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1. Guidance issued on markdown allowances and margin protection payments  

BY Paul Bonner
Final rules clarify retailers’ treatment of vendor discounts in inventory valuation. Final regulations restate and clarify retailers’ computation of ending inventory value, including the application of common vendor discounts. The amendments to Regs. Sec. 1.471-8 are intended to render that section’s provisions in plainer language and provide rules for how sales-based vendor allowances and vendor markdown allowances and margin protection payments are taken into account under the retail-inventory method.

2. Jeopardy and termination assessment cases  

BY William D. Hartsock, Esq.
In some circumstances, the IRS may resort to a series of procedures known as jeopardy or termination assessment and collection. If the IRS believes that the collection of an unassessed liability is in jeopardy, it may take steps to begin collection proceedings without following the normal assessment and collection procedures (see Internal Revenue Manual (IRM) §5.17.15.1).

3. Research and experimentation expenditures clarified  

BY Alistair M. Nevius
With enhanced definitions and numerous additional examples, final regulations issued in July (T.D. 9680) clarify research and experimentation (R&E) expenditures under Sec. 174 that may be deducted currently or capitalized and amortized. Under the final regulations, the ultimate success, failure, sale, or use of a product is not relevant to a determination of eligibility under Sec.

4. Aircraft rental is passive activity  

BY Raymond C. Speciale, Esq., CPA and Ronald D. Golden, Esq.
Failure to properly document material participation prompts a Tax Court ruling that an aircraft rental activity is passive. The Tax Court held that losses from an aircraft rental activity were passive and could not be used to offset income from other business sources. The ruling was based on the taxpayer’s failure to produce documentary evidence of material participation in the activity.Facts: Scott Wesley Williams, a part-time lawyer, maintained several businesses during 2007.

5. Effective filing dates of returns are disputable issues of fact  

BY Charles J. Reichert, CPA
The IRS’s motion for dismissal was denied in a case where determining the timeliness of a taxpayer’s refund claims depended on determining the effective filing date of the taxpayer’s returns.The Court of Federal Claims denied a motion by the IRS to dismiss a taxpayer’s refund claim for two prior tax years, holding that a trial is required to resolve a genuine factual dispute concerning whether the refund claims had been filed before the statute of limitation expired.Facts: Maria Montiel, a citizen and resident of Mexico, filed Form 1040, U.S.

6. New IRS appeals process launched  

BY Ann Marie Maloney
Cases lacking documentation or adherence to procedural requirements or that have new taxpayer information will be returned to Examination.In September, the IRS Office of Appeals began a policy of hearing only cases that are fully developed; hearing officers will not do their own investigations and will send any new issues raised or evidence submitted by the taxpayer during the appeal back to the originating function for consideration.Under this new Appeals Judicial Approach and Culture (AJAC) project, appeals officers are “no longer going to be examiners or investigators,” Appeals Team Manager Philip A.

7. Whistleblower awards widened  

BY Sally P. Schreiber, J.D.
Final rules expand the definitions of collected proceeds and eligible individuals, and specify the criteria for award amounts. Comprehensive final regulations issued in August provide rules for whistleblower awards under Secs. 7623(a) and (b), as well as rules governing the disclosure of return information under Sec. 6103(h) to pursue these claims.

8. Form 990: Late filing penalty abatement  

BY Vani Murthy, CPA
Many small and medium-size not-for-profit organizations are mostly run by volunteers, and the staff of these charities may forget or inadvertently fail to timely file Form 990, Return of Organization Exempt From Income Tax, Form 990-EZ, Short Form Return of Organization Exempt From Income Tax, or even Form 990-N, Annual Electronic Filing Requirement for Small Exempt Organizations, which is a postcard-size information return that is electronically filed.

9. Defined contribution plans can offer deferred annuities to older participants   WebExclusive

BY Sally P. Schreiber, J.D.
Under guidance released on Friday, qualified defined contribution plans will be allowed to provide lifetime income to plan participants by offering funds including deferred annuities among their assets, even if some of the funds are available only to older plan participants (Notice 2014-66). In the notice, the IRS explained how target date funds (TDFs), which are funds offered to participants in specific age groups designed to change the investment mix as the groups age, can offer deferred annuities without violating the Sec.

10. Pension plan limitations are increased for inflation   WebExclusive

BY Sally P. Schreiber, J.D.
Taxpayers will be allowed to contribute more money to their retirement savings in 2015 under new pension plan limits announced by the IRS on Thursday. The IRS annually adjusts the limitations on pension plan contributions in cases where cost-of-living increases meet the statutory requirements for inflation adjustment. A list of the more significant items that are increased for 2015 includes:The elective deferral limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 in 2014 to $18,000 in 2015.The catch-up contribution limit for employees age 50
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