Federal Tax Update - June 23, 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. Sixth Circuit Affirms Business Expense Deduction for Lease Buyout
    (ABC Beverage Corp. v. United States; CA 6; No. 13-1701; 6/13/2014)
    The Sixth Circuit, affirming a district court, held that a beverage distribution corporation was entitled to claim a business expense deduction for a lease buyout it paid when it purchased property, finding that section 167(c)(2) doesn't prohibit the deduction and no Supreme Court decision has modified a prior Sixth Circuit decision on the issue.
  2. Tax Court Disallows Rental Real Estate Losses, Imposes Penalty
    (John Jason Bogner et ux. v. Commissioner; T.C. Summ. Op. 2014-53; 6/16/2014)
    The Tax Court, in a summary opinion, held that a couple wasn't entitled to passive activity loss deductions for their rental real estate activities during two tax years, finding that their activity logs were inaccurate and exaggerated; the court also upheld accuracy-related penalties under section 6662(a).
  3. Couple Can't Deduct Losses From Rental Real Estate Activity
    (Oscar M. Alfaro et ux. v. Commissioner; T.C. Summ. Op. 2014-54; 6/16/2014)
    The Tax Court, in a summary opinion, held that a couple wasn't entitled to deduct losses from their rental real estate activity because they failed to show that the husband spent more time on rental activities than on his prior job and, thus, the couple's rental real estate activities are considered passive activities under section 469(c)(2).
  4. Complexity Causes Students to Forgo Tax Credit
    (Fact Sheet: Interaction of Pell Grants and Tax Credits: Students May Be Foregoing Tax Benefits by Mistake; UNDATED)
    The complexity of the American opportunity tax credit may be preventing scholarship students and their parents from claiming it, Treasury said in a fact sheet intended to clarify how students can allocate Pell grants for tax purposes and claim the credit.
  5. U.S. Residents May Use OVDP Streamlined Program
    (ARTICLE; 6/19/2014)
    For the first time, the IRS will permit resident U.S. taxpayers to participate in its streamlined filing compliance program, the agency announced June 18.
  6. Fact Sheet Provides Income, Filing Information for Offshore Accounts
    (FS-2014-7; 6/18/2014)
    The IRS has released a fact sheet advising taxpayers who have offshore bank accounts on their obligation to file foreign bank account reports and providing information to tax professionals who prepare and electronically file FBARs.
  7. Streamlined Domestic Offshore Procedures Form
    (Certification by U.S. Person Residing in the United States for
    Streamlined Domestic Offshore Procedures; 6/18/2014)
    The IRS has posted to its website a certification form for U.S. persons residing in the United States to use in submitting amended income tax returns under the IRS's streamlined domestic offshore procedures.
  8. Offshore Voluntary Disclosures Letter
    (Offshore Voluntary Disclosures; 6/18/2014)
    The IRS has posted to its website an offshore voluntary disclosures letter for taxpayers to use in applying for the offshore voluntary disclosure program.
  9. Tax Court Disallows Travel Agent's Business Expense Deductions
    (Rhonda Denise Peppers et vir v. Commissioner; T.C. Summ. Op. 2014-55; 6/18/2014)
    The Tax Court, in a summary opinion, upheld the IRS's disallowance of an individual's Schedule C deductions for travel, telephone, bank, and education expenses regarding her work as an independent agent for a travel company, finding that she had failed to show they were ordinary and necessary to her business.
  10. Partnership's Charitable Contribution Deduction Denied
    (Seventeen Seventy Sherman Street LLC et al. v. Commissioner; T.C. Memo. 2014-124; 6/19/2014)
    The Tax Court, sustaining a negligence penalty, held that a partnership wasn't entitled to a charitable contribution deduction for the donation of conservation easements on a historic landmark building because it failed to show that the fair market value of the easements exceeded the value of consideration received in exchange for the contribution.
  11. Individual Allowed Deductions for Stepchildren, Not Former Wife
    (Tony Ray Duncan v. Commissioner; T.C. Summary Opinion 2014-56; 6/19/2014)
    The Tax Court, in a summary opinion sustaining an accuracy-related penalty, held that an individual wasn't entitled to joint filing status or an exemption deduction for his former spouse because they were divorced at the end of the tax year, but he could claim dependency exemption deductions for his stepchildren and head of household filing status.
  12. Tax Practitioner’s Rights in Circular 230 Disciplinary Cases
    (Rights and Responsibilities of Practitioners in Circular 230 Disciplinary Cases; 6/12/2014)
    The IRS has posted to its website information on who is subject to discipline under Circular 230 and the rights and responsibilities of practitioners in those disciplinary cases.
LAST UPDATED 6/23/2014