Federal Tax Update - June 2, 2014

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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. Disallowed Loss Still Reduces Shareholders' Bases in S Corp Stock
    (ILM 201421015; 5/23/2014)
    In a legal memorandum, the IRS concluded that a disallowed section 311(a) loss will reduce shareholders' bases in S corporation stock and that the S corporation must reduce its accumulated adjustments account.
  2. Refund of State ITC Is Treated as Ordinary Income
    (ILM 201421016; 5/23/2014)
    In a legal memorandum, the IRS determined that the refundable portion of the New York state investment tax credit paid directly to an individual investor in a limited liability company is taxable as ordinary income and cannot be offset by passthrough losses because the taxpayer does not have basis to claim the loss.
  3. Jury Upholds FBAR Fines Totaling 145 Percent of Account Value
    (Tax Notes Today; Article by Amy Elliott; 5/29/2014)
    Florida resident Carl Zwerner lost his fight May 28 over what he deemed excessive fines levied by the IRS for his failure to report to Treasury the existence of a Swiss bank account, with a jury upholding $2.2 million in penalties, plus interest and additions for three of the four years at issue.
  4. FASB and IASB Release Long-Awaited Revenue Standard
    (Accounting Standards Update No. 2014-09; 5/28/2014)
    The Financial Accounting Standards Board and the International Accounting Standards Board on May 28 released the long-awaited converged standard on revenue recognition, with FASB saying in a release that the new standard will "improve the financial reporting of revenue and improve comparability of the top line in financial statements globally."
  5. IRS Didn't Abuse Discretion in Rejecting Compromise Offer
    (Kelvin Trent Tucker v. Commissioner; T.C. Memo. 2014-103; 5/29/2014)
    The Tax Court held that the IRS did not abuse its discretion when it rejected an individual's offer in compromise and proceeded with a proposed levy and sustained a notice of federal tax lien, finding the individual failed to produce requested documentation about his assets and income and also failed to make required periodic payments.