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  • THE ELITE QUARTERLY Taxation Published by CPElite, Inc. The Leader in Continuing Professional Education NewslettersT.M.

    CPE for Enrolled Agents, CFPs, CPAs, and Licensed Accountants44444444444444444444444444444444444444444444444444444444444444444444444444444444

    Volume XXIII, Number 4, Winter 2014 Issue 4 Hours of CPE Credit (Taxation)Phone and fax # 1-800-950-0273, e-mail cpeliteinc@aol.com, web site www.cpelite.com

    44444444444444444444444444444444444444444444444444444444444444444444444444444444 Another year is coming to a close, and we want to wishyou a Happy Holiday season and a happy and productive2015. Thank you for your business. This is our finalnewsletter for 2014. There were four quarterlynewsletters and 2 hours of ethics for 2014. If you did notreceive all our 2014 newsletters, you may download themfrom our website. We are taking subscriptions now for our2015 newsletter options. We have added a new 2015 EAPackage option (Option 2 on the order form on page 18of this newsletter). Under it, you ensure that you get the24 hours of CPE credit each year that you need to meetyour 72-hour three year requirement. And, the cost isonly $5.83 per hour if you order now. In fact, you save byordering by February 15, 2015, on all of our subscriptionpackages. Again, please see page 18.

    We appreciate your telling other tax professionals aboutour tax and ethics newsletters and tax courses. If theyorder any of our 2014 or 2015 subscription options, youwill receive a $50 referral off the price of any of oursubscription packages (Options 1 - 3 on the order form).We will send you a $50 check if you already havesubscribed. If they subscribe for both 2014 and 2015,you earn $100! If they order just newsletters or courses,your referral is 25% of the new customers order cost.Here are items in this newsletter.

    1. IRS Rulings and Other Items (pages 1-7), includingguidance on allocating pre-and after-tax amounts forcertain qualified plan distributions, and tax-exemptsocial clubs, and an IRS warning on tax scams.

    2. Court Decisions (pages 7-12), including Tax Courtdecisions that the federal governments Civil ServiceRetirement System cannot accept IRA rolloverdistributions, and that no depreciation was permittedon an RV even though it was used more than 50%for the taxpayers business use, and another courtdecision on the Section 36B refundable tax credit fortaxpayers covered by a qualified health plan that thetaxpayer enrolls in through an Exchange.

    3. Treasury Items (pages 12-13), including finalregulations that provide favorable tax treatment forlocal lodging expenses.

    4. An Elite Possibility (pages 13-14) on an end-of-year planning strategy for accelerating or deferringincome or deductions between two taxable years.

    5. Quiz Questions (pages 15-16).

    6. Newsletter and Subscription Information (page19), providing four options for using our newsletterfor CPE credit.

    7. Course Information (pages 19-20).

    8. Enrolled Agent Information (page 19).

    9. CPA and Licensed Accountant information (page19).

    LEARNING OBJECTIVE AND CONTENT LEVEL Theprimary learning objective of this newsletter is to makeaccounting and tax practitioners aware of recent IRS andTreasury items, and court decisions which are likely tohave an impact on most tax practices. The content levelof the newsletter material is an overview of these items.

    PREREQUISITES There are no prerequisites nor isadvance preparation required for our newsletters.

    444444444444444444 IRS 4444444444444444444444

    IRS ISSUES NEW GUIDANCE ON QUALIFIED PLANDISTRIBUTION ALLOCATIONS

    In Notice 2014-54 [9/18/14], the IRS provides guidanceon allocating pre-tax and after-tax amounts when adistribution from a qualified retirement plan is sent tomultiple destinations. Generally, for distributions madeon or after January 1, 2015, all disbursements of benefitsfrom the plan to the recipient that are scheduled to bemade at the same time are treated as a singledistribution even though the recipient directs thatdisbursements be made to a single destination ormultiple destinations. If the aggregated pre-tax amountis less than the amount of the distribution that is directlyrolled over to other eligible retirement plans, the entirepre-tax amount is assigned to the amount of thedistribution that is directly rolled over. If the directrollover is to two or more plans, the recipient can selecthow the pre-tax amount is allocated among the plans.The recipient must inform the plan administrator of theallocation before the rollovers are made. If theaggregated pre-tax amount equals or exceeds thedirectly rolled over distribution amount to eligibleretirement plans, the pre-tax amount is assigned to theportion of the distribution directly rolled over up to theamount of the direct rollover. So, each direct rolloverconsists entirely of pre-tax amounts. Any remaining pre-tax amount next is assigned to any 60-day rollovers up tothe amount of the 60-day rollovers. If the remaining pre-tax amount is less than the amount rolled over to 60-dayrollovers, the recipient can select how the pre-tax amountis allocated among the plans that receive 60-dayrollovers. Any remaining pre-tax amount is includible inthe distributees gross income. If the amount rolled overto an eligible retirement plan is more than the pre-taxamount that is assigned or allocated to the plan, theexcess is an after-tax amount. Compliance Pointer:

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    Even though multiple disbursements to differentdestinations are treated as a single aggregateddistribution, each disbursement may be required to bereported on a separate Form 1099-R. Planning Pointer:Assume an employee has a $250,000 qualified planaccount balance ($200,000 pre-tax, $50,000 after-tax)when he separates from service, and he requests a$100,000 distribution. His new employer maintains aqualified plan, and he has an IRA. He directly rolls over$50,000 to his new employers plan (which separatelyaccounts for after-tax contributions), and $32,000 to hisIRA, and takes $18,000 cash. Under Section 72(e)(8),the pre-tax distribution amount is $80,000 ($100,000 x($200,000 / $250,000)). So, the direct rollovers consist of$80,000 in pre-tax amounts and $20,000 in after-taxamounts. He is permitted to allocate the $80,000between his new employer qualified plan and his IRA.IRS: Beginning in 2014, IRS Publication 590 on IRAs willbe split into two separate publications. Publication 590-Awill focus on contributions to traditional and Roth IRAs.Publication 590-B will focus on traditional and Roth IRAdistributions.

    IRS ISSUES CURRENT RATES FOR HIGH-LOWMETHOD

    In Notice 2014-57 [9/19/14], the IRS provides the 2014 -2015 per diem rates for taxpayers to use in substantiatingthe amount of ordinary and necessary business expensesincurred while traveling away from home. These ratesapply to travel on or after October 1, 2014. Under thehigh-low method, the per diem rates are $259 for travel toany "high-cost" locality, and $172 for travel to any otherlocality within the continental United States (per diemsubstantiation method). The amount of the $259 ($172)per diem that is treated as paid for meals for purposes ofSection 274(n) is $65 for travel to any high-cost locality,and $52 for travel to any other locality within thecontinental United States (CONUS). A "high-cost" localityis one with a federal per diem rate of $216 or more. Thespecial transportation industry M&IE rate is $59 per dayfor any locality within the CONUS. The rate for anylocality of travel outside the continental United States(OCONUS) is $65. The rate for any CONUS or OCONUSlocality of travel for the incidental expenses onlydeduction is $5 per day. Incidental expenses include onlyfees and tips given to porters, baggage carriers, hotelstaff, and staff on ships. Transportation between placesof lodging or business and places where meals are taken,and the mailing costs of filing travel vouchers and payingemployer-sponsored charge card billings, are notincluded in incidental expenses. Compliance Pointer:As transportation and mailing expenses are not includedin incidental expenses, taxpayers who use per diem ratesmay separately deduct or be reimbursed for thoseexpenses. IRS: For more on per diem and carallowances, see IRS Publication 463.

    IRS PROVIDES GUIDANCE ON TAX-EXEMPT SOCIALCLUBS

    Suppose a tax-exempt motoring activities social clubsponsors a car racing event and conducts an annualraffle. Can these activities jeopardize the tax-exempt

    status of the social club? The IRS in Technical AdviceMemorandum 201430019 answers this questionregarding a social club which promotes interest inmotoring activities. The clubs mission is to enhance thecar experience for its members by providing services,support, information, and activities that promotecamaraderie and encourage social awareness andresponsibility. It offers a range of services to members,such as publication of a monthly magazine, severaldriving events, an annual national club gathering, and anannual raffle of cars. The magazine accepts paidadvertising from both members and nonmembers.However, advertising is limited to items and events thatspecifically relate to car ownership. It does not solicit orreceive general advertising and has a policy to onlyaccept advertising from vendors who serve the interestof enhancing the car ownership experience. The clubreceives income from membership dues, merchandisesales to members, registration and vendor fees atvarious gatherings, investment income, mailing listrentals, book royalties, as well as from advertising,sponsorship of club events, and an annual raffle event.The IRS reviewed several Code provisions dealing withtax-exempt clubs. Section 501(c)(7) provides for thefederal tax exemption of clubs organized for pleasure,recreation, and other nonprofit purposes. Su