The Eighth Circuit Court of Appeals held that a portion of the dividends paid by an S corporation to its CPA sole shareholder/employee was compensation. In upholding the decision by the District Court of Southern Iowa, the Eighth Circuit agreed that the salary to the sole shareholder/employee used to compute
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TOPICS / TAX
Individual income taxation
HSA inflation adjustments issued for 2013
On Friday, the IRS issued the inflation-adjusted figures for the annual contribution limitation for health savings accounts (HSAs) and the minimum deductible amounts and maximum out-of-pocket expense amounts for high-deductible health plans for calendar year 2013 (Rev. Proc. 2012-26). Under Sec. 223, individuals who participate in a health plan with
IRS proposes expanding tax return information it will disclose to HHS under health care acts
On Friday, the IRS issued proposed regulations relating to how it will release certain tax return information to the Department of Health and Human Services (HHS), as required by 2010’s health care legislation (REG-119632-11). The proposed regulations describe certain items the IRS will disclose in addition to those required by
Congressional subcommittee hearing centers on expiring tax provisions
The term “winners and losers” sprang up several times on Thursday in a congressional subcommittee hearing on expired or soon-to-expire tax provisions. Congress should not pick them, witnesses contended. However, they also lined up to tell the House Ways and Means Select Revenue Subcommittee why a particular tax credit or
Taxpayers can deduct certain local lodging expenses under proposed rules
The IRS issued proposed regulations on Tuesday that permit employees to treat certain expenses paid or incurred for local lodging as deductible business expenses (REG-137589-07). Under Sec. 262(a), living expenses paid or incurred when not traveling away from home are considered nondeductible personal expenses. However, in certain circumstances, the proposed
Federal Circuit dismisses refund suit based on all-zero returns
A married couple who filed tax returns listing all income and tax due as “zero” were denied refunds in a decision by the U.S. Court of Appeals for the Federal Circuit (Waltner, No. 10-CV-225 (Fed. Cir. 4/19/12)). The court dismissed the couple’s tax refund suit for lack of jurisdiction, holding
Don’t neglect to elect, part III
As a follow-up to the June 2010 and January 2011 Tax Practice Corner columns “Don’t Neglect to Elect” and “Don’t Neglect to Elect, Part II,” here are elections available to estates, partnerships and individuals. ESTATES Estate tax portability election. As a result of the Tax Relief, Unemployment Insurance Reauthorization, and Job
Better odds for pro gamblers’ business deductions
Recently, professional gamblers’ luck prevailed as the Tax Court changed directions on the deductibility of nonwagering business expenses. The Tax Court in Mayo (136 T.C. 81 (2011)) partially overruled its precedent, Offutt (16 T.C. 1214 (1951)). Offutt allowed the deduction of wagering losses only to the extent of winnings and
Homebuyer credit denied where former home still in use
A house that a married couple continued to use while trying to sell it was their principal residence during that period; therefore, they did not meet the timing requirement to qualify for an $8,000 first-time homebuyer credit when they purchased a new house, the Tax Court held. Francis and Maureen
Prop. regs., rulings facilitate “longevity annuities”
The IRS issued proposed rules (REG-115809-11) that would permit IRA participants to enter into contracts for annuities that begin at an advanced age (often called longevity annuities), using a certain amount of their account balances without having these amounts count for calculating required minimum distributions from the IRAs under Regs.
IRS and OECD separately address transfer pricing issues
On Tuesday, the IRS announced a reorganization of its advance pricing agreement (APA), mutual agreement, and competent authority programs into one new program (IR-2012-38). All three programs dealt with transfer pricing rules, which determine how international transactions within a multinational company must be priced to ensure each country receives its
Much-anticipated guidance issued on accounting method changes for repair regs.
In December 2011, the IRS issued long-awaited temporary regulations on the treatment of tangible property repairs. On Wednesday, it issued two revenue procedures detailing how taxpayers may obtain IRS automatic consent to the accounting method changes required by the rules. Rev. Proc. 2012-19 addresses repair and maintenance, materials and supplies,
IRS expands “Fresh Start” initiative, provides penalty relief for unemployed
The IRS announced an expanded “Fresh Start” initiative Wednesday to help struggling taxpayers with a number of measures for relief (IR-2012-31). One of the most noteworthy of these measures is the abatement for the 2011 tax year of the failure-to-pay penalty (0.5% per month of the tax due up to
Tax Court says limitation on deductible mortgage interest applies to unmarried co-owners
On Monday, the Tax Court held that unmarried co-owners were together subject to the $1.1 million limit on personal residence indebtedness under Sec. 163(h)(3) (Sophy, 138 T.C. No. 8 (3/5/12)). The taxpayers had argued that, for unmarried taxpayers, each owner should be subject to a separate limit, even though married
2012 automobile depreciation limits released
The IRS on Friday issued the 2012 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F (Rev. Proc. 2012-23). For passenger automobiles (other than trucks or vans) placed in service during calendar year 2012 to which 50% first-year bonus depreciation applies, the depreciation
Temporary regs distinguish capital improvements from repairs
Late in 2011, the IRS issued long-awaited temporary and identical proposed regulations (T.D. 9564; REG-168745-03) regarding the treatment of expenditures incurred in acquiring, producing or improving tangible assets, including rules on determining whether costs related to tangible property are deductible repairs or capital improvements. The temporary regulations clarify and expand
Prop. regs clarify basis reporting for debt, options
In late November, the IRS released proposed regulations (REG-102988-11) clarifying how debt instruments and options will be treated under the new securities basis information reporting regime of Sec. 6045. The IRS had previously addressed treatment of stock under the reporting requirement, which was instituted by the Energy Improvement and Extension
Guidance issued, form finalized for foreign asset reporting
The IRS issued temporary and proposed regulations (T.D. 9567; REG-130302-10) on the requirement that certain foreign financial assets be reported to the IRS for tax years beginning after March 18, 2010. Sec. 6038D requires individuals to report interests in “specified foreign financial assets” (SFFAs) when filing their federal income tax
Temporary regs change TIPS bond premium method
The IRS and Treasury issued proposed and temporary regulations (REG-130777-11; T.D. 9561) requiring the use of the coupon interest method to amortize a premium in excess of a de minimis amount related to Treasury inflation-protected securities (TIPS). The regulations apply to TIPS issued on or after April 8, 2011. TIPS
Taxation of abandonments, foreclosures and repossessions
Many taxpayers in the current economy have had trouble paying mortgages, car notes and other debts. Some are forced to abandon property, go through foreclosures or have property repossessed. While such measures may alleviate the financial burden on these taxpayers, the tax consequences often are overlooked. When property that secures
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