2014 Regional Forums - Individual Developments

Updated RegulationsFinal regs clarify meals & entertainment deduction limit in reimbursement arrangements T.D. 9625, 07/31/2013; Reg. § 1.274-2

IRS issues final regs on individual mandate's shared responsibility payment T.D. 9632,08/27/2013; Reg. § 1.5000A-1; Reg. § 1.5000A-2; Reg. § 1.5000A-3; Reg. § 1.5000A-4; Reg. § 1.5000A-5

Final regs set out rules on deduction vs. capitalization of tangible property costs T.D. 9636, 09/13/2013; Reg. § 1.162-3, Reg. § 1.162-4, Reg. § 1.162-11, Reg. § 1.165-2, Reg. § 1.167(a)-4,Reg. § 1.167(a)-7, Reg. § 1.167(a)-8, Reg. § 1.168(i)-7, Reg. § 1.263(a)-1, Reg. § 1.263(a)-2, Reg. § 1.263(a)-3,Reg. § 1.263(a)-6, Reg. § 1.263A-1, Reg. § 1.1016-3

Final regs clarify 3.8% surtax on investment income & gainsT.D. 9644, 11/26/2013; Reg. § 1.1411-1, Reg. § 1.1411-2, Reg. § 1.1411-3, Reg. § 1.1411-4, Reg. § 1.1411-5,Reg. § 1.1411-6, Reg. § 1.1411-8, Reg. § 1.1411-9, Reg. § 1.469-11

IRS issues proposed reliance regs on 3.8% surtax on net investment incomePreamble to Prop Reg 11/26/2013, Prop Reg § 1.1411-3, Prop Reg § 1.1411-4, Prop Reg § 1.1411-7

Final regs explain additional Medicare tax on employees and self-employed personsT.D. 9645, 11/26/2013; Reg. § 1.1401-1; Reg. § 31.3101-2; Reg. § 31.3102-1 ; Reg. § 31.3102-4; Reg. §31.3202-1; Reg. § 31.6011(a)-1 ; Reg. § 31.6011(a)-2; Reg. § 31.6205-1; Reg. § 31.6402(a)-2 ; Reg. §31.6413(a)-1; Reg. § 31.6413(a)-2

Final regs increase installment agreement, offer-in-compromise feesT.D. 9647, 12/02/2013, Reg. § 300.1, Reg. § 300.2, Reg. § 300.3

Regs give ordinary deduction for bond premium on ultimate disposition of zero coupon bondT.D. 9653, 1/14/2014; Reg. § 1.171-2

Final regs make it harder to defer tax on compensatory property transfersT.D. 9659, 02/25/2014; Reg. § 1.83-3

Proposed reg: 36 months of nonpayment would no longer be debt discharge reporting eventPreamble to Prop Reg10/14/2014; Prop Reg § 1.6050P-1

Cases and Rulings

Supreme Court strikes down DOMA; all legal spouses afforded same federal tax treatment Windsor, (Sup Ct 6/26/2013) 111 AFTR 2d 2013-2385

IRS adopts “state of celebration” rule in recognizing same-sex marriagesIR 2013-72; Rev Rul 2013-17, 2013-38 IRB

Corp's provision of at-cost services to sole owner wasn't constructive dividendWelle, (2013) 140 TC No. 19

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CA5 affirms FOCus strategy lacked economic substance, but vacates stacked penaltiesNevada Partners Fund, LLC, (CA 5 6/24/2013) 111 AFTR 2d ¶ 2013-841

S Ct vacates decision on valuation misstatement penalty for sham partnership transactions Nevada Partners Fund, LLC, (CA 5 6/24/2013) 111 AFTR 2d 2013-2416, cert granted, judgment vacated, andcase remanded 1/13/2014

S Ct finds valuation misstatement penalty applies to partnership's sham transactionU.S. v. Woods, (S Ct 12/3/2013) 112 AFTR 2d ¶2013-5512

QSST beneficiary could deduct interest on trust debt incurred to buy S corpChief Counsel Advice 201327009

FC inclusions taxed at top ordinary income rate, not at lower qualified dividend rateRodriguez, 112 AFTR 2d ¶ 2013-5050

CEO was responsible person after embezzlement by CFO but possibly not beforeGeorge Perrenod v. U.S., (DC CA 07/03/2013) 112 AFTR 2d ¶ 2013-5046

Forgiven loan to buy and combine adjacent unit qualified for residence debt exclusionPLR 201328023

DC Circuit reverses Tax Court on definition of nonresident alien gambling gainPark, (CA-DC 7/9/2013) 112 AFTR 2d ¶ 2013-5060

Deductible alimony became nondeductible after lump sum paid in lieu of future paymentsJohn D. Nye and Rose M. Nye, TC Memo 2013-166

Taxpayer denied bad debt deduction for advances to family-owned businessShaw, TC Memo 2013-170

Tax Court again finds no conservation easement where parties could agree to terminateCarpenter, et al, TC Memo 2013-172

No rollover relief for spouses who claimed institutions failed to follow verbal instructionsPLR 201328036

Individual pursuing False Claims suit was in trade or businessBagley v. U.S., (DC CA 8/5/2013) 112 AFTR 2d ¶ 2013-5166

Taxpayer didn't meet passive loss material participation test for his side businessBartlett, TC Memo 2013-182

Shareholder dispute didn't shift beneficial interest of S corp sharesKumar, TC Memo 2013-184

Court rejects straight gross receipts analysis for S corp's shareholder's reasonable wagesSean McAlary Ltd, Inc., TC Summary Opinion 2013-62

Information on S corp return wasn't treated as disclosed by shareholderChief Counsel Advice 201333008

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CA 7 finds no relief for taxpayer's criminal liability in offshore voluntary disclosure programSimon v. U.S., (CA 7 8/15/2013) 112 AFTR 2d ¶2013-5205

Married Taxpayer Not Head of Household; Taxpayer’s Spouse Temporarily AwayIRS Letter Ruling 201334041, Aug. 26, 2013

Trader in Securities or Investor Thomas Arthur Endicott and Melinda Jane Endicott v.Commissioner. T.C. Memo. 59,620(M), (Aug. 28, 2013)

TC upholds business owner's liability for Sec. 6672 penalty and IRS's efforts to collect itHellman, TC Memo 2013-190

IRS clarifies application of conservation easement valuation rulesChief Counsel Advice 201334039

IRS explains tax treatment of attorney fees paid under settlements of employee suitsLegal Advice Issued by Field Attorneys 20133501F

8th Circuit holds that outside basis is an affected item determined at partner levelThompson v. Comm., (CA 8 09/09/2013) 112 AFTR 2d ¶2013-5283

IRS provides updated guidance for equitable innocent spouse relief requestsRev Proc 2013-34, 2013-42 IRB

Tax Court reverses holding that façade easement appraisal wasn't qualifiedBarry S. Friedberg and Charlotte Moss, TC Memo 2013-224

CA 2 affirms: façade easement in historic district had no valueScheidelman, (CA 2 6/18/2014) 113 AFTR 2d ¶ 2014-952

Taxpayer denied full exclusion of settlement for failure to satisfy state law requirementSimpson, (2013) 141 TC No. 10

Heirs couldn't disavow special use value in determining gain on sale of farmlandBrett Van Alen, TC Memo 2013-235

IRS relaxes “use-it-or-lose-it” rule for health flexible spending arrangementsNotice 2013-71, 2013-47 IRB

IRA's ownership of taxpayer's business resulted in prohibited transactionEllis, TC Memo 2013-245

Spouses had to separately compute their self-employment taxDonald and Brenda Fitch, TC Memo 2013-244

Interest on unrecorded mortgage wasn't deductible, but no accuracy-related penalty applied DeFrancis, TC Summary Opinion 2013-88

Taxpayer's trading activities insufficient to establish trade or businessNelson, TC Memo 2013-259

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Tax Court upholds deduction for easement contribution, but for drastically lower amountGorra, TC Memo 2013-254

Court rules on taxpayer's liability for fraud and fraudulent failure to file penalties Mohamed, TC Memo 2013-255

District court holds that parsonage allowance is unconstitutionalFreedom from Religion Foundation, Inc. v. Lew, (DC WI 11/21/2013) 112 AFTR 2d ¶ 2013-5565

Tax Court rules on various concepts used to value LLC interestEstate of Tanenblatt, TC Memo 2013-263

Taxpayer not required to include partnership allocations attributable to forfeited interestCrescent Holdings, LLC, (2013) 141 TC No. 15

Lack of permits not fatal to casualty loss for buildings destroyed by forest fireChief Counsel Advice 201346009

Bonus payment under oil and gas agreement was ordinary incomeMichael H. Dudek, TC Memo 2013-272

IRS explains consequences of receipt of mortgage settlement due to foreclosureRev Rul 2014-2, 2014-2 IRB

CA-4: Required Records Doctrine compels production of foreign bank recordsU.S. v. Under Seal, (CA 4 12/13/2013) 112 AFTR 2d ¶2013-5643

Drug salesman can't deduct MBA's cost; he wasn't in a trade or business before enrollingHart, TC Memo 2013-289

Ex-husband not required to include misappropriated IRA distributions in incomeRoberts, (2013) 141 TC No. 19

Salesman fails to prove he logged sufficient hours to be a real estate professionalAdeyemo, TC Memo 2014-1

Emotional distress damages were taxable and accuracy-related penalty appliedSharp, TC Memo 2013-290

No theft loss for amounts taxpayer claimed were mis-invested by his former wifeWest, TC Memo 2014-2

Self-proclaimed “book author” couldn't deduct costs of world travelOros, (CA 9 12/31/2013) 113 AFTR 2d ¶ 2014-311

Taxpayers who went along with a tax deduction scheme didn't commit civil fraudCarreon et al, TC Memo 2014-6

Tax Court's take on one-IRA-rollover-per-year rule is at odds with IRS's PublicationBobrow, TC Memo 2014-21

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IRS to adopt Tax Court's interpretation of one-IRA-rollover-per-year ruleAnn. 2014-15, 2014-16 IRB (3/27/2014)

IRS withdraws prop reg in light of changed position on one-rollover-per-year limitationPreamble to Prop Reg 07/10/2014; Prop Reg § 1.408-4

Six-month out-of-town work assignment was “temporary” for business travel deductionpurposes Snellman, TC Summary Opinion 2014-10

Appraisal defects and false information precluded taxpayers' charitable contribution deductionAlli, TC Memo 2014-15

Doctor couldn't deduct tuition repayment triggered by failure to meet service requirementTripp Dargie, (CA-6 02/05/2014) 113 AFTR 2d ¶ 2014-457

Whistleblower's award under False Claims Act wasn't capital gainPatrick, (2014) 142 TC No. 5

No alimony deduction for equalization payment to former spouseRoscoe Jerome McNealy, TC Summary Opinion 2014-14

Court order not enough to give dependency deduction to noncustodial parentSwint, (2014) 142 TC No. 6

Unlike IRS, Tax Court weighs factor as one for granting equitable spousal reliefJulie G. Howerter, et al., TC Summary Opinion 2014-15

State-imposed term defeats perpetuity requirement for easement contribution deductionWachter, (2014) 142 TC No. 7

Tax Court rejects professional gambler's business expense/constitutionality argumentsLakhani, (2014) 142 TC No. 8

IRS could levy on pension plan account that was excluded, not exempted, in bankruptcyGross, (CA 9 2/25/2014) 113 AFTR 2d ¶ 2014-529

Taxpayer convicted of insider trading could qualify for relief under Code Sec. 1341Nacchio v. U.S., (Ct Fed Cl 3/12/2014) 112 AFTR 2d ¶ 2014-597

Payment for development of client methodology taxed as ordinary incomeKamieneski, TC Summary Opinion 2014-22

Separate filing wife couldn't rely on husband's activities to escape PAL rulesJulie A. Oderio, TC Memo 2014-39

Taxpayers lose appeals of two Tax Court conservation easement decisionsEsgar Corporation, (CA 10 03/07/2014) 113 AFTR 2d ¶ 2014-583

Court order insufficient to support noncustodial parent's dependency exemption claimArmstrong, (CA 8 03/13/2014) 113 AFTR 2d ¶ 2014-601

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Supreme Court: severance payments are subject to FICA taxU.S. v. Quality Stores, Inc., et al, (Sup Ct 03/25/2014) 113 AFTR 2d ¶2014-604

Spouse can't file as head of household on amended late-filed returnChief Counsel Advice 201411017

Estate's administrators were liable for decedent's unpaid income taxesU.S. v. Robert Shriner, (DC MD 03/12/2014)113 AFTR 2d ¶ 2014-616

IRS provides relief to married victims of domestic abuse claiming premium tax creditNotice 2014-23, 2014-16 IRB

Court says gambler had no profit objective, despite its opposite conclusion for earlier yearsEstate of John F. Chow, TC Memo 2014-49

Individual received income from merger-triggered stock sale before her deathSantangelo v. U.S., (DC MS 03/19/2014) 113 AFTR 2d ¶ 2014-649

Tax Court: pre-easement restrictions made easement worthlessKaufman, TC Memo 2014-52

Court rejects taxpayer argument that custodian was to blame for late IRA rolloverAlexander, TC Summary Opinion 2014-18

French social security taxes don't qualify for foreign tax creditEshel, (2014) 142 TC No. 11

Provision linking spousal support payments to children's education kills alimony deductionJohnson, TC Memo 2014-67

Lawyer's losses from side racehorse activity weren't passiveStefan A. Tolin, TC Memo 2014-65

Mortgage foreclosure was passive activity disposition despite COD income exclusionChief Counsel Advice 201415002

Passive activity losses from home converted to rental don't offset excluded homesale gainChief Counsel Advice 201428008

No bad debt deduction for transfers to trusts; no business loss for indemnifying mother's lossesAlpert, TC Memo 2014-70

Group home manager for business serving adults with disabilities was employeeAtig Rahman, TC Summary Opinion 2014-35

Court finds that unmarried dad was custodial parent entitled to child tax breaksRodney Harris, TC Memo 2014-69

QDRO distribution to ex-wife was taxable despite ex-husband's debt to herWeaver-Adams, TC Memo 2014-73

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Eighth Circuit holds that taxpayer made a timely partial rollover to an IRAHaury, (CA 8 5/12/2014) 113 AFTR 2d ¶ 2014-820

Taxpayer who failed to establish basis had large stock gainsHoang v. Commr, (CA 11 05/02/14) 113 AFTR 2d ¶2014-795

Tax Court upholds negligence penalty against couple, but not fraud penaltyFlake, TC Memo 2014-76

Court rejects IRS valuation of easement deduction after determining land's best usePalmer Ranch Holdings Ltd., TC Memo 2014-79

Taxpayer's reacquisition of principal residence triggers loss of homesale exclusionDebough, (2014) 142 TC No. 17

Owner of LLC who co-guaranteed loan was 50% at risk & not subject to PAL limitsMoreno, et al, (DC LA 5/19/2014) 113 AFTR 2d ¶ 2014-839

Mortgage-related dispute kept foreclosure from being passive activity dispositionHerwig, TC Memo 2014-95

Taxpayer who says he intended to flip real estate wasn't in a trade or businessOhana, TC Memo 2014-83

Jury finds willful FBAR filing failures; penalty could reach 150% of account balance(U.S. v. Carl Zwerner, Civil Docket Case #1:13-cv-22082-CMA)

District Court: online poker accounts had to be included on FBARHom, (DC CA 6/4/2014) 113 AFTR 2d ¶ 2014-893

IRS announces new Taxpayer Bill of Rights IR 2014-72 (6/12/2014)

Court holds land sale triggered ordinary income, not capital gainFrederic Allen v. U.S., (DC CA 05/28/14) 113 AFTR 2d ¶2014-873

IRA withdrawal used to fund real property purchase was taxable distributionDabney, TC Memo 2014-108

Supreme Court: Inherited IRAs don't get Bankruptcy Code protectionClark v. Rameker, (Sup Ct 6/12/2014) 113 AFTR 2d ¶ 2014-889

Court finds no 1031 transaction and rejects taxpayer's basis calculationBlangiardo, TC Memo 2014-110

IRS permits spouse to roll over a Roth IRA payable to a trust she controlsPLR 201423043

IRS explains federal tax treatment of MA's refundable credit for senior citizensChief Counsel Advice 201423020

No goodwill transfer where taxpayer wound down business and his sons started new oneBross Trucking, Inc., TC Memo 2014-107

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IRS announces changes to offshore account compliance programIR 2014-73; Fact Sheet 2014-6, 06/18/2014; Fact Sheet 2014-7, 06/18/2014

FAQs clarify changes to offshore voluntary disclosure program and transition rules

New details emerge on IRS's streamlined offshore account compliance program (10/9/14)

Reluctant sale didn't qualify for involuntary conversion treatmentPeters, (DC MO 6/11/2014) 113 AFTR 2d ¶ 2014-926

Taxpayer salvages partial deduction for unsubstantiated trucking expensesBaker, TC Memo 2014-122

Junior ROTC instructor couldn't exclude pay as nontaxable military allowanceAmbrosius, TC Memo 2014-126

Taxpayer who didn't pick up his mail couldn't challenge tax liability at CDP hearingOnyango, (6/24/2014) 142 TC No. 24

Failure to consider property received in transaction negated entire charitable deductionSeventeen Seventy Sherman Street, LLC, TC Memo 2014-124

IRS policy change: aliens may keep ITINs indefinitely if they use them on tax returnsIR 2014-76

Separate activity treatment doesn't affect passive loss real estate professional testChief Counsel Advice 201427016

Tax Court disallows losses from CARDS transaction and related forward contractsHunter, TC Memo 2014-132

Attorney's spouse engaged to handle difficult client was an independent contractorJones, TC Memo 2014-125

Passive activity losses from home converted to rental don't offset excluded homesale gainChief Counsel Advice 201428008

Rental of residence never commenced so interest wasn't deductible as business expense Michael Hume and Dorsaye Dilani, TC Memo 2014-135

Taxpayer wasn't real estate professional; losses barred by passive activity rulesSchumann, TC Memo 2014-138

Court rules on deductions where employer's office was employee's homeMiller, TC Summary Opinion 2014-74

Airplane rental was passive activity where owner failed to show material participationWilliams, TC Memo 2014-158

Taxpayer whose son took over management of business still “materially participated”Wade, TC Memo 2014-169

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25% income omission for 6-year assessment period based on gains, not amounts realizedBarkett, (2014) 143 TC No. 6

Taxpayer willfully attempted to evade tax, so tax not discharged in bankruptcyVaughn, (CA 10 8/26/2014) 114 AFTR 2d ¶ 2014-5191

Taxpayer wasn't nonresident alien or Chinese resident, so regular U.S. rates appliedShi, TC Memo 2014-173

Partners weren't “limited partners” exempt from self-employment taxChief Counsel Advice 201436049

No bad debt deduction, or theft or investment loss, for investment gone badBunch, TC Memo 2014-177

Tax Court: reportable transactions penalty based on tax shown on original returnYari, (2014) 143 TC No. 7

Couple's farmhouse wasn't held as rental property or for production of incomeMeinhardt, (CA 8 9/10/2014) 114 AFTR 2d ¶ 2014-5233

Settlement in malpractice suit against tax preparers wasn't includible in the taxpayers' income Cosentino, TC Memo 2014-186

Tax Court: IRA withdrawal to cover deposit to govt. annuity not tax-free rolloverBohner, (2014) 143 TC No. 11

Lawful permanent resident couldn't “informally” abandon his status to avoid U.S. taxGerd Topsnik, (2014) 143 TC No. 12

Relief gives automatic tax deferral to many in Canadian retirement plansRev Proc 2014-55, 2014-44 IRB, IR 2014-97

Tax Court holds longtime artist and art professor not snared by hobby loss rulesCrile, TC Memo 2014-202

IRS sets out treatment of green card holders under various tax provisionsInformation Letter 2014-0033

Taxpayer's sports memorabilia activity was not engaged in for profitAkey, TC Memo 2014-211

2014 C Corporation Tax DevelopmentsCRS report examines IRS's latest efforts to limit corporate inversionsNotice 2014-52, 2014-42 IRB

Dispositions of installment obligations can create taxable events

Circuit Court affirms deduction for large lease termination paymentABC Beverage Corporation v. U.S., (CA 6 6/13/2014) 113 AFTR 2d 2014-934

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Contributions of grooming products didn't qualify for enhanced charitable deductionChief Counsel Advice 201414014

No gain or loss recognized on division of corporation by feuding siblings PLR 201411012

Bankruptcy obligations no excuse for responsible person's failure to remit trust fund taxesNakano, (CA 9 2/18/2014) 113 AFTR 2d 2014-510

Getting cash out of a closely held corporation

2014 S Corporation Tax Developments

Passive activity losses-S corp. owners-material participation-proof. Charles E. Wade,et ux. v. Commissioner, (2014) TC Memo 2014-169, 2014 RIA TC Memo ¶2014-169

Partners' and more than 2%-S-corporation shareholders' LT health care coverageRev Rul 91-26, 1991-1 CB 184

Taxpayer whose son took over management of business still "materially partici-pated"Wade, TC Memo 2014-169

Revocation of parent's S status means former QSub must separately account for income, etc.Chief Counsel Advice 201433014

Final regs provide that only bona fide shareholder loans to S corporation create basisT.D. 9682 , 07/22/2014 ; Reg. 1.108-7 , Reg. 1.1366-2 , Reg. 1.1366-5

Tax-saving opportunities for "active" S corporation owners

IRS finalizes regs on FICA, FUTA and tanning tax treatment of disregarded entities T.D.9670, 06/25/2014 , Reg. § 1.1361-4, Reg. 31.3121(b)(3)-1 , Reg. 31.3127-1 , Reg. 31.3306(c)(5)-1, Reg.301.7701-2

Active-participation exception to farming syndicate not limited to individualsBurnett Ranches, Limited v. U.S., (CA 5 5/22/2014) 113 AFTR 2d 2014-848

IRS advice on its processing amended S corp return after running of statute of limi-tationsChief Counsel Advice 201409005

Third Circuit affirms: QSub election doesn't increase shareholder's basis in S corporationR. Ball et al, (CA 3 2/12/2013) 113 AFTR 2d 2014-494

IRS gives green light to favorable tax results on transfer of S corporation to employeesPLR 201405005

CCA determines tax treatment of S corp's disallowed loss from property distributionChief Counsel Advice 201421015

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S corps.-adjustments to basis of stock of shareholders-allocations-accumulated adjustmentsaccount - tax -exempt income PLR 201440013

2014 Partnership Tax Developments

Final Rules on Start-Up Expenses After Technical Termination T.D. 9681

Interest Expense by Corps. Owning 10 Percent of P’ship Addressed T.D. 9676

Excluded Gain Not Passive Activity Gross Income for PALs CCA 201428008

Arizona: LLC Members Not Entitled to Deduct Expenses Paid on Behalf of LLC Sommer v. Arizona Department of Revenue, Arizona State Board of Tax Appeals, No. 2015-12-I

California: Filing and Payment Requirements for Business Entity Members ofMultiple-Member LLCs Addressed Legal Ruling 2014-01, California Franchise Tax Board

Pennsylvania: Nonresident Partners Liable for Tax on Debt Discharged Because of ForeclosureWirth v. Commonwealth of Pennsylvania, Pennsylvania Supreme Court

Partnership’s Proceeds from Sale of Land Were Ordinary IncomeC.D. Pool, TC Memo. 2014-3, Dec. 59,804(M)

Michigan: Income from Sale of Limited Partnership Interest Was Business IncomeAikens v. Department of Treasury, Michigan Court of Appeals, No. 310528

Utah: Nonresident Liable for Tax on Gain Apportioned by Partnership to StateCommission Decision, Appeal No. 12-2275, Utah State Tax Commission

2014 Fiduciary Income Tax Developments

No bad debt deduction for transfers to trusts; no business loss for indemnifying mother's lossesAlpert, TC Memo 2014-70

Court finds trust liable as transferee of a transferee but only to a limited extentFrank Sawyer Trust of May 92, Transferee, Carol S. Parks, Trustee, TC Memo 2014-59

Tax Court clarifies application of passive activity rules to trusts and estates Frank Aragona Trust, (2014) 142 TC No. 9

IRS permits spouse to roll over a Roth IRA payable to a trust she controls PLR 201423043

Final regs list additional trust /estate expenses that escape the 2% AGI floor T.D. 9664, 05/08/2014 ; Reg. 1.67-4

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Claim of right refunds and deductions-double deductions-income in respect of decedent-capitalloss vs. business expense or expense for production of incomeBatchelor-Robjohns v. U.S., DC FL, 113 AFTR 2d 2014-1392

IRAs-inherited IRAs-surviving spouse-rollovers; transfers PLR 201437029

2014 Estate and Gift Tax DevelopmentsUnified estate and gift tax exclusion amount 2014, $5,340,000 ($5,250,000 for 2013)

Generation-skipping transfer (GST) tax exemption. The exemption from GST tax will be $5,340,000 fortransfers in 2014 (up from $5,250,000 for transfers in 2013)

Gift tax annual exclusion 2014, $14,000 (same as for 2013)

Increased annual exclusion for gifts to noncitizen spouses 2014, $145,000 ($143,000 for 2013)

Expatriation 2014, $157,000 for the five tax years ending before the date of the loss of U.S. citizenship will bea covered expatriate ($155,000 for 2013). Under a mark-to-market deemed sale rule, all property of a coveredexpatriate is treated as sold on the day before the expatriation date for its fair market value. However, for 2014,the amount that would otherwise be includible in the gross income of any individual under thesemark-to-market rules will be reduced by $680,000 ($668,000 for 2013)

Foreign earned income exclusion $99,200 in 2014 ($97,600 in 2013)

Unified estate and gift tax exclusion amount 2015, $5,430,000

Generation-skipping transfer (GST) tax exemption $5,430,000 for transfers in 2015

Gift tax annual exclusion 2015, $14,000 (same as for 2014).

Increased annual exclusion for gifts to noncitizen spouses 2015, $147,000 Expatriation 2015, $160,000 for the five tax years ending before the date of the loss of U.S. citizenship will bea covered expatriate. Under a mark-to-market deemed sale rule, all property of a covered expatriate is treated assold on the day before the expatriation date for its fair market value. However, for 2015, the amount that wouldotherwise be includible in the gross income of any individual under these mark-to-market rules will be reducedby $690,000.

Foreign earned income exclusion $100,800 in 2015

No credit against gift tax arose where estate overpaid nondeferred portion of estate taxEstate of Franklin Z. Adell, TC Memo 2014-89

IRS issues advice on gift and estate tax treatment of SCINsChief Counsel Advice 201330033

Estate tax dispute concerning pension plan with assets in Madoff account moves forwardEstate of Bernard Kessel, TC Memo 2014-97

Tax Court in Steinberg approves the net net gift conceptIn Steinberg, 141 TC No 8 (2013),

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2014 Tax Accounting Developments

IRS explains E&P adjustment following switch in depreciation recovery periodPLR 201410029

Automatic accounting method change rules to reflect new retail inventory method regRev Proc 2014-48, 2014-36 IRB

Taxpayer wasn't real estate professional; losses barred by passive activity rulesSchumann, TC Memo 2014-138

"Facilities upgrade" payments from car manufacturer were income to dealershipLegal Advice Chief Counsel Issued by Associate 2014-004

Disregarded entity's passive investment activities constitute insurance businessPLR 201412001

IRS OKs related entities' like-kind swap of building for new structure on leased landPLR 201408019

Final regs delay employer mandate for midsize employers & phase in coverage for large firmsT.D. 9655, 02/10/2014 , Reg. 54.4980H-1 , Reg. 54.4980H-2 , Reg. 54.4980H-3 , Reg. 54.4980H-4 , Reg.54.4980H-5 , Reg. 54.4980H-6

Appraisal defects and false information precluded taxpayers' charitable contribution deductionAlli, TC Memo 2014-15

Final regs liberalize rules for deducting non-away-from-home lodgingT.D. 9696, 09/30/2014 ; Reg. 1.162-32 , Reg. 1.262-1

Draft 2015 1099 forms and instructions provide for FATCA compliance

Couple's farmhouse wasn't held as rental property or for production of incomeMeinhardt, (CA 8 9/10/2014) 114 AFTR 2d 2014-5233

Poor substantiation kills charitable deduction for $27,000 of household, etc. ItemsSmith, TC Memo 2014-203

Relief gives automatic tax deferral to many in Canadian retirement plansRev Proc 2014-55, 2014-44 IRB , IR 2014-97

Some key points in dealing with the net investment income tax

IRS explains limits on use of the recurring item exception in accrual accountingChief Counsel Advice 201442048

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2014 Tax Practice and Procedure Developments

IRS provides procedures for automatic accounting method changes under capitalization regs Rev Proc 2014-16, 2014-7 IRB

IRS Proposes To Eliminate 36-Month Nonpayment Rule Triggering COD Income ReportingNPRM REG-136676-13

IRS Provides Rules for Allocation of Disbursements from Roth Accounts to MultipleDestinations Notice 2014-54

IRS revises procedures for validating SSNs in order to stop backup withholdingRev Proc 2014-43, 2014-32 IRB

IRS declines to appeal decision striking down return preparer regsLoving , 111 AFTR 2d 2013-589 (DC D.C., 2013

New accounting method change rules for certain royalties, vendor chargebacks, etc.Rev Proc 2014-33, 2014-22 IRB

2014 Tax Changes, Extenders & 2013 Expiring Provisions

What's new for 2014-a roundup of tax changes effective this year

Capitalization rules in final regs go into effect

Individuals not carrying health insurance face a penalty

Refundable tax credit for low- or moderate-income families buying certain health insurance

"Qualified health plans" may be offered through cafeteria plans by "qualified employers"

Excise tax on health insurance providers.

Reduced total assets threshold for Schedule UTP

Lower standard mileage allowance rate

FATCA implementation

Final regs clarifying 3.8% surtax on investment income & gains go into effect

Final regs go into effect allowing agents to handle FUTA for home care service employers

Beginning of phased broker reporting of debt instruments & options

Revised rules for tips and service charges go into effect

Increased fees apply

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ATRA 2012 EXTENDERS—SOME EXPIRED AS OF 2013 BUT SOME CONTINUE ON

Taxable & Exempt Income

•1 Parity for the exclusions of employer-provided mass transit and parking benefits was retro-activelyextended through 2013. For 2014, an employee can exclude up to $250 a month of employer-providedqualified parking benefits, but only $130 for the combined value of transit passes and transportation in acommuter highway vehicle.

•2 For 2014, the maximum exclusion for employer-provided adoption assistance is $13,190.

•3 IRS modified the "use-or-lose" rule for health flexible spending accounts (health FSAs) to allow employeesto carry over up to $500 of unused amounts remaining at year-end.

•4 IRS provided new guidance on the $2,500 limit on health FSAs that applies in 2013 and 2014.

•5 For 2013, the top dividend rate rose to 20% for certain higher-income taxpayers.

•6 The maximum fair market value (FMV) for 2014 for which the fleet-average valuation method can be usedis $21,300 for a passenger auto and $22,600 for a truck or van.

•7 The maximum FMV for 2014 for which the cents-per-mile valuation method can be used is $16,000 forpassenger autos and $17,300 for a truck or van.

•8 IRS provided the 2013 and 2014 income threshold ($115,000) for the definition of a "highly compensatedemployee."

•9 The per-diem dollar threshold in computing the limits for the exclusion of benefits from long-term careinsurance is $330 for 2014.

•10 IRS delayed to 2014 implementing FICA guidance on employers' treatment of tips and service charges.

•11 A district court has held that a parsonage allowance was unconstitutional.(May see further litiga-tion onthis.)

•12 Regulations were issued on elective deferral of cancellation of debt (COD) income from the re-acquisitionof debt instruments.

•13 IRS provided a safe harbor accounting method for calculating original issue discount (OID) on a pool ofcredit card receivables.

•14 Regulations provided that Treasury Inflation-Indexed Securities (TIPS) issued with more than a de minimisamount of premium are subject to the coupon bond method.

•15 IRS concluded that an incentive to health care professionals and hospitals for using electronic records isincome to recipients.

Deductions & Expenses of a Business

•1 Final regulations were issued under Code Sec. 162(a) and Code Sec. 263(a) with respect to amounts paid toacquire, produce, or improve tangible property, that cover: deductible repairs and maintenance costs; timingfor deducting materials and supplies; how to handle the cost of rotable, temporary and standby emergencyspare parts; capitalization, generally; amounts paid to acquire property; and amounts paid to improveproperty.

•2 An optional safe harbor method of calculating a home office deduction is available starting with the 2013tax year. The safe harbor-$5 × square feet of qualified use (up to 300 square feet)-provides an alternative tothe calculation, allocation, and substantiation of actual expenses that would otherwise be required.

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•3 Under the simplified (high-low) per diem rates for post-Sept. 30, 2013 travel, a payor may reim-burse up to$251 for high-cost localities ($186 for lodging and $65 for M&IE) and $170 for other localities ($118 forlodging and $52 for M&IE).

•4 For 2013, a high deductible health plan (HDHP) for Archer medical savings account (MSA) purposes is ahealth plan with an annual deductible of at least $2,150 and not more than $3,200 for individual coverage($4,300 and not more than $6,450 for family coverage); in addition, the maximum out-of-pocket expensescan't exceed $4,300 for individual coverage ($7,850 for family coverage). For 2014, an HDHP for MSApurposes is a health plan with an annual deductible of at least $2,200 and not more than $3,250 forindividual coverage ($4,350 and not more than $6,550 for family coverage); in addition, the maximumout-of-pocket expenses can't exceed $4,350 for individual coverage ($8,000 for family coverage).

•5 For 2013 and 2014, a HDHP for health savings account (HSA) purposes is a health plan with an annualdeductible that is not less than $1,250 for individual coverage & $2,500 for family cover-age. Maximumout-of-pocket expenses can't exceed $6,250 for individual coverage for 2013 ($6,350 for 2014) and $12,500for family coverage for 2013 ($12,700 for 2014). The maximum annual HSA deductible contribution is thesum of the monthly contribution limits, based on eligi-bility and health plan coverage on the first day of themonth. The monthly limit is 1/12 of the indexed amount for self-only coverage ($3,250 for 2013 & $3,300for 2014) and for family cover-age ($6,450 for 2013 and $6,550 for 2014).

•6 New reliance regulations provided definitions, exceptions, etc. regarding the $500,000 limit for certainremuneration paid by health insurers.

•7 Puerto Rico was treated as included in the U.S. for purposes of calculating domestic produc-tion grossreceipts (DPGR) through 2013.

Interest Expense, Taxes & Losses

•1 Temporary regulations provided that taxpayers can deduct amounts paid for repairs and mainte-nance totangible property if the amounts paid do not otherwise have to be capitalized.

•2 The treatment of mortgage insurance premiums as qualified residence interest has expired.

•3 The election under Code Sec. 164 to deduct state and local sales taxes instead of state and local incometaxes has expired.

•4 IRS issued final regulations on the allocation of prepaid qualified mortgage insurance premiums.

•5 Beginning during 2013, proposed reliance regulations provided a regrouping "fresh start" under the passiveactivity rules for certain taxpayers subject to the 3.8% surtax on unearned income.

•6 A Court of Appeal held that a co-op stockholder may be entitled to a casualty loss deduction for damage tothe co-op's premises if the taxpayer has a sufficient property interest under state law.

Depreciation & Expensing

•1 50% bonus depreciation has basically expired but still applies in 2014 for certain long-production-periodproperty and aircraft placed in service before 2015.

•2 15-year MACRS depreciation for qualified leasehold improvement property, qualified restaurant propertyand qualified retail improvement property has expired.

•3 7-year MACRS depreciation for motorsports entertainment complexes has expired.

•4 Another round of trading bonus and accelerated depreciation for certain otherwise-deferred credits is stillprovided for certain long-production-period property and aircraft placed in service before 2015.

•5 Faster MACRS depreciation for qualified Indian reservation property has expired.

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•6 Proposed reliance regulations modified the rules for determining what transactions are dispo-sitions ofMACRS assets.

•7 Proposed reliance regulations modified the rules for accounting for MACRS depreciation using generalasset accounts.

•8 The federal sequester imposed a limit on the amounts refundable for trading bonus and accelerateddepreciation for certain otherwise-deferred credits.

•9 50% bonus depreciation for certain property used in biofuel production has expired.

•10 The Code Sec. 179 expensing limit is now set at $25,000 unless Congress acts before year end.

•11 Up to $250,000 of qualified real property made eligible for Code Sec. 179 has expired.

•12 50% expensing for qualified advanced mine safety equipment has expired.

•13 Expensing for certain film and TV production costs has expired.

•14 IRS determined that S corporations aren't subject to the Code Sec. 179 limitations that apply to consolidatedgroups.

•15 The right to revoke or alter a Code Sec. 179 expensing election without IRS consent has expired.

•16 Eligibility of off-the-shelf computer software for Code Sec. 179 expensing has expired.

•17 Enhanced Code Sec. 179 expensing for qualified zone property has expired.

•18 Autos, trucks and vans placed in service in 2014 are subject to revised auto depreciation and expensingdollar caps.

•19 The income inclusion amounts for autos, trucks and vans leased in 2014 were revised.

Charitable Contributions & Medical Expenses

•1 Above-basis deduction rules for charitable contributions of food inventory by both non-corporate taxpayersand C corporations have expired.

•2 Deductible amounts for insubstantial benefit to donors of charitable contributions increased. Items are fullydeductible if: (1) the value of all benefits received isn't more than $104 for 2014; or (2) the amountcontributed to the charity is at least $52 for 2014 and the donor receives only token benefits (bookmarks,calendars, mugs, posters, tee shirts, etc.) generally costing no more than $10.40 for 2014.

•3 The Tax Court has held there was no qualified easement in property subject to a mortgage unless themortgagee timely subordinated its rights to those of charitable donee.

•4 The Tax Court found no qualified easement where replacement property could be substituted for theproperty originally transferred subject to easement.

•5 The increased charitable deduction for qualified conservation easements contributed by indivi-duals(including ranchers & farmers) has expired.

•6 The increased charitable deduction for qualified conservation easements contributed by corpo-rate ranchersand farmers has expired.

•7 Maximum premiums paid for a qualified long-term care insurance contract, deductible as a medicalexpense, increased.

Education Tax Breaks

•1 The American Opportunity Tax Credit for higher education expenses was extended through 2017.

•2 For 2013 and 2014, the Lifetime Learning credit phases out over higher levels of modified AGI.

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•3 For Coverdell education savings accounts (CESAs), the $2,000 contribution limit, higher phase-out ranges,and other enhancements were made permanent.

•4 Exclusion for employer-provided education assistance (including assistance for graduate-level courses) wasmade permanent.

•5 Exclusion for awards received under the National Health Service Corps and Armed Services HealthProfessions scholarship programs was made permanent.

•6 For student loan interest deduction, removal of 60-month limit and increased phase-out ranges were madepermanent.

•7 Phaseout ranges were provided for the deduction for interest paid on qualified higher education loans in2013 and 2014. For 2014, the deduction phases out ratably for taxpayers with modified AGI between$65,000 and $80,000 ($130,000 and $160,000 for joint returns).

•8 The up-to-$250 above-the-line deduction for teachers’ out-of-pocket classroom-related expen-ses hasexpired.

•9 The above-the-line deduction for qualified tuition and related expenses was has expired.

Business and Personal Tax Credits

•1 The research credit has expired.

•2 The work opportunity tax credit (WOTC) has expired.

•3 The railroad track maintenance credit has expired.

•4 The mine rescue team training credit has expired.

•5 The cellulosic biofuel producer credit has expired.

•6 The minimum low-income tax credit rate for nonfederally subsidized new buildings has expired.

•7 Qualified zone academy bonds has expired.

•8 The production credit for Indian coal facilities has expired.

•9 The placed-in-service date for a facility using wind to produce electricity to be a qualified facility hasexpired.

•10 The Indian employment tax credit has expired.

•11 The new markets tax credit has expired.

•12 The American Samoa economic development credit was modified and extended through 2014.

•13 The credit for biodiesel and renewable diesel has expired.

•14 The nonbusiness energy property credit has expired.

•15 The credit for energy-efficient new homes has expired.

•16 The credit for energy-efficient appliances has expired.

•17 The alternative fuel vehicle refueling property credit (nonhydrogen property) has expired.

•18 The credit for 2- or 3-wheeled plug-in electric vehicles has expired.

•19 The employer wage credit for employees who are active duty members of the uniformed services hasexpired.

•20 Earned income tax credit (EITC) changes relating to higher amounts for eligible taxpayers with three ormore children, and increases in threshold phaseout amounts for singles, surviving spouses, and heads ofhouseholds were extended for five years through 2017.

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•21 Eased rules in qualifying for the refundable child credit were extended for 5 years through 2017.

•22 The maximum amount of disqualified income that can be received for EITC purposes increased and for2014 it’s $3,350.

•23 Final regulations explained "affordability" of employer-sponsored coverage for purposes of the health carepremium tax credit.

•24 Transition relief allowed certain small employers to claim the Code Sec. 45R health care credit.

•25 The adoption credit rules (but not refundability provisions) were made permanent.

•26 Nonrefundable personal credits were allowed to permanently offset both alternative minimum tax andregular tax.

•27 The AGI amounts used in computing the "saver's" credit for elective deferrals and IRA contribu-tionsincreased for 2013 and 2014. The applicable credit percentage depends on filing status and AGI. For 2014,the amounts are: For joint filers: $0 to $35,500, 50%; $35,500 to $38,500, 20%; and $38,500 to $59,000,10% (no credit if AGI is above $59,000). For heads of households: $0 to $26,625, 50%; $26,625 to$28,875, 20%; and $28,875 to $44,250, 10% (no credit if AGI is above $44,250). For all other filers: $0 to$17,750, 50%; $17,750 to $19,250, 20%; and $19,250 to $29,500, 10% (no credit if AGI is above $29,500).

•28 The sequester reduced the direct payment of refundable tax credit bonds.

•29 The sequester reduced the small business health care credit of a tax-exempt employer.

•30 The Supreme Court held that a U.K. windfall tax qualified for the foreign tax credit.

•31 A Rev Proc provided a new safe harbor for partnership allocations of rehabilitation credits.

Sales & Exchanges

•1 The depreciation part of the standard mileage rate remains at 23¢.

•2 Tax-free exchange of life insurance contract or annuities held to apply to beneficiaries after death of owner.

•3 State treatment of property as real or personal was held not determinative for like-kind exchange purposes.

Capital Gains & Losses

•1 The maximum tax rate on long-term capital gains of higher income noncorporate taxpayers increased to20% in tax years beginning after 2012.

•2 100% gain exclusion for qualified small business stock has expired.

•3 Regulations clarified that an obligation under a debt instrument may be a position in personal property thatis part of a straddle.

•4 Temporary regulations provided rules for determining when to take unrealized gain or loss into account onmixed straddles established after Aug. 1, 2013.

•5 IRS provided guidance for allocating gain on the sale of qualified real property for which a Code Sec. 179 election was made between Code Sec. 1245 property and Code Sec. 1250 property.

Tax Accounting

•1 Automatic change in accounting procedures will apply for repair/capitalization regulations under Code Sec.162 and Code Sec. 263 .

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Tax Withholding

•1 Beginning in 2013, the voluntary withholding rate on unemployment benefits permanently remains at 10%.

•2 Beginning in 2013, the optional flat withholding rate for supplemental wage payments totaling $1 million orless for a calendar year permanently remains at 25%.

•3 Beginning in 2013, the mandatory flat withholding rate for supplemental wage payments totaling more than$1 million for a calendar year was increased to 39.6% (from 35%).

•4 Beginning in 2013, the withholding rate on gambling proceeds permanently remains at 25%.

•5 Beginning in 2013, the backup withholding rate on reportable payments permanently remains at 28%.

•6 For 2014, an employee who can be claimed as a dependent on someone else's return can't claim anexemption from withholding if his income exceeds $1,000 and includes more than $350 of unearnedincome.

•7 The threshold amount for cash payments to domestic service employees (e.g., nannies) to be subject toFICA is $1,900 for 2014.

•8 IRS released a revised Form 8952 to apply for the misclassified worker settlement program.

•9 A Court of Appeal held that a settlement payment for age discrimination is treated as wages for FICApurposes.

•10 The Supreme Court agreed to resolve a circuit split on the FICA tax treatment of severance pay.

•11 IRS provided guidance on whether an employee may ask for additional withholding on supple-mentalwages.

•12 IRS guidance stated that a worker providing services in multiple roles can be both an employee and anindependent contractor, when working on two projects for the same company.

Individual Tax Computation

•1 A seventh, higher tax bracket was added to the tax rates on individuals' incomes for 2013 and later years.The tax rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.

•2 The standard deduction amounts for 2014 are as follows: for joint filers and surviving spouses, $12,400; forheads of household, $9,100; for singles, $6,200; and for marrieds filing separately, $6,200. For 2013 and2014, the basic standard deduction of individuals who can be claimed as dependents by another taxpayercan't exceed the greater of (a) $1,000 or (b) $350 plus the individual's earned income; and, it can't be morethan the regular basic standard deduction amount shown above ($6,200 for 2014).

•3 For 2013 and later years, the overall limitation on itemized deductions (the "Pease" limitation) was restored.For 2013, it applies when AGI exceeds $300M for joint returns, $275M for heads of household, $250M forsingle filers, & $150M for married individuals filing separately.

•4 For 2014, the personal exemption amount is $3,950.

•5 For 2013 and later years, the personal exemption phaseout was restored. For joint filers and survivingspouses, the phaseout begins to apply at $305,050 for 2014 and is completed at $427,550. For heads ofhousehold, the phase-out begins to apply at $279,650 for 2014 and is completed at $402,150. For singlefilers (other than surviving spouses and heads of house-hold), the phaseout begins to apply at $254,200 for2014 and is completed at $376,700. For marrieds filing separately, the phaseout begins to apply at$152,525 for 2014 and is completed at $213,775.

•6 Under the kiddie tax, the parents' highest tax rate applies to a child's unearned income over $2,000 for 2013and 2014.

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•7 For 2014, the dollar thresholds for the optional methods of computing net earnings from self-employmentare $4,800 and $7,200.

•8 The wage base for computing the Social Security tax (OASDI) is $117,000 for 2014.

•9 For 2013 and later years, the above-the-line deduction for self-employment tax is 50% of allself-employment tax.

•10 IRS issued final regulations on the additional 0.9% Medicare tax on employee compensation andself-employment income.

•11 Final regulations clarified application of the 3.8% net investment income tax that applies after 2012. IRSalso issued proposed reliance regulations on the 3.8% tax that deal with the com-putation of net investmentincome with respect to a number of specialized provisions and situations.

Alternative Minimum Tax

•1 The statutory amount that is part of the calculation of tentative minimum tax, which is adjusted for inflationfor any tax year beginning in 2013 and thereafter, was set at $182,500 for 2014.

•2 Increased individual alternative minimum tax (AMT) exemption amounts were made applicable for taxyears beginning in 2013 and thereafter. The 2013 amounts are: $51,900 for unmarried individuals, $80,800for married individuals filing jointly, and $40,400 (50% of the joint filing amount) for married individualsfiling separately. These amounts phase out at high levels of income.

•3 For estates and trusts, the AMT exemption amount for tax years beginning in 2014 was set at $23,500 less25% of alternative minimum taxable income (AMTI) exceeding $78,250. Thus, no exemption is availablewhen AMTI reaches $172,250.

•4 The AMT exemption amounts and phase-out of exemption amounts are adjusted for inflation for any taxyear beginning in 2013 and thereafter.

•5 The AMT exemption amount for a child subject to the kiddie tax can't exceed the child's earned income forthe tax year plus $7,250 for 2014. But this exemption amount can't be more than the child's regular AMTexemption, i.e., the unmarried individual's $52,800 (before a phaseout) exemption.

Corporate Tax Computation & S Corporations

•1 The accumulated earnings tax rate increased to 20% for tax years beginning in 2013 and thereafter.

•2 The personal holding company penalty tax rate increased to 20% for tax years beginning in 2013 andthereafter.

•3 IRS provided new simplified methods for taxpayers to request relief for late S corporation and relatedelections.

•4 IRS privately ruled that a membership interest can satisfy the requirement for tax-free distri-bution that adistribution be made "with respect to its stock."

•5 The reduced 5-year recognition period for an S corporation's built-in gains has expired.

•6 A Court of Appeal held that if a shareholder fails to claim a suspended loss deduction and is latertime-barred from doing so, he can't claim a corresponding increase in basis.

Corporate Transactions

•1 IRS issued final regulations barring use of controlled corporations to avoid related corporation redemptionrules.

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•2 The rule treating ordinary income from disposition of Section 306 stock as qualified dividend income wasmade permanent.

•3 Final regulations modified the application of 382 segregation rules to small shareholders.

•4 Monthly long-term exempt rates for the §382 limitation ranged from a low of 2.7% to a high of 3.5%.

•5 IRS issued final regulations on deemed asset sale treatment for certain transactions under Code Sec. 336(e) .

•6 IRS issued final regulations on outbound stock transfers from a U.S. person to a foreign corporation.

•7 The collapsible corporation rules were permanently repealed.

Trust, Estates, & Decedents

•1 Electing small business trusts (ESBTs) are taxed at a flat rate of 39.6% on some income.

•2 Final regulations clarified the application of the post-2012 3.8% net investment income tax. IRS also issuedproposed reliance regulations dealing with the computation of net investment in-come with respect to anumber of specialized provisions and situations.

•3 A court denied a net operating loss (NOL) carryover from terminated bankruptcy estate to debtor.

Exempt Organizations

•1 For 2014, unrelated business taxable income excludes annual dues of up to $158 per member received byagricultural or horticultural organizations.

•2 IRS issued guidance for Type III supporting organizations.

Retirement Plans

•1 RS issued final regulations on suspending 401(k) safe harbor contributions. For 2013 and 2014, the limit on401(k) plan elective deferrals is $17,500.

•2 For 2013 and 2014, compensation for "highly compensated employee" status is $115,000.

•3 For 2014, the limit on annual additions to a defined compensation plan is $52,000.

•4 For 2014, the maximum annual benefit from a defined benefit plan is $210,000.

•5 IRS provided post-Windsor guidance to same-sex married couples with respect to cafeteria plans and HSAs.

•6 The rule allowing up to $100,000 in required minimum distributions from IRAs to be contributed tax-free tocharity has expired.

Foreign Income & Transactions

•1 Final regulations were issued providing additional guidance on withholding on payments to foreignfinancial institutions and others under the Foreign Account Tax Compliance Act(FATCA).

•2 IRS postponed implementation dates in FATCA regulations, with withholding being implemented in phasesbeginning on July 1, 2014.

•3 IRS issued a final foreign financial institution agreement and other new FATCA guidance.

•4 Final regulations were issued on the treatment of dividend equivalents.

•5 Final, temporary, and proposed regulations clarified passive foreign investment company (PFIC) ownerdeterminations and filing requirements.

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Returns and Payment of Tax

•1 IRS has warned Congress again that there may be another delay this year for the start of the filing seasondue to inaction by Congress or acting too late.

•2 Individual return filing thresholds for 2014:

1 Single taxpayer: $10,150 2 Single taxpayer (age 65 or over): $11,700 3 Married filing joint return: $20,300 4 Married filing joint return (one 65 or over): $21,500 5 Married filing joint return (both 65 or over): $22,700 6 Married filing separate return: $3,950 7 Head of Household: $13,050 8 Head of Household (65 or over): $14,600 9 Surviving spouse: $16,350 10 Surviving spouse (65 or over) $17,550

•3 For joint return purposes, an individual is married to a person of the same sex if the individuals are lawfullymarried under state law. For this purpose, individuals are legally married if their marriage was validlyentered into under state law ("state of celebration"), even if the married couple is domiciled in a state thatdoes not recognize the validity of same-sex marriages.

•4 The income tax return filing threshold for a bankruptcy estate of an individual is $10,150 for 2014.

•5 Mandatory employer and insurer reporting requirements under Code Sec. 6055 and Code Sec. 6056 andemployer shared responsibility payments under Code Sec. 4980H , which were to have gone into effect onJan. 1, 2014, were postponed until Jan. 1, 2015.

•6 Applicable large employers and insurers don't have to report information about an employee's insurancecoverage for periods beginning after 2014.

•7 For covered securities acquired after 2013, brokers have to report bond premiums and acquisitionpremiums.

•8 For less complex debt instruments acquired after 2013, brokers have to report information relating to thebasis of the debt instrument and character of any gain. For more complex debt instruments, brokers don'thave to report the information until after 2015.

•9 New final mortgage insurance premium reporting regulations apply to 2013 and thereafter.

•10 A district court enjoined IRS from enforcing its regulatory scheme for registered tax return preparers.

•11 Information return preparers can use truncated TINs (TTINs) on certain paper payee statements.

•12 New guidelines for taxpayers requesting equitable relief from income tax liability under the innocent spouserules apply to requests filed (or pending) after Sept. 15, 2013.

Deficiencies, Refunds & Penalties

•1 Final regulations increased installment agreement and offer-in-compromise fees.

•2 IRS's small business fast track settlement program was expanded to operate nationwide.

•3 Mandatory employer and insurer reporting requirements under Code Sec. 6055 and Code Sec. 6056 andemployer shared responsibility payments under Code Sec. 4980H , which were to have gone into effect onJan. 1, 2014, were postponed until Jan. 1, 2015.

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•4 Proposed reliance regulations provided guidance on terms relevant to the employer's shared responsibilitymandate and provided general operating rules and transition relief associated with its implementation.

•5 Guidance clarified the treatment of statutory deficiency notices issued pursuant to a civil exam-ination fortax periods also covered by a restitution order and restitution-based assessments.

•6 The Supreme Court held that the valuation misstatement penalty applied to a partnership's sham transaction.

•7 Proposed reliance regulations clarified the material advisor penalty and allowed for 20-day discretionaryextension.

Estate, Gift & Generation-Skipping Transfer Taxes

•1 The maximum 2013 and 2014 estate, gift and generation-skipping transfer (GST) tax rates are 40%.

•2 The basic exclusion amount for gifts and estates, and the exemption amount for the GST tax, is $5,340,000for 2014. The corresponding unified credit amount (the tax otherwise imposed on the exclusion amount) is$2,081,800 in 2014.

•3 An executor must file an estate tax return if the decedent's gross estate at death exceeds the basic exclusionamount ($5,340,000 for estates of individuals dying in 2014).

•4 The gift tax annual exclusion is $14,000 for 2013 and 2014.

•5 For 2014, $145,000 may be transferred to a noncitizen spouse free of gift tax.

•6 Code Sec. 2010(c)(4) was amended, conforming to the regulations, by replacing "basic exclu-sion amount"with "applicable exclusion amount."

•7 Regulations fleshed out the portability election for decedents dying after 2010.

•8 Forms 706 and 709 include a section and schedule, respectively, for portability.

•9 New Schedule PC, Protective Claim for Refund, preserves estate's right to a refund of estate taxes paidwhen a claim or expense that is the subject of unresolved controversy at the time of filing the return laterbecomes deductible.

•10 A Court of Appeal found that an executor's reliance on an accountant, which caused a delay in filing theestate tax return, wasn't a sufficient basis to abate the estate's late filing penalty.

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