Case Summaries

Bernstine v. Comr., T.C. Sum. Op. 2013-19

(petitioner, long-time pastor as independent contractor, claimed various Schedule C deductions attributable to ministry; many expenses not sufficiently substantiated and deductions denied or limited; no deduction allowed for travel, meals and entertainment due to lack of substantiation; charitable contribution deduction limited due to lack of substantiation; petitioner entitled to deduction for business use of home; petitioner conceded failure to include over $10,000 of income on 2008 return; accuracy-related penalty imposed). 

C.C.A. 201323015 (Feb. 21, 2013)

(collaboration between corporations involving development and eventual commercialization of product constituted partnership based on analysis of all factors; if result was production of product produced in significant part in U.S., Sec. 199 deduction available and would be allocated to partners). 

Smoker v. Comr., T.C. Memo. 2013-56

(petitioner took out variable rate loan on principal residence with ceiling on monthly payment; if rate causes ceiling to be exceeded, excess interest is capitalized; petitioner, cash basis taxpayer, deducted capitalized interest currently; court disallowed deduction on basis that interest not paid, but merely secured, and "paid or accrued" language of I.R.C. Sec. 163(h) not applicable because amount not actually paid and petitioner on cash method).

Wagoner v. Comr., T.C. Sum. Op. 2013-14

(petitioner, a lawyer in Grand Island, NE, failed to pay income tax for seven years resulting in IRS lien on principal residence; petitioner attempted to deduct interest and penalties as qualified residence interest under I.R.C. Sec. 163(h)(3)(A); court rejected petitioner's claim because neither lien nor filing of notice of lien caused the tax indebtedness to be secured by principal residence, and such interest is personal interest in any event; accuracy-related penalties imposed).

Romanowski v. Comr., T.C. Memo. 2013-55

(petitioner, former NFL player, was advised by Denver lawyer to invest in horse breeding program which turned out to be a tax shelter; petitioners invested over $13 million into the program which generated large losses for seven years; petitioners attempted to deduct losses, but IRS denied them on grounds that activity was a hobby and losses subject to hobby loss rules; $4.4 million deficiency upheld; no accuracy-related penalty imposed because petitioner not sophisticated in tax and relied on attorney in good faith). 

Fite v. Comr., T.C. Sum. Op. 2013-12

(petitioner purchased home on Nov. 11, 2009, and claimed FTHBC of $8,000; IRS disallowed the credit and assessed accuracy-related penalty; IRS claimed that petitioner purchased the residence from his father, a related person, which automatically disqualified the purchase from being eligible for the FTHBC; petitioner paid FMV for the home, but court agreed with IRS without analyzing that the statute actually only bars an acquisition of a home from a related party via gift or inheritance and not in a FMV sale transaction; accuracy-related penalty not imposed).  

Zdunek v. Comr., T.C. Summary Op. 2013-13

(petitioner, former IRS employee and CPA, filed as MFS in 2007 and claimed a mortgage interest deduction of $47,477 on VA residence and second residence in WV; IRS disallowed the deduction in full on basis that it exceeded the allowable limitation for MFS return ($500,000 plus $50,000 of home equity indebtedness); parties agreed to deduction of $29,494 on 2007 return and petitioner sought to change filing status to MFJ; court determined that I.R.C. Sec. 6013(b)(2)(B) bars filing of joint return after filing of separate return if petitioner files a timely petition with Tax Court with respect to noticed of deficiency for year at issue, thus petitioner barred from filing MFJ return; petitioner then claimed that because she wasn't informed of the MFS limitation before filing Tax Court petition, she would have filed an amended return electing MFJ status; no authority cited to support petitioner's argument; court upholds parties agreement and imposes accuracy-related penalties). 

In re Shaw, No. 09-18648-FJB, 2013 Bankr. LEXIS 638 (Bankr. D. Mass. Feb. 20, 2013)

(Chapter 11 case in which debtors (married couple) owned second and third homes that they tried to rent out; debtors lost money on rental homes and claimed loss deductions against husband's unrelated earnings; court determined that debtors not engaged in renting homes with requisite profit intent and had actually acquired homes for personal purposes and actually used them for family purposes on annual basis; debtors did not rely on rental homes as primary income source; debtors also failed to satisfy 750-hour test under passive loss rules for all years at issue). 

Jarvis v. Comr., T.C. Sum. Op. 2013-11

(petitioner purchased whole life insurance policy in 1976 with face value of $40,000 and annual premium payment of $556 for first 13 years; automatic premium loan provision selected; policy modified in 1986 by replacing old policy with new one with $125,000 of coverage and annual premium of $2,256 and automatic premium loan provision selected; petitioner made deposit of $7,582 into premium deposit account to cover premiums through 1990; from 1991-2009, company made premium payments automatically with loans against cash value of policy; policy lapsed in 2009 when outstanding loan balance exceeded policy's cash value and Form 1099-R issued showing gross distribution of $86,762 and taxable amount of $37,981 for 2009; petitioner claimed he never got the 1099-R, but it was mailed to petitioner's correct address; IRS position upheld and accuracy-related penalty upheld). 

Mears v. Comr., T.C. Memo. 2013-52

(petitioner owned rental properties and also had office in home; court disallowed basis increase in rental properties based on property tax assessed values; no depreciation on one property because not placed in service by end of tax year; lack of substantiation resulted in depreciation deductions on other properties and home office).

Crimi, et al. v. Comr., T.C. Memo. 2013-51

(petitioners transferred to county more than 65 acres of undeveloped land for $1,550,000 in part-gift/part-sale transaction; land value reported at $2,950,000 and charitable contributions claimed; IRS rejected charitable deductions on basis that I.R.C. Sec. 170 requirements not satisfied; expert testimony involved issues of development rights, environmental legislation and appraisal methodology that used a statistical model involving polynomial regression analysis to correlate relationship between number of lots undeveloped parcel can be subdivided into and per lot selling price; court gave guidance as to proper role of expert witness in court and then rejected each witness' conclusion due to errors in analysis and application; court reconstructed FMV on its own; thus, appraisal attached to Form 8832 was flawed, but was excused due to reasonable cause; no penalty imposed and partial charitable deduction allowed). 

IRS Notice 2013-3

(by presumption, IRS has historically treated dual-use property (property held for sale or lease) that dealer holds as inventory property not eligible for depreciation; presumption rebuttable if dealer can establish that property actually used in dealer's trade or business and cost recovered through use in business; dealers in construction and ag equipment are typically resellers or enter into leases (under which the property is either reacquired at end of lease or purchased by lessee); in Notice, IRS requesting comments as to whether construction and ag equipment held for sale or lease to customers should be treated as inventory or depreciable property, and under what circumstances the property would qualify for like-kind exchange treatment). 

Pinn v. Comr., T.C. Memo. 2013-45

 (plaintiffs, brothers, established an employee plan for their construction business employees; plan was I.R.C. Sec. 419 plan that provided for death benefits for management  and unlimited deductions for payments to plan; plan bought life insurance for beneficiaries who could borrow against cash surrender value of their policies, but were required to pay back any loans (with interest) with any unpaid loans at death coming out of death benefit; if employment terminated, plan discontinued or employer discontinues, benefit eliminated; employee could make irrevocable designation of life insurance; plaintiffs borrow from plan and sign promissory notes, but made only nominal payment on loan; plan made no attempt to collect or hold plaintiffs in default; plan trustee disclosed loans to IRS on Form 5500 (Schedule G) claiming loans were secured and will be paid when mature and are not uncollectible; at answer stage of pleading, IRS claimed plaintiffs had cancellation of indebtedness income (CODI); IRS stipulates at trial that loans are bona fide and that trust had collection policy requiring demand letter to be issued to borrowers in default and that Forms 1099 would be sent to borrowers that remained delinquent; no demand letter sent to either plaintiff in 2002, so IRS concluded that trust intended to forgive loans and CODI resulted in 2002; however, court noted that trust had no policy for collection of delinquent loans until 2002; plaintiffs' right to receive proceeds not highly contingent; no CODI until company leaves plan, either or both of plaintiffs leaves company or plan ceases; Form 5500 did not necessary mean that loans uncollectible in year issued - merely in default). 

A.O.D. 2012-05, IRB 2013-7 (Feb. 11, 2013)

(IRS issues nonacquiescence in Patel v. Comr., 138 T.C. No. 23 (2012) where the petitioners, married couple, purchased house with intent to tear it down and construct new house on same property; instead of tearing house down, petitioners donated house to local fire department for fire training exercise in course of which house would be burned down; petitioners obtained demolition permit and completed all necessary requirements, including execution of documents giving fire department right to conduct training exercises and burn the house down; house burned down; petitioners reported charitable contribution of $339,504; court upheld IRS denial of charitable deduction in total ($92,865); petitioners did not donate ownership interest in house to charity, but only right to conduct training exercises (license); Sec. 170 (f)(3) denies charitable deduction for donation and use property regardless of value; donation was of only a partial interest, and donation of partial interest not deductible; accuracy-related penalty not imposed because taxpayers within reasonable cause exception of I.R.C. Sec. 6664(c) based on all the facts and circumstances and uncertain status of law on issue; IRS nonacquiescence notes IRS disagreement with court's conclusion that uncertain state of law is factor supporting finding of reasonable cause and good faith where taxpayer did not investigate status of law and did not obtain professional tax advice; IRS position is that taxpayer cannot act in good faith for purposes of not having accuracy-related penalty apply if taxpayer unaware of state of applicable law and made no reasonable attempt to become aware of state of applicable law). 

McMillan v. Comr., T.C. Memo. 2013-40

(petitioner not entitled to deduct expenses of horse activities because activity not engaged in for profit; evidence not presented to establish business-like record keeping, conformance with standard industry practices, or changes to improve profitability; petitioner did not seek expert advice, that she had any reasonable expectation that her stud horse would appreciate in value after eight years between siring any foals and lameness prohibiting dressage competitions, or that she has ever operated any horse business at a profit; court also held that death of horse was not a deductible casualty loss as losses resulting from diseases are not deductible; court also denied deductions for legal fees incurred in a lawsuit against her homeowner’s association because there was no evidence of any connection between lawsuit and any trade or business; petitioner not liable for accuracy-related penalties due to success in previous audits establishing reasonable cause and good faith efforts by petitioner).

Pollard v. Comr., T.C. Memo. 2013-38

(petitioner donated conservation easement in accordance with negotiations with local zoning board and in return for county approval of subdivision exemption; IRS denied charitable deduction because donation involved quid pro quo; 20 percent substantial understatement penalty imposed; court noted lack of testimony from practitioner that prepared return; 40 percent gross valuation penalty of I.R.C. Sec. 6662(h)(2) rejected - petitioner's appraisal was from qualified appraiser and was a qualified appraisal and utilized "before and after" approach to valuation). 

Ball, et al. v. Comr., T.C. Memo. 2013-39

(plaintiff family formed trusts that came to own stock in S corporation that owned C corporation stock; trust made QSub election so as to be able to disregard existence of C corporation (Treasury Regulations treat a QSub election as a deemed liquidation of the subsidiary, and under I.R.C. Secs. 332 and 337, the liquidation of a 100 percent subsidiary is not taxable - neither subsidiary nor parent has gain) and treat as division; appreciation in S corporation assets was $226 million and shareholders increased income tax basis in S corporation stock by like amount; taxpayer's argued that unrecognized gain be treated as tax-exempt income that subsidiary earned that passed through to shareholders resulting in basis increase; S corporate stock then sold for $230 million and shareholder reported loss on returns for year in issue; IRS determined that no basis increase should have occurred on QSub election - I.R.C. Sec. 337 does not result in exemption from income, but simply non-recognition because S corporation continued investment in subsidiary by holding assets directly rather than via stock ownership; court agreed with IRS  and noted that situation not analogous to discharge of indebtedness recognized by S corporation which results in basis increase; no accession to wealth when subsidiary liquidated; no basis increase in shareholders from $15 million to $241 million upon QSub election - non-recognition of $226 million gain under I.R.C. Sec. 337 did not involve tax-exempt income so no related basis increase under I.R.C. Sec. 1367(a)(1) result was cumulative gain of $215 million on stock sale and not $11 million loss). 

Alphonso v. Comr., 708 F.3d 344 (2d Cir. 2013), vac'g. and rem'g. 136 T.C. 247 (2011)

(stockholder in residential cooperative housing corporation could claim casualty loss deduction related to $26,390 assessment paid so that retaining wall in common area could be repaired; stockholder had sufficient property interest in wall under state (NY) law; case remanded so Tax Court could determine if loss was actually caused by casualty; petitioner leased apartment building from housing corporation that she owned stock in and court determined that stockholder's rights were granted by lease agreement which gave her right to use grounds in complex and exclude persons that are not tenants or their guests).

Estate of Evenchik v. Comr., T.C. Memo. 2013-34

(decedent, before death, contributed 72 percent of capital stock in corporation that owned two apartment buildings to non-profit housing corporation and claimed charitable deduction of $1,045,289; due to deductibility limitation, taxpayer carried over excess amount to 2006; IRS denied carryover amount on basis that taxpayer failed to satisfy appraisal requirements; court determined that taxpayer's appraisals valued apartment units (which were not donated) rather than underlying stock that was actually donated; as a result of appraisals of wrong asset, IRS not given cannot determine whether interest actually contributed was properly valued; statutory requirements to obtain charitable deduction very specific and must be precisely followed). 

Hoskins v. Comr., T.C. Memo. 2013-36

(petitioner was a real estate agent that also managed bank properties; activity with respect to bank properties generated losses of $203,962 for year at issue; petitioner deducted loss on basis that petitioner materially participated in activity; loss deduction denied for lack of substantiation of necessary hours; accuracy-related penalty imposed). 

Antioco v. Comr., T.C. Memo. 2013-35

(petitioner owned bed and breakfast with spouse; $170,000 tax liability triggered upon sale for approximately $2 million because of failed I.R.C. Sec. 1031 exchange; before petitioner knew of tax liability sale proceeds used to buy apartment building; petitioner lived in one unit and elderly mother lived in another unit with three other units rented; IRS moved to seize apartment building and petitioner sought to pay on liability monthly while trying to find lender to refinance; IRS appeals rejected petitioner's offer and petitioner appealed; IRS conceded that appeals officer abused discretion by not asking for revised financial data; Tax Court remanded for supplemental hearing with appeals officer; new appeals officer failed to follow Tax Court's guidance and asserted that petitioner committed fraud and put lien on apartment building and suggested that IRS seize and sell building; IRS later determined that no fraud committed but rejected monthly payment arrangement because IRS claimed that petitioner could pay liability in full; case returned to Tax Court where court determined that IRS had made many errors and failed to gain sufficient information to support conclusion that petitioner's collection alternative not reasonable; IRS abused discretion by sustaining proposed levy against apartment building; Tax Court could not independently review whether proposed collection alternative is appropriate; case remanded to appeals for consideration of proposed payment arrangement, petitioner's financial information and whether hardship existed). 

Milano's Inc. v. Kansas Department of Labor, 296 Kan. 497 (Kan. Sup. Ct. 2013), aff'g., 43 Kan. App.2d, 231 P.3d 1072 (Kan. Ct. App. 2010)

(plaintiff, strip club operator, employed dancers as employees rather than independent contractors; plaintiff maintained sufficient control over dancers such that dancers were employees for unemployment tax purposes; plaintiff designated place where dancers performed, controlled customers, cover charge, tips, schedules, shifts, and fees charged for particular "services"; dancers also prohibited from "working the crowd" around stage area while another dancer on stage, and if dancer violated "house rule" plaintiff's management had authority to impose fines or terminate business relationship; also, dancers required to charge minimum price for various "dances" and if minimum not paid, plaintiff's doorman would inform customer that such behavior unacceptable).

C.C.A. 201312041 (Jan. 31, 2013)

(in response to Tax Court's opinion in Shiekh v. Comr., T.C. Memo. 2012-126, IRS points out that court decision could be incorrectly interpreted as stating that capital gain and ordinary losses offset each other for tax reporting purposes and for purposes of calculating amount of tax due outside scope and context of I.R.C. Sec. 469(d)(1); under I.R.C. Sec. 469 does not require offsetting of capital gain with ordinary losses for other tax purposes). 

Yates v. Comr., T.C. Memo. 2013-28

(petitioners, married couple, received a bed and breakfast as boot in a muti-party like-kind exchange; while petitioners claimed that they intended to use the property as business property, they failed to produce evidence of business use instead using the property as a personal residence; petitioners could, however, to use FMV allocations utilized for purpose of exchange because parties were in adverse positions and IRS did not adequately refute allocations set forth in agreement).

C.C.A. 201310029 (Jan. 14, 2013)

(question raised as to whether CA residents can deduct the CA Fire Prevention Fee as a real property tax; fee enacted via 2011 legislation requiring State Board of Equalization to charge up to $150 as fire prevention fee on each structure in "state responsibility area"; under Treas. Reg. Sec. 1.164-4(a), to be deductible, real property tax must be levied for general public welfare at like rate against all real property in taxing authority's jurisdiction, and assessed amount on specific property benefitted by local benefit (such as for streets, etc.) not deductible as real property tax; fee at issue not deductible as real property tax because it is not a tax under either federal or CA law, is not levied at a like rate, is not imposed against all real property throughout taxing authority's jurisdiction, and is assessed only against specific property to provide local benefit). 

Griggs v. Comr., T.C. Memo. 2013-2

(petitioner bought home with ex-fiancee; ex-fiancee was obligor on loan and petitioner failed to provide evidence that amounts he paid to ex-fiancee were to be applied to mortgage interest; petitioner could not establish that he could claim deduction for points paid, and no proof offered that would allow petitioner to deduct any amount attributable to refinancing of home).

I.R.S. Notice 2012-9, 2012-4 IRB

(eff. beginning with 2012 Forms W-2 to be given employees by end of January 2013)(IRS modifies prior interim guidance concerning health care act's reporting requirement for employer-sponsored health coverage; IRS notes that effective Jan. 1, 2011, aggregate cost of applicable employer-sponsored health insurance coverage must be reported on Form W-2; reporting optional for 2011 and IRS later provided relief for small employers (where less than 250 Forms W-2 filed for preceding calendar year) by making such reporting optional through at least 2012; IRS notes that reporting requirement does not apply to coverage under FSA if contributions occur only through employee salary reduction elections).

C.C.A. 201319010 (Dec. 28, 2012)

(taxpayer's subsidiary donated land and mineral rights largely located in National Park to National Park Service and claimed charitable deduction; due to restrictions on mining in National Park, FMV of gift must be reduced by cost of removing restrictions on use and time necessary to receive removal of restrictions; if donated property only has value as mine and mining restrictions are significant, then property worthless). 

IRS Info. Letter 2012-0069 (Dec. 28, 2012)

(professional consultant working for business on separate consulting projects could be an employee for one project and an independent contractor for the other project; relationship between worker and business to be examined separately).

Norman v. Commissioner, T.C. Memo. 2012-360

(petitioner bought two properties, one for investment and one as a principal residence, for total price of $1.8 million, under a single loan and allocated $1,000,000 to debt on primary residence and $800,000 to debt on investment property;  no investment interest deduction allowed for 2005 because petitioner did not have any net investment income; for 2006, no mortgage amount to be allocated to investment property and, hence, no investment interest deduction principal residence interest deduction limited to interest attributable to $1.1 million loan; properties financed with single credit line deed of trust note).

Zampella v. Comr., T.C. Memo. 2012-359

(petitioner and brother appointed as co-executors of mother's estate and, as co-executors, transferred title in mother's residence to petitioner for $215,000; petitioner claimed FTHBC and IRS denied credit on basis that purchase was from a "related person"; court agreed, noting that while siblings are excluded from the definition of related persons under I.R.C. Sec. 36(c)(5) and Sec. 267(b)(1), the executor of an estate and a beneficiary is deemed to be a related person (See I.R.C. Sec. 36(c)(5) and Sec. 267(b)(13); home acquired by beneficiary of estate from executor of estate and substance of transaction agrees with the form of the transaction).

Parker v. Comr., T.C. Memo. 2012-357

(taxpayer found to have sold property on installment method and did not elect out; taxpayer's intention that sale be cash sale but where it was changed at last minute with further intent of reversion to cash sale not controlling; no deduction allowed for labor expenses because only Form 1099-Misc. supplied and not filed with IRS and amount on Form failed to match deduction claimed).

Fitch, et al. v. Comr., T.C. Memo. 2012-358

(petitioner (tax practitioner) and wife (real estate agent) owned rental properties; deduction for expenses related to one property allowed because petitioner had intent to rent property out during year at issue and expenses incurred were for purpose of producing income in conjunction with I.R.C. Sec. 212; petitioner rendered management services, advertised property for rent and sought insurance coverage). 

Priv. Ltr. Rul. 201214003 (Dec. 21, 2011)

(capitalized interest while property is being produced must be treated as part of the property’s total cost for purposes of bonus depreciation safe harbor which specifies that physical work of significant degree begins (for accrual basis taxpayer) when more than 10 percent of total cost of property incurred (not counting land cost and cost of any preliminary activities).

Browning v. Comr., T.C. Sum. Op. 2012-121

(court-ordered joint parenting agreement governed petitioners' illegitimate son; petitioners did not live together during year in issue but, mother had custody and father had visitation rights and was required to pay child support; dependency exemption altered between parents from year-to-year, but father's deductions dependent on paying child support; mother did not sign court order and father files return without Form 8332; mother signs form 8332 four years later; IRS denied dependency exemption for father because he was a non-custodial parent that failed to attach Form 8332 to the return; court agreed with IRS - no deductions or credits for the father). 

Rasmussen v. Comr., T.C. Memo. 2012-353

(petitioner had a sole proprietorship window installation business and petitioner's wife was a cosmetologist; petitioner's business deductions denied for vehicle expenses due to lack of documentation; same outcome for wife's vehicle expenses). 

Armstrong v. Comr., 139 T.C. No. 18 (2012)

(petitioner divorced from wife and ex-wife given custody of couple's son; arbitration award and two state court orders in different years specified that petitioner entitled to dependency deduction and wife had to execute Form 8332 in petitioner's favor so long as petitioner paid child support; petitioner paid child support through 2007, but no Form 8332 executed; petitioner remarried and claimed dependency exemption for 2007 and attached arbitration award and signed child support orders; deduction disallowed because state court order signed by custodial parent not in compliance with I.R.C. Sec. 152(a) on account of failure to unconditionally specify that ex-wife would not claim child as dependent for 2007). 

George v. Comr., 139 T.C. No. 19 (2012)

(petitioners, formerly married couple, claimed dependency exemption deduction and child tax credit with respect to child; pursuant to state court order, ex-wife executed form 8332 in which she agreed not to claim exemption for daughter as dependent for years at issue; ex-wife went ahead and claimed dependency exemption and child tax credit  for 2007 and 2008 on belief that court order was erroneous; ex-husband also claimed child tax credit for same years and attached Form 8332 to returns; ex-wife loses because Form 8332 not rendered invalid by an error in state court order or because she signed Form 8332 due to court order to do so; thus, daughter not qualifying child under I.R.C. Sec. 152(e)).

Ratcliffe v. Comr., T.C. Memo. 2012-349

(petitioners, married couple, moved into husband's house after marriage; wife had no ownership interest in house, but wife signed deed of trust when house refinanced; couple divorced in 2008 and wife buys new home in 2009 and claimed first-time homebuyer tax credit; IRS disallowed credit based on ownership interest in prior marital home due to signing of deed of trust; wife's attorney prevails in obtaining FTHBTC for wife of $8,000 at IRS appeals level on basis that she signed deed of trust due to state law requirement; petitioner not entitled to attorney fees because IRS position substantially justified at time statutory notice of deficiency issue). 

Minnick, et al. v. Comr., T.C. Memo 2012-345

(petitioner, former Democratic member of U.S. House and lawyer that practiced tax law, donated permanent conservation easement on 80 percent of 74-acre parcel to qualified land trust; land subject to mortgage at time of donation and mortgage not subordinated until two years after petitioner received statutory notice of deficiency from IRS; petitioner argued that state (ID) Uniform Conservation Easement Act protected charitable use, but court noted Act would have only protected whatever interest remained after lender satisfied; no partial subordination involved; negligence penalty imposed). 

Kutney v. Comr., T.C. Sum. Op. 2012-120

(petitioner, aeronautical engineer, owned several rental properties that he rented out and managed, and claimed losses from the rental activity for 2005-2007; IRS denied loss deductions on basis that petitioner subject to passive loss rules because petitioner failed to qualify as a real estate professional; court agreed with IRS because petitioner did not perform more than 50 percent of his personal services in real property trades or businesses; no contemporaneous log kept and testimony vague and indefinite; merely being on-call with respect to management services doesn't generate hours that can be counted toward 50 percent test).

Priv. Ltr. Rul. 201313018 (Dec. 14, 2012)

(issue was whether no-fault auto insurance benefits are excludible from gross income under I.R.C. Sec. 104(a)(3); such benefits covers reasonable costs for products, services and accommodations for injured person's care, recovery or rehabilitation and are paid regardless of fault; IRS concludes that such benefits are not includible in gross income based on the statute, regs. and Rev. Rul. 73-154, 1973-1 C.B. 50). 

PLR 201311003 (Dec. 12, 2012)

(aerogenerator deemed to be placed service in stated year for purposes of I.R.C. Sec. 45, 167 and 168 even if transmission line not completed by end of year if aerogenerators can deliver at least stated-percent of capacity to market in year of completion by means of temporary intertie; aerogenerators must also rotate across temporary intertie such that each aerogenerator operates regularly and consistently). 

Priv. Ltr. Rul. 201310047 (Dec. 11, 2012)

(Mormon group formed as religious trust to preserve and advance religious doctrines of Mormonism as espoused by founder Joseph Smith, Jr., sought tax-exempt status under I.R.C. Sec. 501(a) as an organization described in I.R.C. Sec. 501(d); IRS denied exemption on basis that group's belief in and promotion of polygamy via "Celestial Marriage" was illegal under state and federal law and a charitable trust cannot be created for an illegal purpose). 

Specks v. Comr., T.C. Memo. 2012-343

(petitioner provided security services to businesses during his time when he was an off-duty police officer; petitioner reported his service income on "other income" line on return; petitioner determined to be independent contractor and income subject to self-employment tax; petitioner also failed to qualify as real estate professional under I.R.C. Sec. 469(c)(7)(B) for failure to meet the 750-hour test and failure to meet the more than 50 percent test).

PLR 201310043 (Dec. 11, 2012)

(bank made bonus payments to IRAs of new customers; such payments not subject to information reporting, but payments to new I.R.C. Sec. 529 plans are subject to information reporting if of $600 or more). 

Corcoran v. Comr., T.C. Sum. Op. 2012-119

(petitioner was insurance salesman before losing his job due to low sales; prior to termination petitioner enrolled in employer's defined benefit plan which required petitioner to stay with employer for five years and meet certain (unattainable) sales quotas; petitioner never contributed to defined benefit plan and never joined company's defined contribution plan; petitioner made $6,000 catch-up contribution to an IRS; company issued W-2 to petitioner stating he was enrolled in company's plan; consequently IRS denied deduction for contribution to IRA under I.R.C. Sec. 219 because petitioner was "actively enrolled" in employer's retirement plan; court upheld IRS determination even though petitioner didn't know he was enrolled, received nothing from "enrollment" and never made any contributions; "actively enrolled" means petitioner's name was on the books irrespective of whether any contributions made or whether there is any right to receive anything from the employer's plan). 

Priv. Ltr. Rul. 201313001 (Dec. 6, 2012)

(buy-sell agreement entered into before Oct. 8, 1990, not subject to valuation restrictions of I.R.C. Sec. 2703; such agreements not subject to I.R.C. Sec. 2703 if not substantially modified after Oct. 8, 1990; here, agreement modified to extend repayment term and IRS viewed extension as merely de minimis change to quality, timing or value of rights of parties to agreement because agreement required reasonable interest rate to be paid; agreement also modified  to specify that "prime rate" is rate to be adjusted semiannually, and this was also not substantial modification because resulting payments would more closely approximate fair market value; requirements of Treas. Reg. Sec. 20.2031-2(h) must still be satisfied to control valuation issues at death).

Tennessee Dept. of Rev. Ltr. Rul. 11-67 (Dec. 6, 2012)

(lawnmower sales to farmers did not qualify for exemption from state sales and use tax because they would not be used in the direct production of agricultural commodities; lawnmowers at issue were to be used for grounds keeping and maintenance of pathways, cutting brush to install fence lines and mowing). 

Morales v. Comr., T.C. Memo. 2012-341

(petitioners, married couple, filed separate returns for separate principal residences on same tax lot with each claiming an $8,000 first-time homebuyer tax credit; however, new homes purchased within three years of selling prior principal residence; petitioners' claim that Turbo Tax software allowed the credit, but no evidence presented that result from Turbo Tax instructional error or error in programming; use of Turbo Tax not defense to accuracy-related penalty; court noted, however, that "We leave for another day whether reliance on tax preparation software such as Turbo Tax is sufficient to avoid the accuracy-related penalty where the taxpayer has provided evidence demonstrating a programming flaw or an instructional error").