identify the initial relevant tax question that you would have needed to answer if this issue had been brought to you to research beforehand?What are the material facts?Also, now that this case has been determined, where does it fit into the types of authority that you might research for a new issue on this topic?

TAX MATTERS By Paul Bonner, a JofA senior editor. Post-retirement payments are subject to self-employment tax The Tax Court's finding that the pay was nonqualified deferred compensation is upheld on appeal. The Eleventh Circuit affirmed the decision of the Tax Court that a retired cosmetics sales consultant's distributions from Mary Kay Inc. were subject to selfemployment tax because the plan under which the payments were made was characterized as a Sec. 409A deferred compensation plan. Facts: Christine Peterson was a suc cessful independent beauty consultant for Mary Kay who reached the level of 82 I Journal o f A ccountancy LIN E ____________________________________________ ITEMS Tax Court allows D.C. snow day extension for p etitio n filing The Tax Court in Guralnik, 146 T.C. No. 15 (2016), denied the IRS's motion to dismiss the case for lack of jurisdiction, consistent with the earlier findings and recommendation of a special trial judge (order 8/24/15; see \"Tax Practice Corner: Let It Snow (but to Be Sure, Use an IRS-Approved PDS),\" JofA, Feb. 2016, tinyurl.com/h5hzt2r).The taxpayer mailed a Tax Court petition for redetermination, using a service that had not yet been added to the IRS's approved list of private delivery services that taxpayers may rely upon under the timely mailing/ timely filing rule. The 30-day filing deadline for the petition fell on a Sunday, which was followed by a legal holiday. The next day would have been a normal business day, except the Tax Court and other federal offices in the District of Columbia were closed due to snow. The petition was delivered the following day, when the court reopened, and was timely filed, the court held. Wellness rewards and prem ium s not excludable from em ployees' income Employers may not exclude from employees'gross income cash rewards for participating in certain wellness programs or reimbursement of premiums for such participation if the premiums were paid by a salary reduction through a Sec. 125 cafeteria plan, the IRS Office of Chief Counsel advised in Chief Counsel Advice (CCA) 201622031. The CCA noted that an employer-provided well ness program that constitutes medical care as defined in Sec. 213(d) is generally excluded from income. However, any reward, incentive, or other benefit under such a program that is not medical care is included in income unless it is exclud able as an employee fringe benefit under Sec. 132. A cash benefit is generally not excludable as a de minimis fringe benefit under Sec. 132(e). Payment of gym fees that do not qualify as medical care would not be excludable from employees' income even if provided through a wellness program because it is a cash benefit, the CCA concluded. IRS notes general principles o f crow dfunding income In Information Letter 2016-0036 (available at tinyurl.com/jsvh4pn), the IRS outlined tax principles that may be relevant to crowdfunding income (see also \"Crowdfunding and Income Taxes,"JofA, Oct. 2015, tinyurl.com/jezze4s).The letter addresses whether funds raised by a crowdfunding appeal to purchase a company, in which contributors receive something (redacted), are constructively received if the funds \"may have to be returned to the contributors.''The letter states that, generally, crowdfunding revenues are includible in income if they are not loans that must be repaid, capital contributed to an entity in exchange for an equity interest in the entity, or gifts made out of detached generosity and without any \"quid pro quo.\"The IRS noted that income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restric tions, but a self-imposed restriction on the availability of income does not legally defer its recognition. S e ptem ber 2016 LEFT: IMAGE BY NATIANIS/ISTOCK; RIGHT: IMAGE 8Y ADEYVIRTUOSHRED/ISTOCK registry\" as a business that \"supplies, arranges or refers independent contrac tors to provide home care services.\" Having determined that Nelly quali fied for the \"reasonable basis\" safe harbor for treating its workers as independent contractors and was entitled to a refund of the employment taxes, the court said it was not necessary for it to determine whether Nelly should have treated the workers as employees. Nelly Home Care, LLC, No. 15-439 (E.D. Pa. 5/10/16) TAX MATTERS national sales director (NSD). Peterson entered into two company programs whose agreements provided monthly distributions upon completion of five years of NSD service to, and retire ment from, Mary Kay. The distribution amounts were primarily based on a percentage of her average commissions before retirement. The agreements stated that each program was intended to be a nonqualified deferred compensation arrangement that was intended to meet the requirements of Sec. 409A. Peterson retired from Mary Kay in 2009 and received payments of $489,707 under the programs, on which she did not pay self-employment tax. The IRS issued a notice of defi ciency, claiming that the payments received by Peterson were subject to self-employment tax, and assessed $33,594 of self-employment tax. The Tax Court upheld the determination of the IRS. Peterson appealed to the Eleventh Circuit. Is s u e : Generally, Sec. 409A(d)(l) defines a nonqualified deferred com pensation plan as any plan that provides for the deferral of compensation. Regs. Sec. 1.409A-l(b)(l) states in pertinent part that a plan provides for a deferral of compensation where the service provider has a legally binding right to compensa tion in a later year. Largest p e rc e n ta g e changes in c o rp o ra te p re ta x p ro fits b y sector, 2 0 1 2 - 2 0 1 3 Profits for all North American Industry Classification System sectors combined grew 8.7% from $1.77 trillion to $1.93 trillion. The largest sector by amount, finance and insurance, grew by 9% to $564 billion. H o l d i n g : The Eleventh Circuit held that under the Danielson rule (.Danielson, 378 F.2d 775 (3d Cir. 1967)), Peterson was bound by the program agree ments'characterization of the program distributions. Thus, the distributions Peterson received were subject to selfemployment tax because the program agreements characterized the programs as Sec. 409A nonqualified deferred compensation plans for tax purposes. Peterson argued that the payments she received were not deferred com pensation but rather payments from the sale of her business or payments for entering a covenant not to compete with Mary Kay after retirement. The Eleventh Circuit, however, found that no sales agreement existed. Additionally, the court rejected the argument that the payments were for the covenant not to compete because Peterson sought employment elsewhere within two years of retirement and Mary Kay still made all the payments due under the program. Peterson, No. 14-15773 (11th Cir. 5/24/16) By Maria M. Pirrone, CPA, LL.M., as sistant professor of accounting and taxation, St.Johns University, Queens, N.Y. Utilities Real estate, rental, and leasing FAQs e x p la in t h e w r o n g f u l in c a r c e r a tio n Management of companies (holding companies) Construction Information Wholesale trade Health care and social assistance e x c lu s io n A new PATH Act provision excludes certain damages, awards, and restitution from gross income; the normal refund limitation period is waived through Dec. 19. Agriculture, forestry, fishing, and hunting Professional, scientific, and technical services Educational service Source: IRS, Corporation Income Tax Returns, 2013, Figure B. 84 I Journal o f Accountancy Wrongfully incarcerated individuals are now permitted to exclude from income \"any civil damages, restitution, or other monetary award\" that they receive as compensation for their wrongful incar ceration, thanks to Sec. 139F, which was added to the Internal Revenue Code last December by the Protecting Americans September 2016 Copyright of Journal of Accountancy is the property of American Institute of Ceritified Public Accountants and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use