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Duly Noted

Flight Attendant’s Argument Doesn’t Fly. A Hong Kong-based flight attendant cannot claim favorable foreign-source tax treatment for income she earns while flying over international waters or U.S. airspace, a federal appeals court ruled. The Internal Revenue Service assessed $3,428 of tax, plus an additional 20 percent “accuracy-related” penalty, against Yen-Ling Rogers and her husband, William Rogers, for 2007. The couple claimed that all of Yen-Ling’s income from United Airlines was eligible for the exclusion for foreign-source income provided under Sec. 911 of the tax code. They fought the IRS in Tax Court, lost, then took their case to the D.C. Circuit Court of Appeals - and lost again. A three-judge appellate panel cited regulations defining foreign-source income as earned in the sovereign territory or airspace of another nation. The appeals court upheld the penalty because the IRS had made the same correction of the Rogers’ tax returns for earlier years. William D. Rogers v. Commissioner, 2015 TNT 75-11.

Real Estate ‘Professional’ Means ‘Owner’ In New York, Administrative Judge Says. Kathryn Brandvold and her husband, Erik, might understandably be confused about what it means to be a “professional” in New York. She is an executive at Zeckendorf Development LLC, a real estate development firm, and the couple own and manage several rental properties on Long Island. But an administrative law judge upheld the state Department of Taxation and Finance’s conclusion that they are not entitled to claim passive loss deductions that are available under Sec. 469 of the tax code to real estate professionals, because she is not at least a 5 percent owner of Zeckendorf. For support, the department - backed by Administrative Law Judge Arthur Bray - pointed to a definition of “key employees” provided in Sec. 416, which deals with an unrelated topic, top-heavy retirement plans, and which specifically applies only to that section. Matter of Brandvold, DTA No. 825578.

IRS Doubles Fees For Private Rulings. As it copes with budget cuts, the Internal Revenue Service has over the past four years more than doubled the user fee it charges for taxpayers seeking private rulings, according to a report by Tax Analysts. Standard fees have climbed from $14,000 at the beginning of 2012 to $28,300 for requests received after Feb. 1, 2015. The cost for a more streamlined type of ruling that provides relief for missed deadlines or other technical failures has fluctuated in the same period from $14,000 to $6,900 and back up to $9,800. Tax Analysts said IRS officials cited better information about the time required to produce each sort of ruling, and a changing workload, with fewer of the streamlined cases and a growing number of more complex requests. Taxpayers can request private rulings to gain assurance about the tax consequences of proposed transactions. 2015 TNT 56-1.

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