BISK EDUCATION’S WEEKLY TAX PODCAST
With E. Lynn Nichols, CPA
October 3, 2011
CITATIONS
1. IRS Addresses Taxability of Fringe Benefit Flights
(ECC 201138048; 9/6/2011, rel. 9/23/2011)
In e-mailed advice, the IRS concluded that the costs of flying an employee's guests may
be imputed fringe benefit income to the employee even if the employee is not on the flight.
2. FAQ on Voluntary Classification Settlement Program
(Voluntary Classification Settlement Program FAQs; 9/21/2011)
The IRS has released a list of frequently asked questions on its voluntary classification
settlement program, which provides partial relief from federal employment taxes for eligible
taxpayers that agree to prospectively treat workers as employees instead of independent
contractors.
3. Claims Court Dismisses Couple's Refund Suit Related to Losses on Stock Sale
(Donald R. Schroerlucke; Fed Clms, No. 09-772T. 9/21/2011) [Doc 2011-20469]
The Court of Federal Claims dismissed a couple's suit for a refund based on their claim of
unreimbursed losses stemming from losses they suffered on the sale of WorldCom stock,
finding that they are entitled to capital loss deductions under IRC Secs. 165(f) and (g) but
that they did not suffer a theft that entitled them to the claimed theft loss deductions under
IRC Sec. 165(e).
4. Supreme Court Grants Certiorari in Overstated Basis Assessment Period Debate
(Tax Analysts Article, Jeremiah Coder, Doc 2011-20508, 9/28/2011)
The Supreme Court has chosen to review the Fourth Circuit's interpretation of section
6501(e), granting certiorari on September 27 in Home Concrete & Supply LLC v. United
States. For decisions on opposite sides of the dispute see:
Home Concrete & Supply, LLC; CA 4, 2/7/2011
(Son–of-BOSS transaction)
Beard, CA 7, 1/26/2011
(Son-of-BOSS transaction)
5. Second Circuit Affirms Jury Verdict Denying Tax Refund in SILO/LILO Case
(Altria Group Inc. v. United States; CA 2, No. 10-2404, 9/27/20110)
The Second Circuit affirmed a district court's denial of a company's motion for judgment as
a matter of law or for a new trial after a jury denied a tax refund claim stemming from
disallowed deductions from sale-in, lease-out and lease-in, lease-out transactions, holding
that the jury was properly instructed on the substance-over-form doctrine.
6. Safe Harbor for Taxpayers Using Nonaccrual-Experience Method of Accounting
(Rev. Proc. 2011-46; 2011-42 IRB 1, 9/28/2011)
The IRS has issued a revenue procedure providing a book safe harbor method of
accounting for taxpayers using the nonaccrual-experience method of accounting under
section 448(d)(5).
7. Exempt Org. Must Allocate Portion of Member Dues to Circulation Income
(National Education Association of the United States v. Comm.; 137 T.C. No. 8,
9/28/2011)
The Tax Court held that for unrelated business income tax purposes the tax-exempt
National Education Association of the United States, which publishes magazines and
sends them to its members, must allocate a portion of its members' dues to circulation
income, thereby reducing the portion of circulation expense allocable to advertising
income. That adjustment results in significantly increasing UBTI.
8. Couple Didn't Have Cancellation of Indebtedness Income
(Thomas Kleber et ux. v. Comm.; T.C. Memo. 2011-233, 9/28/2011)
The Tax Court held that a couple isn't liable for an accuracy-related penalty and didn't
have cancellation of indebtedness income as reported by the Defense Finance and
Accounting Services, finding that the IRS failed to rebut a presumption that the identifiable
event under which the debt was discharged occurred in a prior tax year.
9. Individual Liable for Addition to Tax for Early Distribution From Retirement Plan
(Gail Marie Watson v. Comm.; T.C. Summ. Op. 2011-113, 9/28/2011)
The Tax Court, in a summary opinion, held than an individual was liable for the section
72(t) 10 percent addition to tax for an early distribution from a qualified retirement plan
because she left service before age 55, even though she did not receive the payments
until after she was 55.
10. Electing Portability of Deceased Spouse's Unused Exclusion Amount
(Notice 2011-82; 2011-42 IRB 1, 9/29/2011)
The IRS has issued guidance informing executors of estates of married individuals dying
after December 31, 2010, that they must file Form 706 to elect to allow the decedent's
surviving spouse to take advantage of the deceased spouse's unused estate and gift tax
exclusion amount.
11. Management Fees Paid by LLC to Wholly Owned Corporation Disallowed
(Daniel E. Fuhrman et ux. v. Commissioner; T.C. Memo. 2011-236; 9/29/2011)
The Tax Court, sustaining accuracy-related penalties, held that a couple was not entitled to
deduct more than the IRS determined for management fees paid by the husband's singlemember LLC to his wholly owned C corporation, finding that they did not establish that the
fees were ordinary and necessary expenses. There was no way the taxpayers could
explain how the husband would consult with himself, or why an LLC that employed no
drivers would need to train drivers.