Wichita State University Accounting & Auditing Conference.

Tax Update May 20, 2010Wichita, KS

Wichita State University Accounting & Auditing

Conference

What We’re Going to Cover

7216 Guidance Disclosure of uncertain tax positions Tax preparer registration Tax provisions in health care bill HIRE Act Prospective legislation

Levin’s list

Section 7216

Brief History Only criminal penalty applicable to preparers Prohibits misuse of taxpayer information Regs 1/1/09 required advance written

permission for any use other than tax preparation

New guidance in late December 2009 satisfied many of our concerns

IRS Clarifications

Advance approval not required for: Newsletters – even if:

Written and distributed by unrelated third party Filtered by type of client

Disclosure of statistical data of practice i.e. in practice development activity

Disclosures for Quality, peer review or conflict reviews Professional liability insurance matters

Acknowledged “normal course of accounting services” exception

May make return information available to: Taxpayers regarding changes in tax law and

regulations Third parties such as stockholders, management,

suppliers or lenders Providing K-1 to CPA preparing a partner’s return?

Next steps Continue to work with Treasury

To provide further guidance on the “normal course” language



Levin’s list

Disclosure of Uncertain Tax Positions - Background

US v. Arthur Young (1984) gave IRS access to tax accrual workpapers

Historical IRS “policy of restraint”

1/26/2010 - IRS Commissioner Shulman introduced Announcement 2010-9

Fin 48 calculation is stated impetus for IRS proposal

Proposal status - not yet effective

Would require most business tax returns to annually disclose “uncertain tax positions”

7

Disclosure of Uncertain Tax Positions - Concerns Being Considered

May alter traditional notion of voluntary and cooperative tax reporting system

May cause taxpayers to seek non-traditional preparers

Possible effects on financial statement reporting

Difficult to apply to “factual” situations

Allocation between land and building

Executive compensation

Difficult to apply to flow-thru entities 8



Levin’s list

Tax Preparer Registration - Drivers

• Driven by significant errors with refundable tax credits, i.e., EITC and home buyers credit

• IRS commenced a review to:• Enhance competency, and

• Elevate the ethical conduct of preparers

Confidential

10

Tax Preparer Registration – Overview

January 4th – IRS released proposal

Commissioner announced his intent to implement:

1. PTIN

2. All preparers subject to Circular 230

3. CPE component

4. Testing

Phased in implementation – not applicable to 2010 filing season

Non-signing preparer issue 11

AICPA Positions

• Support PTIN requirement

• Support Circular 230 requirement for all preparers

• AICPA succeeded in exempting CPAs from education and testing requirements

• Concerns

• About the exam creating taxpayer confusion

• If “non-signing” preparers subject to registration 12

Comparing CPA and IRS-registered tax preparer requirements

CPA requirements IRS requirements

College graduate

150 hours college education

Uniform CPA exam

120 hours CPE over 3-year period

High school graduate

18 years old

IRS exam – level unknown

15 hours annual tax education

13



Levin’s list

Health Care TaxesDescription Amount Phase In Effectiv

eDate

Individuals

No insurance then pay greater of $95 or 1% income 2014

$325 or 2% income 2015

$695 or 2.5% income

2016

Itemized deduct medical Excess over 10% AGI 2013

Medicare tax earned income .9% on earned income

>$200 AGI single 2013

$250 AGI jt 2013

Medicare tax on invest income 3.8% Same as above 2013

Premium assistance

Refundable cr if premium exceeds

2% income < 133% poverty level

2013

3% income 133%-150% 2013

4% 150%-200% 2013

6.3% 200%-250% 2013

8.05% 250%-300% 2013

9.5% 300%-400% 2013

Excise tax on tanning 10% n/a 2011

Health Care

Individuals – Health Coverage1. No insurance then pay greater of $95 or 1% of income (2014) $325 or 2% of income (2015) $695 or 2.5% of income (2016)

2. Premium assistance (2013) Ranges between 2% - 9.5% of income Available up to 400% of poverty level

Health Care

Individuals – Medical Expenses1. Hurdle for itemized deduction

(2013) Increases from 7.5% to 10% AGI Transition rule for seniors thru 2016

2. Change in definition of medical expenses (2011)

Over-the-counter medications Coverage for adult children

Health Care

Medicare Tax (2013) 3.8% on investments 0.9% on earned income Affects high income

taxpayers >$200,000 of income (single) > $250,000 of income (joint)

Description Amount Phase In Effective

Date

Insurance Companies

Cadillac plans tax on premiums over 40% excise $10,200 s ingle 2018

$27,500 family 2018

If high risk profession or over 55 Same $11,800 single 2018

$30,950 family 2018

Health Care Taxes (cont’d)

Health Care

Cadillac Plans $10,200 single; $27,500 family Higher limits for high risk

professions and over 55 40% excise tax Effective 2018

Description Amount Phase In

Effective

Date

Employers

If no medical plan

• Generally • $2,000 x(# ees-30)

• 2014

• If < 50 employees • n/a • 2014

Small business credits

< 25 employees <$50k avg wage 9% premiums paid 2011-2013

<10 employees <$25k avg wage 35% premiums paid

Same

Penalty

Codification Economic Substance Doc 40% under paid tax

Enactment

Health Care Taxes (cont’d)

Health Care

Employer Requirements If no plan, penalty $2,000 x (number of employees-30) Not applicable if fewer than 50

employees Effective 2013

Small business credits (2011-2013) 35% premiums (<10 employees) 9% premiums (<25 employees)

Codification of Economic substance

Included in health care legislationApplicable if no benefit other than tax

savingsPenalty 40% tax savings (20% if

disclosed) Revenue increase $5.5 bil



Levin’s list

Hiring Incentives to Restore Employment Act

If New hire after 3/19/10 and before 1/1/11 Must be unemployed for >60 daysThen

1. Social Security Tax Exemption 6.2% of wages paid up to FICA limit of

$106,800 (i.e., max. of $6,621) Would still owe Medicare tax

2. Income Tax Credit Up to $1,000 Must retain worker for 52 weeks

2010 benefit but taken on 2011 returns

HIRE Act

1. Extends 179 exp through 2010 - $35 mil

2. Expands Build America Bonds - $4.56 bil Subsidizes 65% interest

payment to issuer

179 – $250,000 expensing allowance

Phase out dollar for dollar starts at $800,000

Note – Not subject to mid-year or mid-quarter

convention Not a preference item for AMT – 56(a)(1)(B) Can be new or used property Illinois conforms to federal law If not extended beyond ‘10

‘11 – 25k write off – phase out begins at $200k



Levin’s list S 2917 Small Business Jobs Act Estate Tax Extenders Bill

Levin’s List

Estate tax Permit an election of 2009 or 2010 rules

AMT 2-year patch

Marginal rates Extend 2001 cuts for middle-class

(10,15, 25 and 28% rates) Bring back the 39.6% rate

Extend unemployment benefits

Small Business Tax Relief House and S 2917

100% exclusion from gain sale small business stock Purchase directly from Corp between

3/15/10 and 12/1/12 When corp has less than $50 mil in assets Hold for 5 years

Start-up expenses Immediate deduction $20,000 (currently

$5,000) but reduce dollar for dollar to extent expenses exceed $75,000

Extend “Build America Bonds” to 2013 IDB bonds issued in 2011 exempt from AMT

S 2917 Penalty Relief

6707A failure to report listed transaction

Strict liability penalty $100k/individual - $200k for other

taxpayers IRS extended until June 1 its

moratorium on collecting penalty and/or filing liens

S 2917 reduce penalty to 75% tax benefit Retroactive to1/1/07

S 2917 Small Business and Infrastructure Jobs Act

Revenue offsets 1099’s for expenses related to rental

property Clamp down on federal contractors and

vendors Minimum term of 10 years for GRATs Various international tax provisions

Estate Tax ??

Temporary fix for confusion Permit an election to follow 2010 repeal or

2009 rates and exemption Exemption $5 mil Rate – 35% New features

Portability between spouses Conformity with gift, GST and special use

valuations Exemption indexed to inflation

Senate Extenders Bill Individuals Energy efficient home credits Standard deduction for real estate taxes Itemized deduction for sales taxes Qualified tuition deduction Charitable contributions from retirement plans Refundable low-income housing creditsBusinesses R&D credit 15 yr life for leasehold, restaurant and retail improvements Charitable deduction for food inventory Offsets Repeal Black liquor credit - $21.7 bil Increase reporting requirements for first time home buyer –

negligible Codify economic substance doctrine - $5.5 bil Information reporting for rental property expense payments $2.5 bil

Codification of Economic substance

Included in health care legislationApplicable if no benefit other than tax

savingsPenalty 40% tax savings (20% if

disclosed) Revenue increase $5.5 bil

Cases & Rulings

61 – Settlement Credit Card Debt Payne, Jr. 8th Cir. 2009-7793, affrmg TC Facts

Taxpayer renegotiated lower credit card debt Lower amount was not less than result if

“normal” interest rate had applied Taxpayer argued reduction should be

regarded as purchase price adjustment Decision

Court denied taxpayer both arguments Reduction in debt was income

61(a)(12) – Income from Forgiveness of Debt Paul Neal Jensen; T.C. Memo. 2010-77Facts Husband was obligor on a bank debt Wife agreed to assume the liability in divorce

decree Debt was cancelled by bank Issue Who recognizes the income from discharge of

indebtedness, H or W?Decision Husband because he was the obligor the bank

looked to for payment

67(a) – Miscellaneous Itemized DeductionsJames Purdy, TC Sum 2010-26 Facts Purdy was an employee of Merrill Lynch Merrill Lynch terminated him Purdy claimed wrongful termination Case went to arbitration Purdy reported award as wages but legal

expenses on Sch CIssue Were the legal expenses unreimbursed employee

business expenses subject to 67(a) 2% AGI limitation?

Decision Although the expenses were incurred

after Purdy’s employment, they were a direct result of his employment and therefore are subject to the 2% AGI rule

72(t) – Early Distributions from IRA Welker, TC Summ., Op. 2009-193Facts

Taxpayer rec’d various distributions ($69k, $44k, $81k, etc.) from 2001-2005

Taxpayer was a cancer survivor. Left job from telephone company in 2001 as a result of treatments.

Taxpayer rec’d wages 2001-2003 (book store), 2005 (“modest” income) and 2006 (new job as asst. nurse)

Issue Was the distribution in 2005 exempt from the 10%

additional tax on early distributions under the exceptions for disability or part of a series of substantially equal periodic payments? Sli

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72(t) – Early Distributions from IRA Decision

Qualify under disability exception? NO “Disabled” only if unable to engage in any

substantial gainful activity Taxpayer started a new career in 2006 Example in regs is “Cancer which is inoperable

and progressive” Qualify under substantial equal periodic

payments? NO Notice 89-25 requires calculation of payments

under 1 of 3 methods: (1) RMD method; (2) fixed amortization method; or (3) fixed annuitization method Sli

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152 – Dependency Exemption Aaron Lee Hill, TC sum Op 2009-188Facts Hill took in sister’s 2 children Provided housing, meals, etc. Issue Can Hill claim exemption for children that are not his

own?Decision Yes under 152(c)(1) – also eligible for

Child tax credits Earned income credit But not head of household because no evidence of cost

of maintaining household

163 – Interest Deduction

Adams, TC Memo, 2010-72Facts Homeowner put house in land trust Remained primarily liable for mortgage Rented house - renters

Had option to buy Paid rent equal to mortgage and taxes Obligated to carry insurance and maintain house But were not obligated on the mortgage

Issue Can “renters” take home mortgage interest

deduction for portion of “rent” they pay equal to the mortgage interest?

Decision Yes, the terms of the agreement

made “renters” the equitable owners of the residence

165 – Theft Loss

INFO 2009-05 (Information Letter)Facts Stock loses value due to fraudulent or criminal

acts committed by corporate officers or directorsIssue Does this qualify for ordinary loss treatment under

Rev Rul 2009-9 and Rev Proc 2009-20 (guidance related to Ponzi schemes)?

Conclusion No, distinguishable from Ponzi scheme because

criminal act not directly related to the acquisition of the stock

165 - Casualty Loss

Justin Rohrs TC Sum 2009-190Facts Rohrs was DWI on winding road Car damaged when it ran off road Insurance did not cover DWI incidents Issue Was Rohrs eligible for casualty deduction?DecisionYes – level of intoxication and manner he drove did not

indicate he was indifferent to hazard Exact cause of accident not determined (DWI, speed,

road condition)

167 - Amortization

Recovery Group, TC Memo 2010-76Facts Company bought out 23% shareholder Agreement included payment of

$400,000 for a covenant not to compete for one year

Issue Was the $400,000 paid for the covenant

deductible over the 12 months it was effective?

Decision No, the 15-year write off is the norm

for an intangible resulting from the acquisition of a business.

170 – Contribution Façade Easement Kaufman, 134 TC No. 9 Facts Kaufman donated façade easement Property subject to mortgageIssue Can Kaufman claim a deduction for

the decrease in value of the property due to the façade easement?

Decision Not eligible for the deduction Terms of the mortgage provided that,

if the building were destroyed, the bank would have first rights to all insurance proceeds until the mortgage was satisfied

To claim the deduction, the donee must have a guaranteed right to the value of the easement

172(f)(4) – Specified Liability Losses CCA 201006028Facts Homebuilder required to repair damage resulting

certain construction defects Builder treated expenses as incurred in settling a

product liability As such, builder argued the loss generated was

eligible for a 10-year carryback Issue Should costs incurred to repair damage be

treated as product liability losses eligible for the 10-year carryback?

Conclusion No , “product liability” limited to

damages due to injury or emotional harm or damage or loss of the use of property (generally a tort liability)

The facts in this case were contractual liabilities

CCA concludes “defect” means “safety defect”

197 – Amortization of Intangibles Recovery Group Inc. T.C. Memo. 2010-76Facts Corp redeemed stock held by a minority

shareholder / employee $400,000 of payment was for a 1-year covenant

not to compete.Issue Can company deduct cost of the covenant not to

compete over its 12-month term?Decision No - cost of a covenant not to compete is a section

197 intangible and must be amortized over 15 years

213 Medical Expense

PLR 200941003 Deduction denied for cost of baby

formula because the formula is “properly viewed as food that the infant would normally consume”

401 – Required Minimum Distributions

Client turned 70 ½ 2009 RMD suspended for 2009 But must make RMD by 12/31/10

Client turned 70 ½ this year Has until 4/1/11 to take initial RMD But consider making initial RMD this

year Tax rates may be higher next year Avoids bunching 2 RMDs into 2011

401(k)

Schwab v Dibickero, 9th Cir Facts

Decedent rolled 401(k) over to IRA Willed IRA to children of previous

marriage Issue

Surviving spouse arguing that, to the extent the IRA consists of the401(k) rollover, it automatically goes to her

408 - IRAs

Chilton, D.C. Texas Facts Chilton inherited mother’s IRA Chilton later filed for bankruptcy Bankruptcy law provides $1 mil

exemption from creditors for IRAs Issue Does Chilton get to exclude the inherited

IRA from the assets in bankruptcy?

Decision Wife’s position correct only if funds still

held in 401(k) Once funds rolled over to IRA, surviving

wife has no priority over will

446 – Method of Accounting ILM 200949040 Facts Accrual method company Bonus for employees fixed at year end But paid early in subsequent year Recipient must be employee at payment dateIssue Can company accrue deduction for bonuses at

year end?Conclusion No because payment is contingent on event in

subsequent year – continued employment

451 – Taxable Year of Inclusion Gift Cards

FAA 20100901FFacts Gift card income

Deferred until redeemed if sold by company providing the goods or services

But currently taxable if sold by subsidiary Corp sells gift cards through LLC that is

disregarded Conclusion

If LLC disregarded, treated as if sold by company providing goods or services

461 – Year of Deduction

CCA 200949040 Facts

Accrual method company Bonuses

based on Year 1 income Paid within 2 ½ months of Year 2 if still an employee employees had no ownership in company

Question Are bonuses deductible in Year 1?

Conclusion No – conditioned upon an event that was not satisfied

at end of Year 1 - i.e. continued employment for 2 ½ months Year 2

469 Passive Loss Rules

PLR 201005016 Interest S corp earns on working capital

is not treated as business income for purposes of the passive loss rules regardless of its intended use

469 – Passive Losses

Newell, TC Memo 2010-23 Facts Newell was managing member of LLC that owned

and operated a country club in California Club operated at a lossIssue Was the pass a passive loss that Newell has to

defer until he has passive income or disposes of his interest?

Decision No, Newell was materially active and was not a

limited partner in a limited partnership

469 Passive activity Losses Rev Proc 2010-13 Requires taxpayers to report their

groupings of passive activities Removes the Notice 2008-64

requirement for disclosure whenever there is a disposition of an activity within a grouping

Applicable to tax years beginning after 1/25/10

469 – Passive Losses

Trask, TC Memo, 2010-78Facts Trask owned several rental properties Most generated losses Trask spent more than 750 hr/yr and more

than 50% of his working hrs on the properties

Issue Did Trask qualify as a real estate professional

to enable him to claim the losses currently?

Decision No, he didn’t spend more than 750 hrs

and 50% of his time on any one propertyNote Could have avoided this problem by

electing to aggregate all his properties Disadvantage of aggregation is that he

would not be able to report a loss on the disposition of any one property until he had disposed of them all.

469 - Passive Losses

Thompson Ct. of Claims 2009 Facts

Taxpayer had 99.9% interest in LLC taxed as partnership

Taxpayer was general manager of LLC’s operations

LLC had loss IRC 469(h)(2) states limited partners deemed

not to be materially active

Issue Can taxpayer report the loss as an ”active” loss

Slide 71

Decision Yes,

Taxpayer’s activities similar to those of a general partner

Limited liability is not determining factor 469(h)(2) meant to apply only to limited

partners because, unlike LLC owners, limited partners cannot participate in the business and retain limited liability

Note – IRS issued AOD acquiescence in result only Sli

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Passive Losses

469 - Passive Activity Losses Agosto, TC Summ., Op. 2009-191Facts

Taxpayer’s incurred $60,000 of PALs on rental property

Taxpayer actively participated in rental property (and eventually agreed losses were limited to $25,000)

Taxpayer claimed add’l $44,000 casualty loss on same rental activity (due to fire damage)

Issue Since the casualty loss was from rental activity,

should it be subject to the $25,000 limitation? Slide 73

469 - Passive Activity Losses Decision

Casualty loss limited under §469? NO. Section 469 does not apply to all

casualty and theft losses (Reg. §1.469-2(d)(2)(xi))

Losses are NOT passive if: Caused from fire, storm, shipwreck, or

other casualty, or from theft; Losses that are similar in cause and

severity do not occur regularly; and Taxpayer sustains loss after 1989 Sli

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469- election to Aggregate Rental Activities Donald William Trask v. Commissioner; T.C. Memo. 2010-78Facts Since 1994 taxpayer aggregated his rental income and

expenses on Sch E as if the rental real estate activities were a single activity.

But did not attach to any return a statement electing to treat his rental real estate activities as a single activity.

Issue Was reporting rental activity on an aggregate basis a

“deemed” election to aggregate Decision The fact that petitioner consistently aggregated the rental

income and expenses from the rental properties on his Schedules E is not a deemed election under the requirements of section 469(c)(7)(A).

469 – Interest in LLC not Automatically Passive AOD IRB 2010-14, 4/5/10Facts Thompson owned 99% of charter airplane business held

as LLC IRS disallowed losses because he did not materially

participate under limited partner rules of 1.469-5T(e)(3)(i)

Thompson argued that owner of LLC not same as limited partner - Material participation should be determined under 7 tests of -

5T(a)

Decision Thompson, Fed Cl 2009 Claims Court found for taxpayer IRS has acquiesced in “result only”

1012 - New Basis Reporting Requirements Energy Improvement and Extension

Act of 2008 Notice 2009-17 Proposed regulations issued 12/16/09

Effective for stocks acquired on or after 1/1/2011

Effective date for RIC and DRP stocks is 1/1/2012

Other securities have until 1/1/2013 AICPA Comments Sli

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1031 – Like-Kind Exchanges Rev Proc 2010-14Facts Like kind exchange using Qualified Intermediary Qualified intermediary goes bankrupt before replacement

property is acquired Code requires replacement to take place within 180 days

from when the relinquished property is surrenderedIssue If the bankruptcy exceeds 180 days, does the owner of

the relinquished property have to recognize gain?Conclusion No – owner of relinquished property recognizes the gain

from the sale of the property only as actual cash is received after QI comes out of bankruptcy

1031 – Like Kind Exchange

Facts taxpayer exchanging old off-road truck ($750,000

fmv $150,000 basis) for a dealer's new one ($760,000

taxpayer transferred old truck to qualified intermediary, which then sold the truck to an individual related to the taxpayer for $750,000.

The intermediary then purchased from the dealer's inventory the new truck that the taxpayer had selected, paying $760,000.

Issue Does this qualify as a tax free exchange under IRC

1031?

Conclusion 1031(f) does not permit deferral of gain

when transaction is with a related party This result cannot be avoided

restrictions by structuring transaction through a n unrelated party

Also ineligible for exception under 1031(f)(2) because a purpose was tax avoidance.

See also Rev. Rul. 2002-83

2031 - Estate Tax

Congress did not extend the $3.5mil exclusion and 45% marginal rate

Accordingly, estate tax repealed for 2010

Generally carryover basis except stepped up basis for: First $1.3 mil of unrealized capital gain

plus Additional $3 mil if the assets go to

surviving spouse

2033 - Family Limited Partnerships Est of Shurtz, TC Memo 2010-21 Facts

FLP formed to hold timber land Non tax benefits

Protected land from general creditors Provided centralized management

Decision FLP approved where taxpayer

demonstrated important purpose other than tax savings

2501 - Gift Tax

Petter, TCM 2009-280Facts Petter gifted units of LLC to children and

charity Formula clause would reduce units to

children and increase units to charity if value later determined to be greater

Issue Was the formula clause effective to adjust

the number of units deemed transferred or was it an invalid “savings clause”

Decision Clause effective – made clear that

gift was of certain value not certain number of shares or a certain % of interest in the LLC

2503(b) – Annual gift tax exclusion Price v. Comm’r, T.C. Memo. 2010-2Facts

Taxpayers formed LP to own privately held company and commercial real estate. Company was sold w/in months.

LP agreement Provided for discretionary distributions Prohibited transfers to 3rd parties

Taxpayers transferred LP interests to children over 6 yrs.

Issue Did the transfers of the LP interests qualify for the

annual exclusion from gift tax liability under §2503(b)?Slide 85

2503(b) – Annual gift tax exclusion Decision

NO, the transfers were not present interest gifts Applied the methodology set forth in Hackl

Donees must have immediate use, possession, or enjoyment of either the transferred property or the income therefrom.

Taxpayers must show that the LP would generate income at or near the time of

gifts; some portion of that income would flow steadily to the

donees; and (PROBLEM: No distributions in 97 or 01) the portion of income flowing can be readily

ascertained. (PROBLEM: Timing and amount of discretionary distributions are pure speculation) Sli

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2503(b) – Annual gift tax exclusion Price v. Comm’r, T.C. Memo. 2010-2Facts

Taxpayers formed LP to own privately held company and commercial real estate. Company was sold w/in months.

LP agreement Provided for discretionary distributions Prohibited transfers to 3rd parties

Taxpayers transferred LP interests to children over 6 yrs.

Issue Did the transfers of the LP interests qualify for the

annual exclusion from gift tax liability under §2503(b)?Slide 87

2503(b) – Annual gift tax exclusion Decision

NO, the transfers were not present interest gifts Applied the methodology set forth in Hackl

Donees must have immediate use, possession, or enjoyment of either the transferred property or the income therefrom.

Taxpayers must show that the LP would generate income at or near the time of

gifts; some portion of that income would flow steadily to the

donees; and (PROBLEM: No distributions in 97 or 01) the portion of income flowing can be readily

ascertained. (PROBLEM: Timing and amount of discretionary distributions are pure speculation) Sli

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2703 – Certain Restrictions Disregarded Holman, 8th Cir, 4/7/10, affmg TC Facts Holman passed Dell stock into an limited

partnership Gifted partnership shares to children Subject to certain restrictions on ability of

children to transfer their interest in the pship

Issue Did the restrictions on transferability affect

the value of the gifts for tax purposes?

Decision Restrictions not effective in reducing

value Most of assets were readily marketable

securities No business purpose for the restrictions General partners had broad

management discretion

3111 – Social Security Tax Quality Stores, DC Western District of

Michigan 2/23/10 , affmg Bankruptcy CourtFacts Quality Stores laid off 75 workers

Each was given supplemental unemployment compensation benefits

Quality argued “decoupling rule” of 3121(a) treats FICA and wages separately

IRS argued CSX, Fed Cir, 3/6/08 and Rev Rul 90-72 concluded that severance pay was subject to FICA

Decision Severance pay not subject to social security tax Not payment for services – rather “wage

replacement social benefit” as defined in 3402(o)(2)

Note IRS likely to appeal so employers should continue

to withhold but file protective claim for refund if: Layoff was involuntary – employees cannot be

given a choice to forgo the pay and continue work

Has to involve more than one worker

4974(d) – Penalty for Failure to Take RMDPLR 201008049 Facts Beneficiary of decedent’s IRAs failed to take required

minimum distributions beginning the year after decedent’s death, 1999

Beneficiary’s legal right to the IRAs was in dispute until 2008 while beneficiary was serving prison sentence for the murder of the decedent

Issue Did the legal dispute over the rights to the IRAs effectively

delay the required date for the RMDs?Decision Yes, failure to receive the distributions was beyond the

control of the beneficiary even though it was the act of the beneficiary that caused the uncertainty.

New Basis Reporting Requirements Energy Improvement and Extension

Act of 2008 Notice 2009-17 Proposed regulations issued 12/16/09

Effective for stocks acquired on or after 1/1/2011

Effective date for RIC and DRP stocks is 1/1/2012

Other securities have until 1/1/2013 AICPA Comments Sli

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Heads Up

1. No phase-out of personal exemptions or itemized deductions in 2010 but these will return to pre-2006 levels in 2011 unless Congress takes action

Have a Great Conference!

Wichita State University Accounting & Auditing Conference.

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