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1. Taxpayers must reveal tax shelter opinion letters despite attorney-client privilege   WebExclusive

BY Alistair M. Nevius, J.D.
By attempting to establish good-faith and state-of-mind defenses, taxpayers put their legal knowledge and understanding into contention, and therefore they waived attorney-client privilege, the Tax Court held on Wednesday (Ad Investment 2000 Fund LLC, 142 T.C. No. 13 (2014)). As a result, the court will order the taxpayers to produce letters that expressed their attorneys’ opinions as to whether anticipated tax benefits of a son-of-boss tax shelter would be upheld.

2. Foreign housing expense limitations issued for 2014   WebExclusive

BY Alistair M. Nevius, J.D.
According to the IRS, Hong Kong, Moscow, and Geneva are the three most expensive foreign cities to live in, for purposes of the Sec. 911 foreign housing exclusion. On Monday, the IRS provided its annual list of inflation-adjusted limitations on foreign housing expenses for 2014 (Notice 2014-29).Sec. 911(a) allows a qualified individual to elect to exclude his or her foreign earned income and certain housing costs from gross income.

3. Horse breeder materially participated   WebExclusive

BY Sally P. Schreiber, J.D.
The Tax Court held that a taxpayer materially participated in his horse-breeding activity for 2002 through 2004 and therefore was not barred from deducting his losses as passive activity losses under Sec. 469 (Tolin, T.C. Memo. 2014-65). Although the case involved horse-breeding activities, the IRS did not seek to disallow the losses under Sec.

4. Guidance issued on application of Windsor to retirement plans   WebExclusive

BY Alistair M. Nevius, J.D.
Administrators of qualified retirement plans must recognize the same-sex spouses of legally married participants as of June 26, 2013, under guidance issued by the IRS but will not be required to amend their plans to retroactively recognize participants’ legal same-sex marriages before that date (Notice 2014-19).The Supreme Court, in Windsor, 133 S.

5. Taxpayers can claim charitable contributions for typhoon relief on 2013 returns   WebExclusive

BY Sally P. Schreiber, J.D.
On Friday, the IRS announced the procedures for taxpayers to follow to take advantage of the recently enacted Philippines Charitable Giving Assistance Act, P.L. 113-92, which allows taxpayers to take deductions for cash contributions to qualified charities for the relief of victims of Typhoon Haiyan on their returns for the 2013 tax year (IR-2014-46).

6. Plan administrators can assume certain rollovers are valid   WebExclusive

BY Sally P. Schreiber, J.D.
In Rev. Rul. 2014-9, the IRS ruled that a plan administrator for a plan that is qualified under Sec. 401(a) may reasonably conclude in the situations described in the ruling that a potential rollover contribution is valid under Regs. Sec. 1.401(a)(31)-1, Q&A-14(b)(2), which governs the treatment of a plan that accepts an invalid rollover contribution.

7. AICPA recommends changes to net investment income tax rules   WebExclusive

BY Sally P. Schreiber, J.D.
The AICPA submitted a comment letter to the IRS recommending a number of changes to the Sec. 1411 regulations on the application of the net investment income tax to charitable remainder trusts (CRTs), when final regulations are issued. First, the AICPA noted that the final regulations issued last year (T.D.

8. How to calculate employer health care responsibilities   WebExclusive

BY Ken Tysiac
In compliance with new health care employer responsibility regulations, two halves indeed equal a whole for employers when they determine their number of full-time employees.To determine whether a business is subject to the employer mandate penalty under the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, the business must determine the number of its full-time employees, which includes its full-time equivalent employees (FTEs).

9. Trust materially participated in real estate business   WebExclusive

BY Sally P. Schreiber, J.D.
In a case of first impression, the Tax Court held that a trust materially participated in its rental real estate business and therefore could deduct the losses it incurred in conducting those activities in 2005 and 2006 as losses from nonpassive activities (Frank Aragona Trust, 142 T.C. No.

10. Final rules issued on employment tax responsibilities of designated payer agents   WebExclusive

BY Alistair M. Nevius, J.D.
Final regulations issued on Friday contain rules on the liability for employment taxes when an employer designates an agent under a “service agreement” to pay its employees and to satisfy its employment tax obligations instead of following normal IRS procedures to designate an agent (T.D. 9662). The new rules affect agents such as payroll service providers, employee leasing companies, and professional employer organizations.
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