit for which the property was security.
    [Doc 2013-15142]
  3. Conditional Return of Donation of Conservation Easement and Cash Bars Charitable Contribution Deduction
    (Lawrence G. Graev et ux. v. Commissioner; 140 T.C. No. 17; 6/24/2013)
    The Tax Court held that a couple wasn't entitled to charitable contribution deductions for their gift of cash and a conservation easement to an architectural trust, finding that the donation was improperly conditioned on whether the IRS would allow their claimed deductions.
    [Doc 2013-15308] 
  4. IRS Offers Streamlined Option to Free Some Groups From Backlog of Tax-Exempt Applications
    (FS-2013-8; 6/24/2013)
    The IRS has released a fact sheet explaining its safe harbor option that will help reduce its backlog of section 501(c)(4) tax-exempt applications that have been pending for more than 120 days.
    [Doc 2013-15303]
  5. Individual Owes Tax on Distribution From Former Wife's Retirement Account
    (Martin Toombs v. Commissioner; T.C. Summ. Op. 2013-51; 6/25/2013)
    The Tax Court, in a summary opinion, sustained an IRS deficiency determination against an individual who failed to report a distribution he received from his former wife's retirement account but held that he wasn't liable for an accuracy-related penalty because he relied in good faith on the advice of his attorney and return preparer.
    [Doc 2013-15443]
  6. Company's Services to Owner Shouldn't Be Treated as Constructive Dividend
    (Terry J. Welle et ux. v. Commissioner; 140 T.C. No. 19; 6/27/2013)
    The Tax Court held that a couple didn't receive a constructive dividend from the husband's construction company when the company provided services for the couple's construction of a new home, the cost (including allocated overhead) of which they reimbursed, finding that there was no distribution to the couple of the company's current or accumulated earnings and profits.
    [Doc 2013-15696]
  7. Second Circuit Affirms Tax Court; Company Liable for Taxes, Penalties
    (J & M Futon Covers Corp. v. Commissioner; CA 2; No. 12-4384; 6/27/2013
    The Second Circuit, in an unpublished per curiam order, affirmed Tax Court decisions that held a company liable for taxes and penalties, finding the company failed to substantiate that expenses related to travel were business expense deductions and not personal commuting expenses of its employees and officers.
    [Doc 2013-15633]