Federal Tax Update - June 30, 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. Fraternal Group's Insurance Sales Unrelated to Exempt Purpose
    (TAM 201425015; 6/20/2014)
    In technical advice, the IRS ruled that a tax-exempt fraternal beneficiary society's sales of life insurance policies to the widows of its members are unrelated to its exempt purpose.
  2. Loan to ESOPs Is a Prohibited Transaction
    (TAM 201425019; 6/20/2014)
    In technical advice, the IRS ruled that a loan failed the requirements of exemption from the prohibited transaction rules for loans to employee stock ownership plans and, therefore, constituted a prohibited transaction.
  3. Final Regs on Waiting Period for Health Insurance
    (T.D. 9671; 79 F.R. 35942-35948; 6/25/2014)
    The IRS has published final regulations (T.D. 9671) that clarify the maximum allowed length of any reasonable and bona fide employment-based orientation period, consistent with the 90-day waiting period limitation.
  4. IRS May Investigate, Assess Preparer Penalties Before Return Examined
    (ECC 201425012; 6/20/2014)
    In e-mailed advice, the IRS said a preparer penalty exam can't be sent to Appeals prior to the filing of the underlying return, but an investigation may begin; however, the IRS may assess the penalty if the statute of limitations is about to expire and the taxpayer doesn't consent to extend the period.
  5. Individual Who Didn't Retrieve Mail Can't Challenge Tax Liability
    (Eric Onyango v. Commissioner; 142 T.C. No. 24; 6/24/2014)
    The Tax Court held that an individual couldn't challenge his underlying tax liability under section 6330(c)(2)(B) based on his failure to receive a notice of deficiency, finding that he declined to check his mail and retrieve the notice that the IRS attempted to send him by certified mail.
  6. Tax Court Disallows Business Deductions, Upholds Penalty
    (Michael I. Agugo ex ux. v. Commissioner; T.C. Summ. Op. 2014-60; 6/24/2014)
    The Tax Court, in a summary opinion, held that a couple wasn't entitled to deduct expenses relating to their insurance sales or home medical care activity since they didn't prove they were carrying on a business; the court also upheld an accuracy-related penalty, finding the couple hadn't proved their return preparer was a competent professional.
  7. Draft Instructions Issued for Reporting Foreign Financial Assets
    (Draft Instructions for 2014 Form 8938; 6/23/2014)
    The IRS has released 2014 draft instructions for Form 8938, "Statement of Specified Foreign Financial Assets."
    June 2014 version of draft Form 8938.
  8. Tax Court Can't Apply Prior Years' Overpayments to Deficiency
    (Barbara A. Kupersmit v. Commissioner; T.C. Memo. 2014-129; 6/26/2014)
    The Tax Court held that it lacked jurisdiction to apply tax payments and uncashed refund checks from two prior tax years to reduce an individual's tax deficiency for the 2010 tax year and held her liable for additions to tax for failure to timely file returns, pay taxes, and make estimated tax payments.
  9. Koskinen Announces Voluntary Return Preparer Education Program
    (Voluntary Return Preparer Education Program; 6/26/2014)
    IRS Commissioner John Koskinen, in a statement released June 26, announced a new voluntary return preparer education program -- the Annual Filing Season Program -- to help taxpayers by improving the tax knowledge and competency of paid tax return preparers.
LAST UPDATED 6/30/2014