Developments in Individual Taxation

The Tax Adviser Published March 01, 2013      by Karl L. Fava, CPA; Jonathan Horn, CPA; Daniel T. Moore, CPA; Susanne Morrow, CPA; Annette Nellen, J.D., CPA; Teri E. Newman, CPA; S. Miguel Reyna, CPA; Kenneth L. Rubin, CPA; Amy M. Vega, CPA; and Donald J. Zidik Jr., CPA  

Executive Summary

  • The IRS issued proposed regulations permitting deductions for certain local lodging expenses.
  • In Veriha, the Tax Court held that the Sec. 469 self-rental rule applied to a taxpayer who owned three companies, a trucking company and two truck-leasing companies, and thus the income from the S corporation truck-leasing company should be recharacterized as nonpassive, while the losses from his LLC truck-leasing company should remain passive.
  • In Quality Stores, Inc., the Sixth Circuit held that severance payments paid to terminated employees as a direct result of a workforce reduction are not subject to FICA tax.
  • In Rev. Rul. 2012-18, the IRS issued guidance about FICA taxes imposed on tips and the procedures for notice and demand for those taxes under Sec. 3121(q). Under Announcement 2012-50, the rules distinguishing between tips and service charges in the revenue ruling will not apply until Jan. 1, 2014.

This article covers recent developments in individual taxation. The items are arranged in Code section order.  Read full article………………

Sec. 1: Tax Imposed

The First and Second Circuits found Section 3 of the Defense of Marriage Act (DOMA) unconstitutional.1 The effect of Section 3 is to deny federal income tax benefits, such as filing joint income tax returns, to same-sex couples. The First Circuit stayed its mandate that Section 3 not apply pending a likely Supreme Court review. The Supreme Court has granted certiorari in the Second Circuit case and will hear arguments on March 27.