DiscoverSCACPA's Weekly Federal Tax UpdateFederal Tax Update with Lynn Nichols #38
Federal Tax Update with Lynn Nichols #38

Federal Tax Update with Lynn Nichols #38

Update: 2019-04-26


Lynn Nichols Federal Tax Update Podcast

April, 26 2019, Episode 38

Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law.

  1. 2 Percent S Corp Shareholder May Deduct Insurance Premiums

In a legal memorandum, the IRS concluded that an individual who is a 2 percent shareholder of an S corporation under the attribution of ownership rules is entitled to the section 162(l) deduction for amounts paid by the S corporation under a group health plan for all employees and included in the individual’s gross income, if some requirements are met.

[ILM 201912001; 12/21/2018, rel. 3/22/2019]


  1. Man May Deduct Some Litigation Costs for Suits Against Ex-Wife

A man suing his ex-wife over various debts can deduct some of those legal fees because the underlying claims involved investment opportunities, according to the Tax Court.

[Tax Notes Today; 4/16/2019, Article by Nathan Richman]

    Individual May Deduct Some Legal Fees After Suing Former Spouse

The Tax Court, sustaining penalties, held that an individual can’t deduct legal fees under section 162 stemming from lawsuits against his former spouse but some are deductible under section 212, finding that he wasn’t engaged in a trade or business from which he claims the expenses originated but that he did engage in the purported business with the intent of generating a profit.

    [Ames D. Ray; No. 14052-16; T.C. Memo. 2019-36, 4/15/2019]


  1. Flour Milling Company Denied Increased Research Activity Credit

A company in the business of milling and selling wheat flour was not eligible for section 41 increased research activity credits because no projects met all the requirements to constitute qualified research; however, the company had relied in good faith on its accountants' advice and was not liable for accuracy-related penalties under section 6662.

[Siemer Milling Company; No. 21655-15; T.C. Memo. 2019-37, 4/15/2019]


  1. Ninth Circuit Holds Regs Valid, Nixing Mailbox Rule

Taxpayers can’t rely on the common law mailbox rule to prove the timely filing of a refund claim, according to a circuit court decision.

[Tax Notes Today; 4/17/2019, Article by Emily Foster]

[Ninth Circuit Favors Regs Over Mailbox Rule as Refund Suit Heads for Dismissal

The Ninth Circuit, reversing and remanding a refund case for dismissal, held that a lower court erroneously applied the common-law mailbox rule to conclude that a couple’s amended return had been timely filed, finding instead that section 7502 and its regulations provide the exclusive means to prove delivery of a tax return to the IRS.

     [Howard L. Baldwin et ux.; CA9, No. 17-55115; No. 17-5535]









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Federal Tax Update with Lynn Nichols #38

Federal Tax Update with Lynn Nichols #38