Podcasts about tax notes today

Tax Notes Today reporter Aaron Davis discusses the recent state efforts to clamp down on tax-incentive bidding wars by forming a multistate compact.In the latest installment of Willis Weighs In, Tax Notes contributing editor Benjamin Willis discusses PLR 202009002 and its greater application.For additional coverage, read these articles in Tax Notes:States Push for Cooperation Over CompetitionConnecticut Looks to Join Interstate Incentives CompactQuestions Raised by Multistate Plan to Eliminate IncentivesRhode Island Lawmakers File Tax Incentive Compact BillArizona Bill Backs Interstate Tax Incentives CompactKansas-Missouri Incentives War Ends in Truce

In part 2 of an interview with former IRS Commissioner John Koskinen, Tax Notes Today senior reporter William Hoffman and Koskinen discuss President Trump’s tax returns, transparency, and whistleblowers. For additional coverage, read these article in Tax Notes:No Interview Yet Between Neal and IRS WhistleblowerTreasury IG to Review Handling of Trump Tax ReturnsHouse Lawyers to Interview Trump Tax Audit WhistleblowerTrump Audit Meddling Claim Deepens Questions About Whistleblower***This episode is sponsored by University of California, Irvine Law School’s Graduate Tax Program. For more information, visit law.uci.edu/gradtax.

In part 1 of an interview with former IRS Commissioner John Koskinen, Tax Notes Today senior reporter William Hoffman and Koskinen discuss IRS resources, enforcement, and taxpayer services. For additional coverage, read these article in Tax Notes:IRS Rules New Cryptocurrency From Hard Forks Is TaxableIRS Exams Focus on EITC Claims, Not Poor, Inspector General SaysIRS Budget Reduced Billions in Employment Tax CollectionsSmall Business Enforcement Gets Fresh Focus From New IRS Bosses

Lynn Nichols Federal Tax Update Podcast October, 07 2019, Episode 49 Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. Lack of Safe Harbor in Proposed Accounting Regs Chafes Tax Pros Practitioners are disappointed by the absence of goods sold offsets and a financial accounting percentage of completion method safe harbor in newly proposed regulations on the Tax Cuts and Jobs Act’s tax accounting provisions. [Tax Notes Today, 9/9/2019, Article by Nathan J. Richman]  Automatic Consent Procedures Issued for Accounting Rule Changes The IRS has issued procedures (Rev. Proc. 2019-37) for obtaining automatic consent to change accounting methods to comply with section 451 and recently released proposed regulations under reg. section 1.451-3 (REG-104870-18) and 1.451-8 (REG-104554-18). [Rev. Proc. 2019-37; 2019-39 IRB 1, 9.6.2019]   IRS Publishes Proposed Regs on Exempt Organization Donor Disclosures The IRS has published proposed regulations (REG-102508-16) updating the section 6033 reporting regulations for tax-exempt organizations to reflect amendments to the provision, including changes regarding donor disclosures under prior guidance. [REG-102508-16; 84 F.R. 47447-47454, 9/10/2019]   IRS Not Responsible for Paying Return Preparer’s Fee from Refund The Court of Federal Claims dismissed for lack of jurisdiction a return preparer’s suit alleging that the government must pay the tax return preparation fee his client promised to pay from his refund, because the IRS must remit tax refunds to the taxpayer, not the tax return preparer, and is not bound by the agreement with his client. [Prakash Narayan; No. 1:19-cv-00442, 9/5/2019]   IRS Built-In Gain and Loss Rules Eliminate a Safe Harbor Option Proposed regulations that limit a corporation’s losses following a change in ownership could be more restrictive for some companies by eliminating an option for computing built-in gain and loss. [Tax Notes Today, 9/10/2019, Article by Emily Foster]      IRS Publishes Proposed Regs on Built-In Gain and Loss The IRS has published proposed regulations (REG-125710-18) on the items of income and deduction that are included in the calculation of built-in gains and losses under section 382. Comments and hearing requests are due by November 12.      [REG-125710-18; 84 F.R. 47455-47473, 9/10/2019]     Audits of Partnerships That Cease to Exist Could Have Odd Results Partners who were owners of an entity just before it ceased to exist could be on the hook for adjustments related to other partners who exited the scene earlier, under the centralized audit regime. [Tax Notes Today, 9/11/2019, Article by Eric Yauch]   Student Liable for Taxes After Winning Car for Good Grades The Tax Court, in a designated order, held that the value of a car that a high school student won when she was entered in a drawing for students with good grades and attendance was includable in her income and she is liable for a tax deficiency, finding that the value of the car was not excludable as a gift under section 102 or as a prize under section 74. [Alejandra Conyers; No. 13969-18, 9/11/2019]

Lynn Nichols Federal Tax Update Podcast September, 26 2019, Episode 48 Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. IRS Explains Deductibility of Contribution to Retirement Plan In a legal memorandum, the IRS advised that for an employer’s contribution to the trust of a qualified retirement plan to be deductible in the tax year it is made, the contribution must be a payment or cash, a cash equivalent, or property. [ILM 201935011, 8/15/2019] [Don E. Williams Co. v Commissioner, 429 U.S. 569 (1977)   Vacation Rentals Can’t Be Used to Deduct Losses, Court Holds A real estate professional and his spouse couldn’t lump in three vacation rentals with other rental properties in trying to claim non-passive losses. [Tax Notes Today, 9/4/2019. Article  by Stephanie Cumings] Resort Properties Not Part of Rental Activity for Passive Losses A U.S. district court held that a couple that included a real estate professional wasn’t entitled to group their resort properties with other real estate properties as a single rental activity for purposes of section 469, finding that the management companies with whom they had agreements didn’t have a continuous or recurring right to use the properties. [Greg A. Eger; USDC N CA, No. 4:18-cv-00199, 8/30/2019]   Denial of Innocent Spouse Relief Upheld; Collection May Proceed The Tax Court held the IRS properly determined in a collection case that a wife wasn’t entitled to innocent spouse relief, finding that she doesn’t meet the criteria for equitable relief under section 6015 because she failed to show sufficient economic or health hardship, and there was evidence she knew or should have known of the unpaid liabilities. [Melinda Jean Welwood; No. 17254-17L; T.C. Memo. 2019-113, 9/4/2019] Treasury Issues Proposed Regs on TCJA Accounting Rule Changes Treasury has released proposed regulations governing how businesses recognize income and treat advance payments. [Tax Notes Today, 9/6/2019, Article by Stephanie Cumings and Kristen Parillo] Proposed Regs Address Treatment of Advance Payments The IRS has published proposed regulations (REG-104554-18) on the timing of income inclusion under section 451 of advance payments for goods, services, and other items, reflecting changes made by the Tax Cuts and Jobs Act. Proposed Tax Accounting Regs Address Timing of Income Inclusion The IRS has published proposed regulations (REG-104870-18) on the timing of income inclusion under section 451 to reflect changes made by the Tax Cuts and Jobs Act. [9/5/2019]   Motorcycle Dealership’s Challenge to Penalties Will Proceed A U.S. district court held that there is a genuine dispute of material fact regarding whether a motorcycle dealership intentionally disregarded its filing requirements in its suit challenging penalties imposed against it for failing to report transactions involving more than $10,000 in cash but held that it cannot obtain reasonable cause relief to avoid the penalties. [ Mycles Cycles Inc.; USDC S CA, No. 3:18-cv-00314, 9/4/2019]   Couple Gets Litigation Costs After IRS Error The Tax Court granted a couple litigation costs after they received an erroneous SSA-1099 that the IRS refused to acknowledge as false despite proffered evidence until the Taxpayer Advocate Service intervened, leading the IRS to reverse its position; the court held that it lacks authority to adopt a rule proposed by the couple for situations of this nature. [ David K. Wagstaff et vir; No. 22658-17; T.C. Memo. 2019-114; 9/5/2019]

Lynn Nichols Federal Tax Update Podcast September, 12 2019, Episode 47 Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. Individual Can Rollover Deceased Husband's IRA The IRS ruled that an individual could rollover her deceased husband’s IRA into one or more IRAs in her name and that she would not be required to include in gross income any portion of the proceeds distributed from the decedent’s IRA that is timely rolled over into IRAs set up and maintained in her name. [ LTR 201934006, 5/30/2019, rel. 8/23/2019]   Horse Business Deductions Can’t Survive Dead Horse A taxpayer claiming losses from a horse breeding and showing enterprise was either too early or too late to claim it was a business in a year when she didn’t actually own a horse. [Tax Notes Today, 8/27/2019, Article by Nathan Richman]        Settlement Was Income; No Deduction for Horseless Horse Activity   The Tax Court held that an individual should have reported as income a settlement she received from her homeowners’ association, finding that it wasn’t excludable under section 104, and that she couldn’t claim deductions for her horseless horse breeding/showing activity; also, she wasn’t entitled to home office or legal expense deductions for her IT business.      [Denise Celeste McMillan; No. 16203-13; T.C. Memo. 2019-108, 8/26/2019]   Passthrough Interest Expense Wasn’t Investment Interest The Tax Court held that the interest expense passed through to an individual from partnership interests he received by gift or bequest from his father wasn’t investment interest subject to limited deductibility under section 163(d) but was allocable to the partnerships’ real estate assets to offset passthrough real estate income. [William C. Lipnick; No. 1262-18; 153 T.C. No. 1, 8/28/2019]     Photocopied Forms Aren’t Subject to Frivolous Return Penalties The Tax Court held an individual liable for one instead of seven $5,000 frivolous return penalties, finding that copies of the frivolous return that she attached to six separate letters to the IRS did not constitute filing “what purports to be a return” under section 6702(a)(1); the court further held that the IRS complied with the written supervisory approval requirements. [ Gwendolyn L. Kestin; No. 18254-17L; 153 T.C. No. 2, 8/30/2019]   Couple Can’t Claim Education Credit for Daughter for a Fifth Year The Tax Court, in a summary opinion, held that a couple wasn’t eligible to claim the American opportunity tax credit for their daughter’s college education expenses because the credit is only allowed for the first four years of post-secondary education and they had claimed the credit for their daughter in the previous four tax years. [ Milton H. Thomas II et ux.; No. 21655-17S; T.C. Summ. Op. 2019-24, 8/26/2019]   Couple Can’t Rely on Tax Code to Recoup Loan to Son’s Ex A couple who loaned their son’s fiancé money to pay off her student loans can’t use the tax code’s definition of a qualified education loan to get their money back from her bankruptcy estate.   [Tax Notes Today, 8/28/2019, Article by Stephanie Cumings]

Lynn Nichols Federal Tax Update Podcast September, 5 2019, Episode 46 Listen as Lynn Nichols provides commentary on 5 Items pertaining to current developments in U.S. tax law. Solving the Problem of ‘Substantially All’ in the O-Zone Rules In news analysis, Marie Sapirie attempts to parse the differences in the term “substantially all,” as the same phrase in the same statute has two different numerical thresholds. [Tax Notes Today, 8/19/2019, Article by Marie Sapirie}     Timber, Lumber Companies' Value Determined for Gift Tax Purposes The Tax Court, adopting the report of an estate’s valuation expert and rejecting the IRS’s expert valuation, determined the value of limited partnership units in a timber company and determined the value of stock in a lumber manufacturing company for gift tax purposes. [Estate of Aaron U. Jones et al., T.C. Memo. 2019-101, 8/19/2019]     Couple’s Rental Real Estate Loss Disallowed as Passive The Tax Court sustained the IRS’s disallowance of a couple’s rental real estate loss as a passive activity loss, finding that neither of them performed more than 750 hours individually in a real estate activity during the year; therefore, neither of them qualified as a real estate professional under section 469(c)(7)(B). [Ronnie Hairston et ux.; T.C. Memo. 2019-104, 8/20/2019]     Default on Retirement Plan Loan Caused Deemed Distribution The Tax Court in a summary opinion held that a couple received a deemed distribution from the husband’s retirement plan when he defaulted on a loan from the plan despite later resuming payments, finding that the grace period had expired and he failed to cover the missed payments. The court also noted that there is no hardship exception to the section 72(t) additional tax. [Gerard J. McEnroe et ux.; T.C. Summ. Op. 2019-21, 8/20/2019]     Proposed Regs Published on Maximum Value of Employer-Provided Vehicles The IRS has published proposed regulations (REG-101378-19) regarding special valuation rules for employers and employees to use in determining the amount to include in an employee’s gross income for personal use of an employer-provided vehicle. [REG-101378-19; 84 F.R. 44258-44262,8/22/2019]

Lynn Nichols Federal Tax Update Podcast August, 21 2019, Episode 45 Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law. Eighth Circuit Affirms Denial of Innocent Spouse Relief The Eighth Circuit, in an unpublished per curiam opinion, affirmed a Tax Court decision that sustained the IRS’s denial of an individual’s request for innocent spouse relief under section 6015, finding that the Tax Court didn’t abuse its discretion. [Brian Benson v. Commissioner; CA 3, No. 18-3526, 8/2/2019]  Husband Loses Innocent Spouse Claim . . . a husband whose wife was convicted of criminal fraud is not relieved from joint and several liability stemming from their jointly filed tax return, finding that their tax liability wasn’t attributable to an understatement of tax and that he knew his wife couldn’t pay the liability nor would he suffer economic hardship if he paid.  [Brian Benson,. T.C. Memo 2018-157, 9/19/2018]   Misclassification Under HRA Regs Could Trigger Excise Tax Running afoul of the worker classification requirements in new health reimbursement arrangement regulations could lead to additional taxes, according to an IRS official. [Tax Notes Today, 8/7/2019, Article by Stephanie Cumings]   Mayo Clinic Is Educational Organization, Gets $11.5 Million Refund A U.S. district court granted the Mayo Clinic an $11.5 million tax refund, holding that Mayo is an educational organization under section 170(b)(1)(A)(ii) and that reg. section 1.170A-9(c)(1) exceeds statutory authority by adding primary-function and merely-incidental tests that Congress didn’t intend to include in the statute. [Mayo Clinic et al.; USDC Minn., No. 0:16-cv-03113. 8/6/2019]     Couple Penalized for Early Distribution to Make Home Down Payment The Tax Court, in a summary opinion, held that a couple must include in income an early distribution the wife received from her section 401(k) retirement plan to use for a down payment on their first home and held them liable for the section 72(t) additional tax because the distribution wasn’t from a type of plan that is excepted from the additional tax. [Lily Hilda Soltani-Amadi; No. 2090-18S; T.C. Summ. Op. 2019-19; 8/8/2019]

Tax Notes Today reporters Kristen Parillo and Jad Chamseddine discuss the Senate’s recent action on several tax treaties after a nearly decade-long delay. For additional coverage, read these articles in Tax Notes:Senate Finishes Tax Protocols, Sets Sights on Treaties NextSenate Ratifies Spain Protocol, More to ComeSenate Doesn’t Want Further Debate on Tax TreatiesTax Treaties Advance in Senate With Little BacklashTreaties Expected to Advance Despite Amendments ScareNegotiations Over Paul’s Hold on Tax Treaties Break Down

Tax Notes Today legal reporter Eric Yauch delves into the recent decisions by several private equity firms to convert to corporations in wake of the Tax Cuts and Jobs Act.For additional coverage, read these articles in Tax Notes:Carlyle’s ‘Full C Corp’ Conversion Differs From OthersPrivate Equity Firms Are Converting to Corps, Sort OfApollo Joins Fund Manager Bandwagon by Converting to C CorpC Corp Conversions Advance, Others Still Mulling Decision***This episode is sponsored by University of California, Irvine Law School’s Graduate Tax Program. For more information, visit law.uci.edu/gradtax.

Lynn Nichols Federal Tax Update Podcast August, 01 2019, Episode 43 Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. IRS Makes Few Changes in Final Rule on 501(c)(4) Notifications Final regulations explaining how organizations should notify the IRS of their intent to operate as section 501(c)(4) social welfare entities are almost unchanged from the temporary and proposed regs and generally reject recommendations from the public. [Tax Notes Today, 7/22/2019, Article by Fred Stokeld]   Deemed Distribution Requires Downward Basis Adjustment In partially redacted technical advice, the IRS concluded that a deemed distribution of a partnership interest in an assets-over merger of two partnerships is considered an exchange that requires a mandatory downward basis adjustment under section 743(b) when the resulting partnership has a substantial built-in loss. [TAM 201929019, 4/30/2019, rel., 7/19/2019]   LB&I Division Announces 6 New Compliance Campaigns The IRS Large Business and International Division has approved six new compliance initiatives that were identified through LB&I data analysis and suggestions from IRS employees. [LB&I Div. Announcement on July 19,2019]   IRS Working on Guidance for Applying SALT Cap to Passthroughs Treasury and the IRS are developing proposed rules on the application of the $10,000 cap on the state and local tax deduction to passthroughs, and practitioners fear the guidance will seek to invalidate an emerging SALT cap workaround. [Tax Notes Today, 7/23/2019, Article by Amy Hamilton] 110,000 Entities Participate in Connecticut SALT Cap Workaround  About 110,000 passthroughs are participating in Connecticut’s workaround to the $10,000 cap on the state and local tax deduction featuring an entity-level tax and offsetting state credit for members, according to Revenue Commissioner Scott Jackson. [Tax Notes Today, 7/26/2019, Article by Amy Hamilton]   IRS Reminds Tax Pros of Data Security Plan Requirement The IRS has reminded (IR-2019-131) professional tax return preparers that federal law requires them to create a written information security plan to protect their clients’ data. This release is one in a series of the "Tax Security 2.0 -- Taxes-Security Together" campaign. [IR-2019-131, 7/23/2019] Practitioners in Tight Spot on Self-Charged Interest The government punted on the treatment of self-charged interest in the proposed business interest limitation regulations, forcing practitioners to take a best guess on its treatment without authority to rely on. [Tax Notes Today, 7/26/2019, Article by Eric Yauch]   IRS Gives Eligible Partnerships Extension to File Return The IRS has issued guidance (Rev. Proc. 2019-32) granting an extension to eligible partnerships to file a superseding Form 1065, “U.S. Return of Partnership Income,” and furnish a corresponding Schedule K-1 (Form 1065), “Partner’s Share of Income, Deductions, Credits, etc.,” to each of its partners. [Rev. Proc. 2019-32; 2019-33 IRB 1, 7/25/2019] Worker Wins Damages After Employer Sends False Information to IRS A U.S. district court, in a broader breach of contract case, awarded damages under section 7434 to an employee who claimed her employer submitted false information to the IRS by classifying her as an independent contractor rather than as an employee. [Valerie Vanderbilt v. Boat Bottom LLC, et al.; USDC S FL Key West Div.,             No. 4:18-cv-10261]

Tax Notes Today reporters Ryan Finley and Jad Chamseddine review several European countries’ unilateral approaches to taxing the digital economy and the U.S. reaction. For additional coverage, read these articles in Tax Notes:France Confident of G-7 Digital Taxation Deal Despite U.S. ProbeFrench Senate Passes DST Despite U.S. Tariff ThreatsU.K. Proposes Draft DST Legislation Containing Double Tax ReliefLawmakers Warn of Effect of Digital Services Tax on Trade PactsTrump Orders Investigation of French Digital Services Tax***This episode is sponsored by University of California, Irvine Law School’s Graduate Tax Program. For more information, visit law.uci.edu/gradtax.

Lynn Nichols Federal Tax Update Podcast July, 11 2019, Episode 42 Listen as Lynn Nichols provides commentary on 9 Items pertaining to current developments in U.S. tax law. Trustee-to-Trustee Transfer IRAs Are Inherited IRAs The IRS ruled that four beneficiary IRAs created by trustee-to-trustee transfers constitute inherited IRAs under section 408(d)(3)(C), they aren’t considered taxable distributions or attempted rollovers, and the IRAs may be maintained separately for required minimum distribution purposes under section 401(a)(9). [LTR 201924013, 3/15/2019, rel. 6/14/2019] JCT Provides Overview of EO Transportation Benefit Rules The Joint Committee on Taxation, in a June 14 report (JCX-25-19), summarized rules on tax-exempt organizations’ unrelated business taxable income from disallowed transportation-related fringe benefits, in advance of a House Ways and Means Oversight Subcommittee hearing. [JCT-25-19, 6/14/2019] TCJA Regs Have Partnerships Rethinking Guaranteed Payments It turns out that being guaranteed money from a business isn’t always a good thing. [ Tax Notes Today, 6/18/2019, Article by Eric Yauch] IRS Says There’s No Such Thing as a Free Lunch Alex Smith analyzes a recently released technical advice memorandum on employer-provided meals and explores the importance of substantiating the value of those meals when excluding them from employees’ income. [Tax Notes Today, 6/19/2019, Article by Alex Smith] IRS Publishes Proposed Regs on Passthrough Deduction for Cooperatives The IRS has published proposed regulations (REG-118425-18) on the section 199A deduction for qualified business income for cooperatives and on the deduction for domestic production activities for specified agricultural and horticultural cooperatives. [REG-118425-18; 84 F.R. 28668-28706, 6/19/2019] Draft Passthrough Deduction Guidance Outlines Wage Calculation Methods The IRS has issued (Notice 2019-27) a proposed revenue procedure that provides computational guidance on how to calculate W-2 wages for purposes of section 199A(g) and under simultaneously issued proposed regulations (REG-118425-18) on the passthrough deduction for cooperatives. [Notice 2019-27; 2019-28 IRB 1, 6/18/2019] Eleventh Circuit Reverses Denial of Refund Under Claim of Right The Eleventh Circuit reversed a district court decision that denied an individual’s tax refund under the claim of right doctrine stemming from a deduction she claimed for a payment she made to her former husband to return money they jointly treated as income, finding that the requirements of section 1341 were met. [Nora L. Mihelick v. United States; CA 11, No. 17-14975, 6/18/2019] IRS Updates FAQ on QBI Deduction The IRS has updated a prior list of frequently asked questions on the section 199A deduction for qualified business income that was created by the Tax Cuts and Jobs Act. [FAQ, 6/18/2019] IRS Doesn’t Want to Pick Audit Reps, but It Can The IRS has the authority to select partnership representatives for audits in some cases, but that doesn’t mean it’s something they’re eager to do.  [Tax Notes Today, 6/21/2019, Article by Erich Yauch]

Lynn Nichols Federal Tax Update Podcast June, 04 2019, Episode 41 Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. Partnerships Can Defer Section 1231 Gain Under O-Zone Rules Partnerships are allowed to defer capital gains under section 1231 at the entity level to take advantage of the Opportunity Zone program, according to a Treasury official. [Tax Notes Today, 5/13/2019, Article by Eric Yauch] IRS Disciplinary Office Targets High-Risk Practitioners The IRS Office of Professional Responsibility is focusing on practitioners deemed tax noncompliant and those assessed return preparation penalties for disciplinary action. [Tax Notes Today, 5/13/2019, Article by Jonathan Curry] Tax Court Moves to Allow Limited Representation The Tax Court hopes its new move to allow limited entries of appearance by practitioners will be helpful to pro se litigants. [Tax Notes Today, 5/13/2019, Article by Andrew Velarde]     Tax Court Issues Order, Form on Limited Appearances The Tax Court issued an administrative order and sample form to permit admitted practitioners to enter a limited appearance at scheduled trial sessions beginning in the 2019 fall term.      Tax Court Provides FAQ on Limited Appearance Procedures The Tax Court released a list of frequently asked questions on procedures that permit admitted practitioners to enter an appearance on behalf of petitioners that is limited to specific dates during a scheduled trial session. Tax Court Holds IRS Notice Can’t Overturn Statute’s Plain Language The Tax Court held that Medicaid waiver payments were not excludable from gross income under section 131 based on the plain language of the statute and an IRS notice could not reclassify the payments to deprive a couple of the earned income tax and additional child tax credits they claimed. [Mary K. Feigh et vir v. Commissioner; No. 20163-17; 152 T.C. No. 15] Tenth Circuit Affirms ESOP Participants Were Related Persons The Tenth Circuit affirmed a Tax Court decision that held the shareholders in an S corporation liable for deficiencies based on its finding that the S corporation and employees that participated in its employee stock ownership plan were related persons under section 267, so payroll expenses that accrued were not deductible until they were paid to employees. [Steven M. Petersen et ux. et al. v. Commissioner; No. 17-9003; No. 17-9004]   Sixth Circuit Affirms Estate, Widow Liable as Transferees The Sixth Circuit affirmed a Tax Court decision that held an estate and a decedent’s widow liable as transferees for a bowling alley business’s unpaid income taxes stemming from the sale of the business in a midco transaction, finding that the Tax Court properly refused to respect several features of the form of the transaction. [Billy F. Hawk Jr., GST Non-Exempt Marital Trust et al. v. Commissioner; No. 18-1534]   Eleventh Circuit Upholds IRS Summonses for Attorney’s Bank Records The Eleventh Circuit, in an unpublished per curiam opinion, affirmed a district court’s decision refusing to quash IRS summonses issued to a bank for an attorney and his law firm’s account records, finding that the arguments were rejected in a prior opinion in a related case that also sought to quash an IRS summons. [Michael R. Presley et al. v. United States; No. 18-15091] Judge Upholds John Doe Summons on Law Firm A Texas law firm failed to persuade a federal judge that the IRS abused the John Doe summons process by requesting information on clients who used the firm’s services to set up offshore accounts and entities. [Tax Notes Today, 5/17/2019, Article by Kristen Parillo] John Doe Summons Enforced for Information on Law Firm’s Clients A U.S. district court granted the government’s petition to enforce an IRS John Doe summons issued to a law firm for information regarding clients who used the firm to set up foreign accounts and foreign entities to conceal taxable income, rejecting the firm’s abuse of process argument and its blanket assertion of the attorney-client privilege. [Taylor Lohmeyer Law Firm PLLC v. United States; No. 5:18-cv-01161]

Lynn Nichols Federal Tax Update Podcast May, 22 2019, Episode 40 Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. Court Affirms Discharge of Accrued Interest on Student Loan Debt A U.S. district court affirmed a bankruptcy court decision that held that requiring a debtor to pay the accrued interest on her student loan debt would create an undue hardship and the interest should be discharged, holding that there was no error in the court’s finding that she would not be able to repay the loan and could eventually suffer significant tax consequences. [Educational Credit Management Corp. v. Vicky Jo Metz; USDC KS, No. 6:18-cv-01281; 5/2/2019]   IRS Rules Stock Repurchase Rules Doesn’t Ruin S Corp Status The IRS ruled that an S corporation’s agreement allowing the business to repurchase the company’s stock if a stockholder is terminated would not be considered in determining whether the corporation’s shares of stock confer identical rights to shareholders. [LTR 201918013, 11/16/2018. Rel., 5/3/2019]   Eleventh Circuit Affirms Denial of S Corp Shareholder’s Losses The Eleventh Circuit affirmed a Tax Court decision that upheld the IRS’s reduction of an S corporation shareholder’s losses because he didn’t establish a bona fide indebtedness that ran directly to him, finding that his back-to-back loan and incorporated pocketbook arguments didn’t show a bona fide debt through other entities in which he held interests. [Homero F. Meruelo; No. 18-1190, 5/6/2019]   My Boss Told Me Not to Pay' Rejected in Trust Fund Penalty Case The Eleventh Circuit affirmed that an individual who was CFO and president of two companies was liable for trust fund recovery penalties for failing to pay the companies’ trust fund taxes, rejecting his “my-boss-told-me-not-to-pay” argument and holding that the argument doesn’t work even when a government agency receiver told him not to pay the taxes. [Steven J. Myers v. United States; No. 18-11403, 5/7/2019]   IRS Reveals Focus of Upcoming Benefit Plan Audits The IRS expects to roll out new audits of several employee benefit plans this summer, including tax-sheltered annuity, tax-exempt deferred compensation, and employee stock ownership plans, according to an official. [Tax Notes Today, 5/9/2019. Article by Stephanie Cumings]   IRS Provides 2019 Maximum Value of Employer-Provided Vehicles The IRS has announced (Notice 2019-34) the maximum value of employer-provided vehicles first made available to employees for personal use in 2019 for which the vehicle cents-per-mile valuation or the fleet-average valuation rules may apply. For use with either rule, the maximum value is $50,400. [Notice 2019-34; 2019-22 IRB 1, 5/8/2019]   IRS Ruling Addresses Terminated S Corp Stock Redemption The IRS has ruled on the tax treatment of a stock redemption by a terminated S corporation, saying that specific accounts must be offset by the amount of the proceeds, with any remainder treated as a dividend. [Tax Notes Today, 5/10/2019, Article by Eric Yauch] Guidance issued on S Corp Distribution in Post-Termination Period The IRS ruled (Rev. Rul. 2019-13) that if, during a former S corporation’s post-termination transition period, the corporation makes a section 301 cash distribution to redeem a shareholder’s stock, the corporation should reduce its accumulated adjustments account to the extent of the proceeds of the redemption. [Revenue Ruling 2019-13, 5/9/2019]

Lynn Nichols Federal Tax Update Podcast May, 03 2019, Episode 39 Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law. IRS Official: Good Recordkeeping Protects Against Bad Clients Documentation can save practitioners whose clients ignore their advice and apply for tax-exempt status, even when they know they don’t qualify, according to an IRS Office of Professional Responsibility official. [Tax Notes Today; 4/29/2019, Article by Kristen Parillo]   IRS Grants Tax Exemption to Massachusetts-Based Satanic Temple   The Satanic Temple, a self-described nontheistic religious satanic organization based in Massachusetts, has been recognized as a church and granted tax-exempt status by the IRS. [Tax Notes Today; 4/29/2019, Article by Paige Jones]   Tenth Circuit Affirms Liability for Penalty for Overvaluing Easement The Tenth Circuit affirmed a Tax Court decision that held a couple liable for a gross valuation misstatement penalty for overstating the value of a conservation easement donation and that held they weren’t entitled to deductions under section 1341 for the repayment of proceeds they received for the sale of state tax credits. [John L. Roth; CA 10, No. 18-9006, 4/29/2019]   Collection Action Sustained Against Food, Wine Festival Operator The Tax Court held that an IRS settlement officer didn’t abuse her discretion in rejecting a hospitality management company’s proposed installment agreement and sustaining the proposed collection action for $1.4 million in tax liabilities, finding that the company wasn’t in compliance with its current employment tax deposit obligations. [Coastal Luxury Management Inc.; No. 24206-16L; T.C. Memo. 2019-43, 4/29/2019] Extended notes coming soon.

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. 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]   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]   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]   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]

In part 2 of an interview with National Taxpayer Advocate Nina Olson, Tax Notes Today senior reporter William Hoffman and Olson discuss her impending retirement, her work as the national taxpayer advocate, and her future plans.

Lynn Nichols Federal Tax Update Podcast April, 18 2019, Episode 37 Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law.  IRS Explains Negative Tax Basis Capital Reporting Requirement The IRS has responded to taxpayer concerns about a new partnership reporting requirement by providing definitions and real-world examples of what’s required to be handed over to partners, but some practitioners are surprised by the clarifications. [Tax Notes Today; 4/8/2019, article by Eric Yauch]   IRS Denies Exemption to Organization Formed to Support Accident Victim The IRS denied tax-exempt status to an organization established to raise funds for an accident victim and his family because the organization is serving private rather than public purposes. [LTR 201911008, 12/20/2018, rel. 3/15/2019]   (a) IRS Revises Practice Unit on Tax Home Determination The IRS has revised a prior international practice unit on tax homes for purposes of section 911 to provide its staff with explanations of general international tax concepts and information about specific types of transactions.   (b) Practice Unit on Interest Capitalization Revised for TCJA Changes The IRS has revised a prior practice unit to reflect changes made by the Tax Cuts and Jobs Act on the section 263A(f) requirement to capitalize interest if a taxpayer produces designated property, identifying taxpayers subject to section 263A(f) and the steps for determining how much interest must be capitalized to the basis of designated property.   Practice Unit on Construction Industry Accounting Methods Revised The IRS has revised a prior practice unit, incorporating changes made by the Tax Cuts and Jobs Act, on land developers’ and subcontractors’ use of the completed contract method of accounting or the percentage of completion method for long-term contracts in the construction industry.   Business Consultant’s Travel Expense Deductions Denied The Tax Court, sustaining accuracy-related penalties, held that a consultant who operated a concierge chief financial officer business wasn’t entitled to claim travel expense deductions under section 162, finding that his tax home was in New Jersey, where he had a three-year contract with a client, and not Atlanta where he and his family had a home. [Michael E. Brown; No. 21096-15; T.C. Memo. 2019-30, 4/8/2019]   Tax Court Lacks Jurisdiction to Hear Suspended Corporations’ Cases The Tax Court held that it lacked jurisdiction to hear deficiency challenges by two corporations because the state of California had suspended their corporate rights prior to the filing of the petitions and that the revival of their corporate rights was beyond the time allotted to file a petition once a deficiency notice is received. [Timbron International Corp. et al. T.C. Memo. 2019-31, 4/8/2019]   Fact Sheet Outlines Section 199A Deduction The IRS has released a fact sheet (FS-2019-8) outlining the new section 199A deduction, which allows varying deduction amounts for qualified business income, qualified real estate investment trust dividends, and qualified publicly traded partnership income. [FS-2019-8; 4/11/2019]

In part 1 of an interview with National Taxpayer Advocate Nina Olson, Tax Notes Today senior reporter William Hoffman and Olson discuss the filing season, the Taxpayer First Act (H.R. 1957), the disclosure of program manager technical advice, and congressional efforts to get President Trump's tax returns.For additional coverage, read these article in Tax Notes:Treasury Misses Dems’ Deadline for Handing Over Trump’s ReturnsHouse Approves IRS Reform Measure Despite Free File FightRelease of Emailed Chief Counsel Advice Dropped 17 PercentTaxpayer Advocate: IRS Using Email to Avoid Advice Disclosure

Lynn Nichols Federal Tax Update Podcast March, 27 2019, Episode 36 Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law.  Supporters of Clergy Housing Allowance Savor Court Win Supporters of a long-standing clergy housing tax preference are breathing easier now that the provision has survived a court challenge over its constitutional [Tax Notes Today; 3/18/2019, Article by Fred Stokeld] Seventh Circuit Holds Housing Allowance Exclusion Constitutional The Seventh Circuit reversed a district court decision and held constitutional section 107(2), which allows ministers to exclude from income a housing allowance paid to them as part of their compensation, finding that the exclusion doesn’t violate the Establishment Clause. [Annie Laurie Gaylor et al. v. Steven T. Mnuchin et al.; No. 18-1277; No. 18-1280, 3/15/2019]   Group Representing Auto Service Shops Denied Exemption The IRS denied tax-exempt status to an organization seeking exemption as a business league because it operates primarily to help its independent auto service shop members obtain competitive supply pricing rather than helping the independent auto service industry as a whole. [LTR 201907007; 9/10/2018, rel. 2/15/2019]   AND ANOTHER CASE IN WHICH EXEMPT STATUS IS REVOKED  Baseball Team Loses Exemption The IRS revoked the tax-exempt status of an organization established to support a baseball team and promote baseball in the community after concluding the organization is a for-profit enterprise that does not operate primarily for exempt purposes.     [LTR 201907009; 10/24/2018, rel. 2/15/2019]   Individual Liable for Penalties for Timeshare Donation Scam A U.S. district court, granting the government summary judgment, held that an individual who promised tax savings to individuals who donated their timeshares to a tax-exempt entity that he created based on his inflated appraisals of the timeshares is liable for penalties under section 6700. The court held that the penalty amounts remain in dispute. [James Tarpey; USDC MT Butte Div., No. 2:17-cv-00094, 3/19/2019]   Pilot’s Deductions for World War II Fighter Plane Denied The Tax Court held that a pilot wasn’t entitled to deductions in excess of the income he received for the restoration and maintenance of a World War II fighter plane because his activities were not for profit and he wasn't entitled to other unsubstantiated deductions. Also, the court held that the IRS didn’t meet its burden under section 6751 regarding penalties. [Edward G. Kurdziel Jr.; T.C. Memo. 2019-20, 3/21/2019]

Lynn Nichols Federal Tax Update Podcast March, 20 2019, Episode 35 Listen as Lynn Nichols provides commentary on 10 Items pertaining to current developments in U.S. tax law.  IRS Open to Additional Guidance on Portions of 199A Nothing about the proposed real estate rental property safe harbor is set in stone, and further guidance on other one-off issues related to the passthrough deduction is a possibility, IRS officials said March 8. [Tax Notes Today; 3/11/2019, Article by Eric Yauch] Practitioners Call for 199A Soft Guidance, Safe Harbor Fix Practitioners are welcoming IRS signals that it may reconsider its positions on the passthrough deduction rental safe harbor, saying the safe harbor isn't helpful. [Tax Notes Today; 3/15/2019, Article  by Eric Yauch]   Court Dismisses Challenge to IRS Levy on Social Security Benefits A U.S. district court dismissed an individual’s challenge to the IRS’s levy on 100 percent of his Social Security benefits to collect his $20 million tax debt, finding that the suit is barred by the Anti-Injunction Act and the individual didn’t show that any exception to the act applies; the court denied as futile his request to amend the complaint. [Edward J. Holland Jr.; No. 2:17-cv-13926, 3/7/2019]   Fact Sheet Outlines TCJA Changes for Businesses The IRS has released a fact sheet (FS-2019-3) summarizing tax law changes under the Tax Cuts and Jobs Act that affect businesses and provides resources to help business owners track down details specific to their concerns, noting that most of the changes took effect in 2018 and will affect returns filed in 2019. [FS-2019-3, 3/8/2019]   Insurance Agents Group Denied Exemption The IRS denied tax-exempt status to a group of insurance agents seeking exemption as a business league because the organization operates to benefit a specific insurance company rather than to improve the business conditions of insurance agents in general. [LTR 201906014; 11/16/2018, rel. 2/8/2019]   Retroactive Social Security Benefits Stymie ACA Credit Claim A lump-sum payment of retroactive Social Security benefits must be included in income for purposes of determining eligibility for the Affordable Care Act’s premium tax credit, the Tax Court has held. [Tax Notes Today; 3/12/2019, Article by Kristen Parillo] Election Doesn’t Protect Against Liability for Excess ACA Credits The Tax Court, sustaining an IRS determination, held that an individual’s modified adjusted gross income under section 36B to determine his eligibility for advance premium tax credits under the Affordable Care Act included all the Social Security benefits he received in that year despite a section 86(e) election to exclude a lump sum payment for the prior year. [Levon Johnson; 152 T.C. No. 6, 3/11/2019]   Entity-Level Taxes Likely a Safer Bet for SALT Workarounds Entity-level taxes used as state and local tax deduction cap workarounds are likely better able to withstand scrutiny than the creation of charitable funds, according to a practitioner. [Tax Notes Today; 3/13/2019, Article by Andrea Muse]   Ninth Circuit Affirms Reduction of Estate's Charitable Deduction The Ninth Circuit affirmed a Tax Court decision that sustained a tax deficiency and accuracy-related penalty against an estate, finding that the Tax Court properly upheld the IRS’s reduction of a charitable deduction from the value of the property at the time of death because post-death events decreased the value of property actually given to the charity. [Victoria E. Dieringer et al.; CA 9, No. 16-72640, 3/12/2019]   Power of Attorney, Extension Forms Fail to Update Address With IRS The Tax Court, dismissing a deficiency case for lack of jurisdiction, held that forms a couple sent to the IRS with their new address after they had filed a return with their old address didn’t provide clear and concise notification of a different address. [Damian K. Gregory et ux.; 152 T.C. No. 7, 3/13/2019]   Court Won’t Dismiss Former S Corp Shareholder’s Suit for Breach A U.S. district court refused to dismiss a former S corporation shareholder’s suit against the remaining shareholders for breaching an agreement by refusing to agree to a section 1377 election to split the S corporation’s tax year into two years according to the date his interest was terminated, which resulted in his owing additional taxes. [Thomas S. Manfre v. David G. May et al.; USDC N Ill E Div., No. 1:18-cv-02184, 3/12/2019]   IRS Removes Reporting Requirement for Audit Regime Reps The IRS has scaled back the amount of information individuals serving as partnership representatives under the audit regime must disclose on partnership returns. [Tax Notes Today; 3/15/2019, Article by Eric Yauch]

Lynn Nichols Federal Tax Update Podcast March, 07 2019, Episode 33 Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: Organization Is Denied Tax-Exempt Status The IRS denied tax-exempt status to an organization formed to develop programs to enrich and uplift the socio-economic well-being of its members, concluding that its organizing document doesn’t limit the organization to charitable purposes and its activities consist of serving the private interests of its members. [LTR 201904015; 11/1/2018, rel. 2/25/2019]   Medical Corporation Denied Exempt Status The IRS denied tax-exempt status to a professional corporation formed by a public charity for the business purpose of practicing medicine, concluding that it was not organized for one or more exempt purposes. [LTR 20190401; 10/31/2018, rel. 2/25/2019]   Supreme Court Says No to 3 Tax Challenges The Supreme Court recently rejected petitions challenging excise taxes, the IRS’s use of John Doe summonses, and deductions denied for horse-related activities. [Tax Notes Today; 2/26/2019, Article by Patrice Gay]   Court Holds Estate Beneficiaries Liable for Unpaid Estate Tax A U.S. district court, granting the government summary judgment, held that beneficiary family members are liable for an estate’s unpaid tax liability because the undisputed facts show that each individual received property includable in the gross estate and that the federal estate tax was not paid when due. [U. S. v. Donna Ringling et al.; USDC SD S Div., No. 4:17-CV-04006, 2/21/2019]   IRS Releases Revised Audit Technique Guide on Foreclosures, Debt Cancellation The IRS has revised an earlier audit technique guide for examining cases involving real estate foreclosures and cancellation of debt income. [Real Estate Property Foreclosure and Cancellation of Debt Audit Technique Guide, 2/22/2019, Revising 3/11/2015]   Application and Sequence: Limiting Business Loss and Interest Richard Joslin explains how the new business loss and interest expense imitations work in tandem and affect other code provisions. [Tax Notes Today; 2/27/2019, Article by Richard Joslin]   Fact Sheet Outlines TCJA Changes Affecting Individuals and Families The IRS has released a fact sheet (FS-2019-2) outlining changes made by the Tax Cuts and Jobs Act, including changes affecting small business taxpayers and changes to withholding, deductions, benefits for dependents, the alternative minimum tax, and retirement plans. [FS-2019-2; 2/26/2019,   IRS Releases Practice Unit on Self-Employment Tax and Partners The IRS released a practice unit on when an individual partner’s distributive share of income is subject to self-employment tax, noting that the unit applies to all arrangements that are treated as partnerships for federal tax purposes. [PST/C/366_01_01-01; 26 Page Slide Show]

Lynn Nichols Federal Tax Update Podcast February, 20 2019, Episode 32 Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. This week’s topics include: Split Circuit Court Affirms Partnership’s Fee Awards The government can be ordered to pay attorney fees under the qualified offer rule in a partnership proceeding under the 1982 Tax Equity and Fiscal Responsibility Act, the Federal Circuit held. [Tax Notes Today; 2/11/2019, Article by Stephanie Cummings]   Federal Circuit Affirms Award of Litigation Costs to Partnership The Federal Circuit affirmed a Court of Federal Claims decision that awarded a partnership litigation costs under section 7430 in its challenge to an untimely notice of final partnership administrative adjustment, holding that the partnership qualified as the prevailing party, that the amount of tax liability was in issue, and that the partnership incurred litigation costs. [BASR Partnership et al. v. U.S.; Fed Cir, No. 17-1925, 2/8/2019]   DOJ Alerts Federal Circuit to Tax Court Order Related to Appeal The government, in its appeal of a Court of Federal Claims decision that awarded litigation costs to a partnership, alerted the Federal Circuit to a recent Tax Court order that disagreed with the Court of Federal Claims and held that the qualified offer rule in section 7430 did not apply in a partnership proceeding because the amount of tax liability was not in issue. [HURFORD INVESTMENTS NO. 2, LTD., HURFORD MANAGEMENT NO. 2, LLC,       Eleventh Circuit Affirms Conviction for Making False Claim to IRS The Eleventh Circuit, in an unpublished per curiam opinion, upheld an individual’s conviction for making a false claim to the IRS and corruptly impeding the administration of the internal revenue laws, finding that there was sufficient evidence that she fraudulently obtained a refund and moved the proceeds to evade detection and recovery by the IRS. [U. S. v. Ingrid McBride Rich; CA 11, No. 17-15767, 2/12/2019]   Florida Tribe Seeks Review of Decision Holding Distributions Taxable The Miccosukee Tribe of Indians of Florida petitioned the Supreme Court for review of an Eleventh Circuit decision that held that distribution payments a tribe member received from the tribe’s gaming activities are not exempt from taxation, arguing that the payments were exempt as Indian general welfare benefits. [Miccosukee Tribe of Indians of Florida v. United States;   CA 11, No. 18-395, 1/7/2019]   IRS Addresses Bonus Depreciation Anomaly for Luxury Autos The IRS has outlined procedures that will allow passenger car owners eligible for bonus depreciation to deduct depreciation during the recovery period that they wouldn’t otherwise have been able to. [Tax Notes Today; 2/14/2019, Article by Emily Foster]   IRS Provides Safe Harbor for Autos Eligible for Bonus Depreciation The IRS has issued guidance (Rev. Proc. 2019-13) providing a safe harbor accounting method for determining depreciation deductions for passenger automobiles that qualify for the 100 percent additional first-year depreciation deduction under section 168(k) and that are subject to the depreciation limitations under section 280F(a). [Rev. Proc. 2019-13; 2019-9 IRB 1, 2/13/2019]   AICPA Seeks Small Business Relief From Tax Shelter Definition The American Institute of CPAs has asked that small businesses meeting specified conditions be excluded from the definition of a tax shelter so that they can obtain the benefits of the simplifying provisions of the Tax Cuts and Jobs Act. [Letter Re: Small Business Relief from Definition of Tax Shelter, AICPA 2/13/2019]   IRS Now Asking About Negative Partnership Tax Capital Accounts The IRS’s ongoing interest in partners with negative tax basis capital accounts in partnerships has resulted in new instructions for filling out partnership tax returns. [Tax Notes Today; 2/15/2019, Article by Nathan Richman]   Individual Entitled to Alimony Deduction for Arrearages Paid The Tax Court held that an individual was entitled to an alimony deduction for alimony arrearages he paid to his former wife after a state court ordered him to do so or go to jail, finding that the arrearages maintained their character as alimony and were paid under a contempt order, not a money judgment as the IRS claimed. [Jeffrey Siegel; No. 27572-16; T.C. Memo. 2019-11]  

Lynn Nichols Federal Tax Update Podcast January, 28 2019, Episode 30 Listen as Lynn Nichols provides commentary on 2 Items pertaining to current developments in U.S. tax law. This week’s topics include: Treasury Opts for Taxpayer-Friendly Approach in 199A Regs A new batch of guidance on the section 199A deduction aims to clarify taxpayers’ concerns about an earlier proposal, while also taking a generous approach in expanding the number of businesses that can claim the tax break.  [Tax Notes Today; 1/22/2019, Article by Nathan Richman and Jonathan Curry] Passthrough Regs Clarify Antiabuse Rules for Trusts Treasury is looking to clear up some of the confusion regarding the application of its antiabuse rules to multiple trust arrangements under new section 199A passthrough deduction rules. [Tax Notes Today; 1/22/2019, Article by Jonathan Curry] IRS Issues Guidance Package on Section 199A Passthrough     Deduction The IRS has issued final regulations providing taxpayers with computational, definitional, and antiavoidance guidance on the deduction for qualified business income under section 199A. The regs adopt, with changes, proposed regs (REG-107892-18) issued in August.      [T.D. X?X?X?X; 1/18/2019] Proposed Section 199A Regs Focus on Treatment of REIT Dividends The IRS has issued proposed section 199A regulations (REG-134652-18) on the treatment of previously suspended losses that constitute qualified business income and on the determination of the section 199A deduction for taxpayers that hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts.     [REG-134652-18; 1/18/2019]      Passthrough Guidance Proposes Safe Harbor for Rental Real Estate Enterprises The IRS has issued a proposed revenue procedure (Notice 2019-7) that provides a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A and concurrently issued final regulations.     [Notice 2019-7; 1/18/2019]     Passthrough Guidance Provides Methods for Calculating W-2                            Wages The IRS has issued a revenue procedure (Rev. Proc. 2019-11) providing three methods for calculating W-2 wages for purposes of section 199A(b)(2) and (7) and concurrently issued final regulations.     [Rev. Proc. 2019-11; 1/18/2019]   Warren Proposes New Tax on Wealthiest Americans Americans with more than $50 million in assets would pay a new tax under a proposal from Sen. Elizabeth Warren, D-Mass. [Tax Notes Today; 1/24/2019, Article by Asha Glover]

Lynn Nichols Federal Tax Update Podcast January, 16 2019, Episode 29 Listen as Lynn Nichols provides commentary on 5 Items pertaining to current developments in U.S. tax law. This week’s topics include: IRS Releases Final Instructions for Business Interest Expense Form The IRS has released final instructions for Form 8990, “Limitation on Business Interest Expense Under Section 163(j),” which helps taxpayers calculate the amount of business interest expense to deduct and the amount to carryforward to the next year.     [www.irs.gov . . . Form 8990, 1/2/2019]   OMB Reverses IRS’s Stance on Sequestering AMT Credits The Office of Management and Budget has determined that corporations with alternative minimum tax credits are entitled to full refunds under the Tax Cuts and Jobs Act, reversing the IRS’s position. [Tax Notes Today; 1/8/2019, Article by Emily L. Foster]   Bankruptcy Court Can’t Determine Tax Liability of Non-Debtors A U.S. Bankruptcy Court has dismissed for lack of jurisdiction a complaint seeking a determination that the shareholders of an S corporation in Chapter 7 bankruptcy will not be liable for taxes on certain settlement funds because the court only has jurisdiction to determine the tax liability of debtors, not those who have not filed for bankruptcy. [A. Wayne Armstrong et al. v. United States; No. 18-01126, US Bnk Ct, M AL, 13-10932, 1/4/2019]   Blue Book Serves Restaurants an Answer on Meal Deductions The restaurant industry got a welcome clarification about deducting employee shift meals in the Joint Committee on Taxation’s blue book. [JCS-1-18, the “Blue Book,” at Footnote 940, 12/20/2019]   Eleventh Circuit Remands Partnership Case to Tax Court The Eleventh Circuit vacated a Tax Court decision that held that a couple's and a limited partnership's disposal of their partnership interests was capital, finding that the Tax Court erred in assuming an election was made under a partnership agreement and remanding the case for the Tax Court to determine whether the Danielson rule applies. [Thomas E. Watts; CA 11; No. 17-15282, 1/10/2019]

Lynn Nichols Federal Tax Update Podcast January, 8 2019, Episode 28 Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law. This week’s topics include: IRS Offers Interim Explanation of New EO Compensation Tax Tax-exempt organizations that could be subject to a new tax on executive compensation paid to their highest-paid employees have gotten answers to some of their questions. [Tax Notes Today; 1/2/2019, Article by Fred Stokeld]   Guidance Issued on Excess Executive Comp Tax for Exempt Orgs The IRS has issued interim guidance (Notice 2019-9) on the section 4960 excise tax on excess remuneration and excess parachute payments made by an exempt organization to a covered employee. The interim guidance, to be followed up by proposed regulations, defines terms under the code section and explains how to report and pay the excise tax. [Notice 2019-9; 12/31/2019]   American Bankers Association Seeks Guidance on Integrated HRAs The American Bankers Association has posed several questions to the IRS regarding proposed regulations (REG-136724-17) on health reimbursement arrangements, asking the agency to interpret the HRA rules to allow for the best possible coordination with existing health savings account guidance. [Tax Notes Today; 12/28/2018, Reprint of Letter to IRS]   Don't Forget Brownfields Properties in Opportunity Zones, EPA Says The Environmental Protection Agency has urged the IRS to clarify proposed opportunity zone regulations (REG-115420-18) that investments in the assessment, remediation, and redevelopment of brownfields properties in qualified opportunity zones are included within the scope of qualified opportunity funds. [Tax Notes Today; 1/3/2019, Reprint of Letter . . . EPA to IRS]   IRS Releases Final Version of Form for Business Interest Expense Limitation The IRS has released the final version of Form 8990, “Limitation on Business Interest Expense Under Section 163(j).” [www.irs.gov/pub/irs-dft/f8990—dft.pdf . . . 1/3/2019]

Lynn Nichols Federal Tax Update Podcast October 15, 2018, edition Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law. This week’s topics include: IRS Reproposes Parts of Partnership Audit Regs to Reflect Technical Corrections The IRS has issued proposed regulations implementing the centralized partnership audit regime, withdrawing and reproposing parts of earlier proposed rules to reflect changes made by the Technical Corrections Act of 2018. [REG-136118-15; 8/13/2018]   Partnership Audit Rules Make Clear It’s ‘Go Big or Go Home’ Reproposed regs on the partnership audit rules make clear that the IRS doesn’t have to prove that a partnership item would actually affect someone’s tax liability to be within the scope of the rules. [Tax Notes Today; 8/15/2018; Article by Stephanie Cumings]   Bank Deposits Analysis Showed Couple Had Unreported Income The Tax Court, in a summary opinion sustaining accuracy-related penalties, held that the IRS properly used a bank deposits analysis to determine that a couple had unreported income, which the couple failed to contest, and held that the couple failed to provide substantiation for various expense deductions that were disallowed by the IRS. [Whiteford, Joseph Brian et ux. v. Commissioner; No. 4711-17S; T.C. Summ. Op. 2018-39; 8/13/2018]         Fifth Circuit Affirms Denial of Charitable Deduction for Easement The Fifth Circuit, affirming a Tax Court decision, held that a partnership wasn’t entitled to a $15 million charitable contribution deduction for an easement donation because the contribution didn’t meet the perpetuity requirement and the Tax Court didn’t err in its valuation of the easement or in the application of a valuation misstatement penalty. [PBBM-Rose Hill Ltd et al. v. Commissioner; CA 5; No. 17-60276; 8/14/2018]     Real Estate Investor Can’t Deduct Business Bad Debts An investor whose role in a joint venture was to provide capital for a home construction business doesn’t qualify as a trade or business and may not deduct business bad debts. [Yaryan, Terry L. et ux. v. Commissioner; No. 30424-15; T.C. Memo. 2018-129; 8/15/2018]

Lynn Nichols Federal Tax Update Podcast October 08, 2018, edition Listen as Lynn Nichols provides commentary on 9 Items pertaining to current developments in U.S. tax law. This week’s topics include: Measly Offer in Compromise Doesn’t Prevent Approval of Levy on Home The Eighth Circuit affirmed a district court decision that upheld an IRS levy on an individual’s home to satisfy her half million-dollar tax liability, finding that the individual was incorrect in her belief that reg. section 301.6334-1(d)(1) provided that the court couldn’t approve the levy until the IRS responded to her $1,000 offer in compromise. [ Brabant-Scribner, Debora; CA 8; No. 17-2825; 8/17/2018]   Non-Grantor Trusts Still Useful in TCJA Planning Although Treasury effectively shut down tax avoidance strategies that used multiple trusts to take advantage of the new passthrough deduction, setting up at least one non-grantor trust is likely allowed and could still have numerous benefits. [Tax Notes Today; 8/21/2018; Article by Eric Yauch]   Fees Paid to Shareholder-Employees Were Disguised Distributions The Tax Court held that purported factoring fees and most of the management fees paid to five individual shareholder-employees of C corporations were not deductible expenses of the C corporations but instead were disguised distributions of corporate profits, finding that the factoring fees lacked economic substance and the management fees constituted unreasonable compensation for services. [Pacific Management Group et al. v. Commissioner; No. 6411-07; No. 6412-07; No. 6413-07; No. 6414-07; No. 6494-07; No. 6498-07; No. 6499-07; No. 6592-07; No. 6593-07; No. 6594-07; No. 6596-07; T.C. Memo. 2018-131; 8/20/2018]   [See also attached article by Kristen A. Parillo . . . DOC 2018-33960]   IRS Open to Change of Partnership Treatment in Bonus Rules The IRS and Treasury Department addressed the outstanding partnership issues in the proposed bonus deprecation regulations, but that doesn’t mean they can’t be persuaded to change positions in the final rules. [Tax Notes Today; 8/22/2018; Article by Eric Yauch]   IRS Issues TCJA Guidance on UBTI for Separate Trades or Businesses The IRS has requested comments and provided interim guidance and transition rules regarding section 512(a)(6), which requires an exempt organization with more than one unrelated trade or business to calculate unrelated business taxable income separately for each trade or business. [ Notice 2018-67; 2018-36 IRB 409; 8/21/2018]   Basis Limitation in 199A Regs Creates Compliance Conundrums Taxpayers with property that is no longer depreciable could face headaches in navigating the basis limits on passthrough deductions in the proposed section 199A regulations. [Tax Notes Today; 8/23/2018; Article by Eric Yauch]   Accounting Method Guidance Modified for Some Terminated S Corps The IRS has modified the automatic changes list for accounting methods to reflect the addition of section 481(d) by the Tax Cuts and Jobs Act (P.L. 115-97), which provides rules on adjustments required by section 481(a)(2) that are attributable to some revocations of S corporation elections under section 1362(a). [Rev. Proc. 2018-44; 2018-37 IRB 426; 8/22/2018]   S Corp Termination Guidance Offers Clarity on Method Changes Some terminated S corporations that change from a cash method to an accrual method of accounting may take into account positive or negative adjustments ratably over a six-year period under a new IRS revenue procedure. [Tax Notes Today; 8/23/20`18; Article by Marie Sapirie]   IRS Clarifies Interplay of SALT Credits, Federal Tax Rules The IRS has announced the release of proposed regulations (REG-112176-18) that clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. [IR-2018-172; 8/23/2018] Proposed SALT Regs Require Reductions to Charitable Deductions The IRS has published proposed regulations providing that a taxpayer who makes payments or transfers property to an entity listed in section 170(c) must reduce their charitable contribution deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive. [REG-112176-18; 83 F.R. 43563-43571; 2018-37 IRB 430; 8/27/2018]     Tax Court Reins In Couple Using Horse-Breeding to Create Losses   The Tax Court held that a couple that tried to offset all their income with horse-leasing expenses prepaid with sham loans was not entitled to loss deductions as part of a horse-breeding operation. The court found their purported horse-breeding activity was not a trade or business and sustained section 6662(a) penalties for two of the three tax years at issue. [Householder, Scott A.; No. 19150-10; No. 6541-12; T.C. Memo. 2018-136; 8/23/2018]

Lynn Nichols Federal Tax Update Podcast October 02, 2018, edition Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include: New Loss Limitation Hard to Calculate, Interpret With Other Rules The main focus of discussions on the Tax Cuts and Jobs Act has been the Section 199A passthrough deduction, but less talked about is a loss limitation that could have consequences for start-ups and real estate projects. [Tax Notes Today; 8/27/2018; Article by Eris Yauch]   Combat-Zone Contractors Qualify for Foreign Earned Income Exclusion Contract support for the military in designated combat zones may now qualify for the foreign earned income exclusion because of a change in the tax home requirement under the Bipartisan Budget Act of 2018. [IR-2018-173; 8/24/2018]   Stock Transfer Under Divorce Decree Won’t Affect S Corp Tax Status An S corporation won’t be considered to have a second class of stock in violation of federal tax rules solely because shares of its stock will be transferred to a trust under a divorce decree. [LTR 201834007; 5/18/2018; rel. 8/24/2018]   Remaining Value Prevents Worthless Investment Deduction An individual's investments in a dozen special purpose entities holding real estate ventures were not worthless on December 31, 2008, and thus not deductible for 2008, because of evidence of value that would be lost in the event of foreclosure and because the entities successfully renegotiated their construction loans through 2011. [Forlizzo, Robert et ux.; T.C. Memo. 2018-137; 8/27/2018]   Guidance Clarifies Definition of Qualifying Relative, Exemption Amount IRS and Treasury will issue proposed regulations clarifying the definition of “qualifying relative” under section 152(d) for purposes of various tax code provisions, including the new $500 credit for other dependents and head of household filing status for tax years in which the section 151(d) exemption amount is zero. [Notice 2018-70; 2018-38 IRB 441; 8/28/2018]   Tax Court Says Individual’s Debt Cancellation Income Is Taxable An individual failed to provide evidence that his cancellation of debt income was not taxable because of insolvency or because the loan related to the debt was secured by his principal residence. The Tax Court upheld additions to tax and penalties for failure to timely file. [Smethers, Daniel; T.C. Memo 2018-140; 8/29/2018]

Lynn Nichols Federal Tax Update Podcast August 20, 2018, edition Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: Final Regs Provide Substantiation Rules for Charitable Contributions The IRS has issued final regulations on the substantiation and reporting rules for charitable contributions at various monetary thresholds and for donated clothing and household items. The final regs also address the new definitions of qualified appraisal and qualified appraiser for noncash contributions and recordkeeping requirements for all cash contributions. [T.D. 9836; 7/27/2018]    Tax Court Correctly Dismissed Employment Tax Liability Challenge The Eighth Circuit held that the Tax Court properly dismissed on jurisdictional grounds an attorney’s claim that he did not owe additional employment tax on payments he received as the sole owner and officer of an S corporation, finding that because there was no actual controversy involving a determination that he was an employee for FICA purposes, the Tax Court was deprived of jurisdiction. [Azarian, Martin S. P.A. v. Commissioner; CA 8; No. 17-2134; 7/27/2018]     Eighth Circuit Sides With IRS in Employment Tax Dispute Challenges to reasonable compensation determinations for S corporations must allege taxpayer employment issues for the Tax Court to have jurisdiction. [Tax Notes Today; 7/31/2018; Article by Eric Yauch]     Horse Breeding Organization Is Denied Exemption The IRS denied an organization's application for tax-exempt status because its primary activity, conducting a horse breeding program, does not further exempt purposes and the organization serves the private interests of horse breeders. [LTR 201830023; 5/1/2018; rel. 7/27/2018]   IRS Revokes Exempt Status of Social Horse Club The IRS revoked the tax-exempt status of a social club organized to promote interests in horses and horsemanship because its investment and non-member income exceeded the 35 percent threshold, and its non-member income exceeded the 15 percent threshold on a regular basis. [LTR 201830018; 1/11/2018; rel. 7/27/2018]      IRS Isn't Exercising Its Authority Over Unregulated Preparers The IRS failed to assess more than $121 million in preparer tax identification number penalties, despite evidence of “incompetent and unscrupulous” conduct by unregulated return preparers. [Tax Notes Today; 7/31/2018; Article by William Hoffman]   Tax Court Finds Individual’s Mary Kay Activity Wasn’t for Profit The Tax Court, sustaining accuracy-related penalties, held that an individual didn’t engage in her Mary Kay consulting activity for profit but attempted to shelter her taxable wage income by deducting otherwise nondeductible personal expenses, such as trips to Disney World and Europe, as business expenses. [Nix, Kimberly S. v. Commissioner; No. 4000-16; T.C. Memo. 2018-116; 7/30/2018]   Debate Over Parsonage Allowance Continues in Dueling Briefs Supporters of a 64-year-old tax break for clergy housing are continuing their fight to preserve it after a court declared it unconstitutional last fall. [Tax Notes Today; 8/1/2018; Article by Fred Stokeld]   Clergy Urge Court to Hold Rental Allowance Constitutional In a reply brief for the Seventh Circuit, a group of ministers and churches argued that section 107, which allows ministers to exclude from income a rental allowance paid as part of their compensation, is constitutional because it is an exemption and not a transfer of funds and because it applies the convenience-of-the-employer doctrine to ministers. [Annie L. Gaylor et al. v. Steven T. Mnuchin et al.; No. 18-1277; No. 18-1280; 7/30/2018]         Yacht Deductions Disallowed, but Penalties Deep-Sixed The Tax Court jettisoned a taxpayer’s claim that his sport fishing yacht deductions were marketing expenses but chose not to weigh him down with accuracy penalties. [Tax Notes Today; 8/3/2018; Article by Kristen Parillo]   Property Developer Fishing for Yacht Deductions Comes up Empty-Handed The Tax Court held that a Florida property developer wasn’t entitled to deduct expenses for a fishing yacht that he claimed was a marketing tool, finding that the expenses were for entertainment and he failed to provide substantiation. The court didn't impose accuracy-related penalties because the IRS failed to show supervisory approval. [Becnel, Damon R. v. Commissioner; No. 14707-14; T.C. Memo 2018-120; 8/2/2018]

Lynn Nichols Federal Tax Update Podcast August 13, 2018, edition Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: IRS Likely to Trounce 199A Trust Planning Strategy Wealth planning advisers eager to help their clients take advantage of the new passthrough deduction by setting up multiple non-grantor trusts to claim multiple deductions may soon have to undo all that effort. [Tax Notes Today; 7/23/2018; Article by Jonathan Curry]   Group Fails to Meet Operational Test; Exempt Status Revoked The IRS revoked the tax-exempt status of a group that promoted tourism and improved the conditions of the tourism business environment of a particular area, finding that the group wasn't operated exclusively for charitable purposes. [LTR 201829015; 1/16/2018; rel. 7/20/2018]     IRS May Rely On, but Not Adopt, Grouping Rules in 199A Regs The IRS may look to the passive activity loss grouping and material participation rules when drafting the passthrough deduction regulations, but it isn’t likely to completely adopt them. [Tax Notes Today; 7/24/2018; Article by Eric Yauch]     Partners Agreed to Extension of Limitations Period for Assessment The Tax Court, in a Son-of-BOSS case, held that Forms 872-I signed by two partners extended the limitations period for the IRS to assess taxes against them attributable to partnership items, noting that the IRS forms didn’t extend the statute for returns but for the assessment of income tax due on those returns. [Inman Partners et al. v. Commissioner; No. 15953-06; T.C. Memo 2018-114; 7/23/2018]      Shareholders Liable for Transaction Lacking Economic Substance The Ninth Circuit reversed a Tax Court decision involving an asset and stock sale and a third party that was designed as a tax avoidance scheme.  [Tax Notes Today;7/25/2018; Article by Emily Foster]         Former Shareholders Liable for Taxes on Asset Sale as Transferees The Ninth Circuit, reversing a Tax Court decision, held the former shareholders of a closely held corporation liable as transferees for the taxes owed on the proceeds from an asset sale, finding that a stock sale transaction lacked economic substance beyond tax avoidance and the former shareholders are liable for the taxes under applicable state law. [Slone, Norma L. et al. v. Commissioner; No. 16-73349; No. 16-73351; No. 16-73354; No. 16-73356; 7/24/2018]     IRS Argues $33 Million Charitable Deduction Decision Was Correct The IRS’s denial of a $33 million charitable deduction was intended to halt a scheme in which multiple taxpayers claimed a deduction for the same property. [Tax Notes Today; 7/25/2018; Article by Eric Yauch]        Government Argues Tax Court Properly Denied Charitable Deduction In a brief for the D.C. Circuit, the government argued that the Tax Court correctly held that a partnership wasn’t entitled to a $33 million charitable contribution deduction because it failed to comply with substantiation requirements and the Tax Court correctly held that accuracy-related penalties apply to any resulting underpayment.         [Jeff Blau v. Commissioner; USDC DC; Gov. Brief; No. 17-1266; 7/23/2018]       (a)OPR Reaches Settlement Agreement With Enrolled Agent The IRS has announced that the Office of Professional Responsibility and a tax practitioner who violated rules of conduct under Circular 230 have reached a settlement agreement that includes a monetary penalty. [IR-2018-155; 7/25/2018]   (b) OPR Censures Practitioner for Providing Misleading Information The IRS has announced that a tax practitioner was censured by the Office of Professional Responsibility for violating conflict of interest rules under Circular 230. [IR-2018-154; 7/25/2018]   Husband Relieved From Tax on Some of Wife's Embezzlement Income The Tax Court held that an individual is entitled to innocent spouse relief from taxes attributable to income his wife embezzled during one of two tax years, finding that although he lacked actual knowledge of the embezzlement when they filed their return that year, he learned of it when she was arrested before they filed the following year. [Jacobsen, Rick E. v. Commissioner; No. 25348-15; T.C. Memo. 2018-115; 7/25/2018]

Lynn Nichols Federal Tax Update Podcast August 06, 2018, edition Listen as Lynn Nichols provides commentary on 5 Items pertaining to current developments in U.S. tax law. This week’s topics include:   Commitment Fees Paid on Revolving Credit Agreement May Be Deducted In field attorney advice, the IRS concluded that a taxpayer may deduct quarterly commitment fees it paid on its revolving credit agreement in the tax year in which they were incurred. [Tax Notes Today; FAA 20182502F, 4/11/2018, rel.6/26/2018.]     Widow Who Didn’t Face Economic Hardship Denied Spousal Relief The Tax Court denied a widow innocent spouse relief from joint tax liabilities with her late husband who unbeknown to her had failed to pay their taxes, finding that it was not unfair to hold her liable for the taxes because it did not cause her economic hardship and the tax payments were funded by her husband’s life insurance proceeds. [Hale, Kimberly R. v. Commissioner; No. 18664-14; No. 10262-15; T.C. Memo. 2018-93, 6/26/2018]     IRS Revocation of ESOP Determination Was Abuse of Discretion The Tax Court held that the IRS abused its discretion by revoking a final determination letter that said a corporation’s employee stock ownership plan was qualified under section 401(a) and that the ESOP’s related trust was exempt from tax under section 501(a). [Val Lanes Recreation Center Corp. v. Commissioner; No. 24887-10R; T.C. Memo. 2018-92, 6/26/2018]     Couple Denied Dependency, Foster Care Business Deductions The Tax Court, in a summary opinion sustaining an accuracy-related penalty on some underpayments, held that a couple wasn’t entitled to a dependency exemption deduction for the wife’s father who lived in the Philippines and that they weren’t entitled to deductions for their foster care activity beyond those allowed by the IRS. [Kho, Rodrigo et ux. v. Commissioner; No. 7720-17S; T.C. Summ. Op. 2018-32, 6/27/2018]     Lack of Economic Substance Leads to Disallowed Partnership Losses The Tax Court, in consolidated partnership cases, sustained the IRS’s disallowance of losses from transactions involving paired foreign currency options for lack of economic substance, but did not sustain accuracy-related penalties because the IRS failed to obtain written supervisory approval as required under section 6751. [Endeavor Partners Fund LLC et al. v. Commissioner; No. 8698-12; No. 8710-12; No. 8721-12; No. 8846-12; No. 9975-12; No. 11290-12; No. 12591-12; T.C. Memo. 2018-96, 6/28/2018]

Lynn Nichols Federal Tax Update Podcast July 23, 2018, edition   We are back after a short hiatus! Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: How to Decide Whether an S Corp Is a Corporation In news analysis, Marie Sapirie discusses whether Treasury has the authority to say that an S corporation isn’t a corporation for purposes of the carried interest provision in the Tax Cuts and Jobs Act. [Tax Notes Today; 7/16/2018, Article by Marie Sapirie      IRS to Issue Regs on Suspension of Miscellaneous Itemized Deductions The IRS has announced its intention to issue regulations clarifying how newly enacted section 67(g), which eliminates miscellaneous itemized deductions for tax years beginning after December 31, 2017, and before January 1, 2026, affects the deductibility of some expenses that are incurred by estates and non-grantor trusts. [Notice 2018-61; 2018-31 IRB 1; 7/13/2018]      IRS Drops Donor Disclosure Requirements Most types of tax-exempt organizations will no longer have to disclose identifying information about their donors, the Treasury Department and IRS announced late July 16. [ Rev. Proc. 2018-38; 7/16/2018]      Expect 199A Guidance in ‘Weeks, Not Months,’ Kautter Says Tax practitioners should expect a raft of new IRS guidance in coming weeks resulting from changes wrought by the 2017 tax bill, according to acting IRS Commissioner David Kautter. [Tax Notes Today; 7/18/2018; Article by William Hoffman]      IRS Gives Tax Pros 6 Safeguards to Protect Taxpayer Data The IRS and its Security Summit partners have outlined the “security six” safeguards for tax professionals to use to protect sensitive taxpayer data stored on practitioners’ computers, noting that many of the safeguards are also useful for any taxpayer or small business. [Information Release, IR-2018-150, 7/17/2018]      IRS Highlights Pitfalls of New Due Diligence Requirement The IRS is warning tax return preparers to be wary of married taxpayers trying to claim head of household status, especially given the tax law’s new due diligence requirement. [Tax Notes Today; 7/19/2018; Article by Stephanie Cumings]    Wife Can’t File Separate Returns for Refunds After Joint Filings A U.S. district court held that joint returns an individual’s husband filed by signing her name without her knowledge or consent were valid returns because she left all tax matters to her husband and intended to file joint returns with him; the court held that she could not replace the valid joint returns with separate returns seeking refunds. [Coggin, Alice J. v. United States; USDC Mid NC;  No. 1:16-cv-00106; 7/17/2018]

Lynn Nichols Federal Tax Update Podcast July 16, 2018, edition   We are back after a short hiatus! Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . .   Termination of S Corp Election Inadvertent The IRS ruled that a company will be treated as continuing to be an S corporation from the date its subchapter S election was inadvertently terminated when a trust became an ineligible shareholder, provided some conditions are met. [LTR 201824003; 10/27/2017, rel. 6/15/2018] (FIVE LIKE THIS IN SAME WEEK ! ! !) IRS Scraps Leveraged Partnership Rules, Keeps Bottom-Dollar Ban The IRS is reverting to old rules on leveraged partnerships in response to an executive order calling for the removal of burdensome regulations, but bottom-dollar guarantees didn’t make the cut. [Tax Notes Today; June 19,2018, article by Eric Yauch] IRS Proposed Disguised Sales Regs Would Reinstate Prior Regs The IRS has published proposed regulations on the allocation of partnership liabilities for disguised sales, adding that if finalized, the proposed regs would reinstate prior final regs on allocations of excess nonrecourse liabilities of a partnership.  [REG-131186-17; 83 F.R. 28397-28401; 6/19/2018]   Medical Marijuana Business Can't Claim Deduction for Wages The Tax Court held that deductions for wages a couple received from their medical marijuana S corporation weren’t attributable to cost of goods sold and are disallowed under section 280E as attributable to trafficking a controlled substance, rejecting the couple’s claim that denial of the deduction is discriminatory. [Loughman, Jesse M.; No. 21464-15; T.C. Memo. 2018-85, 6/18/2018]   Decedent Held Rights to Cash Surrender Value of Life Insurance The Tax Court refused to hold that sections 2036 and 2038 are inapplicable in valuing a decedent’s interests in three split-dollar life insurance agreements to the cash surrender value at the date of death because the bona fide sale exception was not satisfied and held that summary judgment on inapplicability of section 2703 was inappropriate. [Cahill, Estate of Richard F.; No. 10451-16; T.C. Memo 2018-84, 6/18/2018]   Microcaptive Insurer Case Leaves Open Questions The Tax Court granted the IRS another victory June 18, adding to the agency’s arsenal for combating abusive captive insurance arrangements, but the opinion failed to offer additional guidance for taxpayers.  [Tax Notes Today; 6/20/2018, Article by Emily Foster]   Property Manager Was Employee; Company Hit With Employment Taxes The Tax Court held that the property manager for a company that operated an apartment complex was an employee and not an independent contractor and held the company liable for employment taxes, additions to tax, and penalties; the court held that the company wasn’t entitled to relief under section 530 of the Revenue Act of 1978. [Hampton Software Development LLC; No. 30231-13L; T.C. Memo. 2018-87, 6/19/2018]   Fraudulent Filer Can’t Avoid Penalties With Amended Returns   The Tax Court held that an individual who admitted to filing fraudulent returns but who later filed amended returns reporting additional income was still liable for the penalties, finding that he could not avoid fraud penalties by filing amended returns because an amended return doesn’t purge the original fraudulent filing or fraudulent intent. [Gaskin, Gary et al. v.; No. 7475-17; T.C. Memo. 2018-89; 6/20/2018]   S. Supreme Court Overturns Quill, Freeing States to Tax Online Sales The U.S. Supreme Court held June 21 in South Dakota v. Wayfair Inc. that the physical presence standard in Quill Corp. v. North Dakota is "unsound and incorrect," freeing states to require tax collection on remote sales. [Tax Notes Today; 6/22/2018, Article by Jad Chamseddine]     [South Dakota v. Wayfair Inc.; No. 17–494]

Lynn Nichols Federal Tax Update Podcast June 25, 2018, edition   Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . . Foundation's Set-Aside Request Approved The IRS approved a private foundation's request to set aside funds to restore a historic theater, concluding a set-aside is appropriate because the foundation's grant is part of a grant-matching program with the public charity that owns the theater. [LTR 201823010; 3/14/2018, rel. 6/8/2018 Mitigation May Apply to Allow Taxpayers to Carryback NOLs In emailed advice, the IRS concluded that mitigation could apply to allow taxpayers to carry back net operating losses to closed years when examination of an open year led to the disallowance of a carry forward of a different NOL and revealed the taxpayers’ errors in carrying forward the NOLs without making the election to waive the carryback period. [ECC 201823004; 1/19/2018, rel. 6/8/2018     S Corp Shareholder Can’t Claim FICA Tax Tip Credits The Tax Court held that a shareholder in an S corporation that operated restaurants isn't entitled to claim FICA tax tip credits under section 45B because the S corporation didn’t claim the credits for the years at issue, finding that the individual shareholder can’t unilaterally change the S corporation’s election to not claim the credits. [Caselli, Ronald A. v. Commissioner; No. 835-11; No. 29664-11; T.C. Memo. 2018-81; 6/12/2018]     Pot Shop’s Expenses Are Not Deductible, Tax Court Says A medical marijuana dispensary can’t deduct expenses for what it claimed was a separate business unconnected to sales of the federally prohibited drug. [Alterman v. Commissioner, T.C. Memo. 2018-83, 6/14/2018]   Couple Can’t Deduct Expenses for Medical Marijuana Business The Tax Court, sustaining accuracy-related penalties, held that a couple wasn’t entitled to business expense deductions for costs they incurred in a medical marijuana business related to sale of non-marijuana merchandise and that they weren’t entitled to additional allowances for cost of goods sold beyond amounts conceded by the IRS. [Alterman, Laurel et vir v. Commissioner; No. 13666-14; T.C. Memo. 2018-83; 6/13/2018]   OPR Focuses on Recent Practitioner Behavior, Not Older Conduct The IRS Office of Professional Responsibility typically looks at conduct over the last five years when considering complaints about a practitioner’s behavior, but it may take into account older conduct if it demonstrates a pattern. [Tax Notes Today; 6/14/2018, Article by Nathan Richman]   H&R Block to Close 400 Offices H&R Block will close 400 of its field offices later this year, as the number of taxpayers using its assisted tax return preparation service continues to decrease. [Tax Notes Today; 6/14/2018, Article by Zoe Sagalow]   Disability Benefits Taxable, Not Excluded From Income The Tax Court held that Social Security disability benefits an individual received were taxable as gross income under section 86 and not excludable under section 104 as either workers' compensation, damages on account of personal physical injuries, or insurance. [Palsgaard, Jon K. et ux. v. Commissioner; No. 15293-16; T.C. Memo. 2018-82, 6/13/2-018]

Lynn Nichols Federal Tax Update Podcast June 12, 2018, edition   Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . .   Standard Mileage Rates Guidance Reflects TCJA Changes The IRS has issued guidance on the optional 2018 standard mileage rates to reflect amendments to sections 67 and 217 made by the Tax Cuts and Jobs Act. [Notice 2018-42; 2018-24 IRB 1; 5/25/2018]   Rollover of Plan Distribution From Estate Is Tax-Free The IRS ruled that a distribution from a decedent’s estate to the surviving spouse will be treated as having come directly from the decedent's retirement plan and that the spouse, who was eligible to roll over the amount to her own IRA, won’t have to include the funds in her gross income. [LTR 201821008, 2/2/2018, rel.5/25/2018     Unclaimed IRAs Handed Over to States Subject to Withholding Interests in a retirement account paid to a state unclaimed property fund are subject to federal income tax withholding and must be reported to the IRS. [Tax Notes Today; 5/30/2018, article by Eric Yauch]     Fourth Circuit Affirms Restitution Order in Tax Obstruction Case The Fourth Circuit, in an unpublished per curiam opinion, affirmed a district court's order of restitution as a condition of a probation sentence for an individual who pleaded guilty to interference with the administration of internal revenue laws, finding that there was no abuse of discretion by the district court. [United States v. Lawrence Singleton; CA 4, No. 17-4699, 5/29/2018]   TROUBLESOME PROVISIONS OF TAX CUTS AND JOBS ACT Section 199A 100% bonus depreciation Section 179 deduction Alimony ‘cutoff’ OTHER SUBJECTS GENERATING LOTS OF DISCUSION ‘New’ partnership audit rules Selection and appointment of authorized representative

Lynn Nichols Federal Tax Update Podcast May 29, 2018, edition   Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . .   IRS Noncommittal on Whether Taxpayers Can Rely on Proposed TCJA Regs Guidance on several changes under the 2017 tax law will be issued this summer, but whether taxpayers can rely on that guidance for tax positions is uncertain. [Tax Notes Today, 5/14/2018, Article   Existing Guidance Helpful for Addressing Section 199A Issues Existing code sections are being consulted while Treasury develops new rules on the application of the passthrough deduction.  [Tax Notes Today, 5/14/2018, Article   Termination of S Corp Election Inadvertent The IRS ruled that a company will be treated as continuing to be an S corporation from the date its subchapter S election was inadvertently terminated when a trust became an ineligible shareholder, provided the trust files an electing small business trust election. [ LTR 201819002, 1/5/2018, rel.5/14/2018]   Reliance on Tax Shelter Promoter Is No Defense to Penalties The Tax Court held that accuracy-related penalties apply regarding a partnership’s participation in a Son-of-BOSS transaction to avoid taxes on the sale of a family concrete business, finding that the partnership did not have a reasonable cause and good faith defense to the penalties because it relied on the advice of a tax shelter promoter. [RB-1 Investments Partners et al. v. Commissioner; No. 22674-04; T.C. Memo. 2018-64 , 5/14/2018]   Basis Increase Required Economic Outlay, Eleventh Circuit Says The Eleventh Circuit, in an unpublished per curiam opinion affirming the Tax Court, held that a couple was not entitled to an increase in basis for judgments on loans they personally guaranteed for an S corporation, finding that they hadn’t made any payments toward the judgments. [Rupert E. Phillips et ux. v. Commissioner; CA 11, No. 17-14439, 5/17/2018   Court Refuses to Quash IRS Summonses for Church Financial Records A U.S. district court dismissed a petition to quash IRS summonses issued for a church’s financial records in the IRS’s investigation of the tax liability of the church’s pastors, finding that the investigation is not a church tax inquiry and that the government has met the requirements of United States v. Powell. [Herbert H. Rowe et ux. v. United States; USDC E LA, No. 2:18-cv-00075, 5/16/2018]

Lynn Nichols Federal Tax Update Podcast May 24, 2018, edition   Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . .   IRS Denies Tax-Exempt Status to Natural Gas Promoter The IRS denied tax-exempt status to an organization established to support the natural gas industry after concluding the organization operates in a commercial manner and benefits its founder and other insiders. [LTR 201818018; 2/6/2018, rel. 5/4/2018]     IRS Denies Exemption to Farmers Market The IRS denied tax-exempt status to an organization that operates a farmers market because it provides services for the convenience of vendors instead of improving the business conditions of its farmers market community. [LTR 201818017; 2/7/2018, rel. 5/4/2018]     Tax Court Says Burden Is on Partnership in Penalty Challenge It’s up to partnerships to prove they don’t owe penalties in legal challenges, even though the individual partners would likely be the ones to pay. [Tax Notes Today; May 8. 2018, Article by Eric Yauch]   IRS Doesn’t Have Burden to Show Penalty Approval in Partnership Case The Tax Court held for the first time that the IRS doesn’t bear the burden of production regarding penalties in partnership-level proceedings and, therefore, refused to reopen the record in a partnership case to let the IRS provide evidence of supervisory approval of penalties under section 6751(b). [Dynamo Holdings LP et al. v. Commissioner; No. 2685-11; No. 8393-12; 150 T.C. No. 10, 5/7/2018] Safe Harbors Modified for Determining Built-In Gain, Loss The IRS has issued guidance that modifies two approaches under Notice 2003-65 for determining recognized built-in gain or loss under section 382(h), providing that the hypothetical cost recovery deductions that would have been allowable had an election under section 338 been made or had the asset been purchased at fair market value are determined without regard to the additional first-year depreciation deduction in section 168(k). [Notice 2018-30; 2018-21 IRB 1, 5/8/2018]   Couple Wasn’t Insolvent, Must Include Discharged Debt in Income The Tax Court, sustaining a late-filing addition to tax, held that funds a couple transferred to their son’s savings account should be considered in determining their insolvency status, that they were not insolvent for the tax year at issue, and that discharged student loan debt was not excludable from their income under section 108(a)(1)(B). [Hamilton, Vincent C. et ux. v. Commissioner; No. 8037-16; T.C. Memo. 2018-62, 5/8/2018]   Tax Obstruction Conviction Vacated in Light of Marinello Decision The Second Circuit, in an unpublished per curiam opinion, vacated the section 7212 tax obstruction conviction of an individual who prepared false income tax returns, finding that the obstruction conviction could not stand in light of the Supreme Court’s recent decision in Marinello v. United States, 138 S. Ct. 1101 (2018). [United States v. Samuel Gentle; CA 2, No. 16-4020, 5/9/2018]   [copy of Supreme Court decision follows]   New Automatic Method Change to Conform With New Accounting Standards The IRS has provided a new automatic accounting method change for taxpayers to use to conform with new accounting standards on the recognition of revenue from contracts with customers. [Rev. Proc. 2018-29; 2018-21 IRB 1, 5/10/2018]  

Lynn Nichols Federal Tax Update Podcast May 15, 2018, edition   Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . . IRS Announces Healthcare Tax Credit Relief for Some Small Employers The IRS has announced the release of guidance that provides relief for some small employers that wish to claim the small business healthcare tax credit for 2017 and later years. [ IR-2018-108, 4/27/2018 Healthcare Tax Credit Relief Given to Some Small Employers The IRS has provided relief for an eligible small employer that properly claimed or claims a section 45R credit for all or part of a tax year beginning after December 31, 2015, but that for all or part of the remainder of the credit period has a principal business address in a location in which a qualified health plan through a Small Business Health Options Program exchange is not available. [Notice 2018-27, 4/27/2018]       Doctor’s Patient Safety Consulting Corporation Denied Exempt Status The Tax Court held that a corporation established to provide consulting services to medical providers and government programs through patient safety initiatives was not qualified for tax-exempt status because it would operate for the benefit of its founder and sole employee, who is a doctor and certified patient safety and risk management expert. [Abovo Foundation Inc. v. Commissioner; No. 18673-15X; T.C. Memo. 2018-57     Practice Unit Addresses Claims of Passthrough Losses, Deductions The IRS released a practice unit that provides guidance on determining whether a shareholder has sufficient basis to claim losses and deductions passed through from an S corporation. [SCO/P/53_05_01_03-06 (2016) ,,   IRS Revises Housing Limits Under Foreign Earned Income Exclusion The IRS has revoked prior guidance that provided adjustments to the limitation on housing expenses that can be excluded under section 911 because it used an incorrect amount for the maximum foreign earned income exclusion to calculate the housing cost amount for 2018. [Notice 2018-44; 2018-21 IRB 1, 5/1/2018]     Alternative Rules Being Considered for Interest Deduction Issues The solution to business interest deduction limitation issues that require guidance to implement — such as what qualifies as a trade or business — could come from analogous rules in other code sections. [Tax Notes Today; 5/3/2018, article by Emily Foster]   Application of 199A Basis Limitation Seen as Challenging The basis limitation for the passthrough deduction under the new tax law could have unintended consequences unless guidance is released. [Tax Notes Today; 5/3/2018, article by Eric Yauch] TAX SHELTER NEWS ! ! ! Benistar Participants Bound by Stipulation to Accept Penalty Court held that a couple who challenged an accuracy-related penalty related to their participation in a Benistar 419 pre-retirement plan failed to show their situation differed from that of small business owners in other Benistar cases and thus could not escape their stipulation to be bound by that decision regarding the penalty. [Kennan, Jerry L. et ux. v. Commissioner; No. 8917-09; T.C. Memo. 2018-60, 5/3/2018]     Bad Debt Deductions Properly Denied in DAD Shelter Cases The Tax Court, in consolidated cases, held that the IRS properly disallowed two partnerships’ section 166 bad debt and expense deductions stemming from distressed asset/debt tax shelter transactions and held both liable for accuracy-related penalties. [Derringer Trading LLC et al. v. Commissioner; Nos. 20872-07, 6268-08; T.C. Memo. 2018-59, 5/3/2018]

Lynn Nichols Federal Tax Update Podcast May 7, 2018, edition   Listen as Lynn Nichols provides commentary on 5 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . .   Appeals Filed in ‘Devastating’ Clergy Housing Allowance Decision A group of ministers has joined the government in appealing a court decision on the parsonage housing allowance that they say could impose a tax burden on many churches and harm their communities. [Tax Notes Today; 4/23/2018; Article by Fred Stokeld] Government Urges Court to Allow Minister Rental Allowance Exclusion In a brief for the Seventh Circuit, the government urged the court to reverse a decision that held unconstitutional section 107(2), which allows ministers to exclude from income a rental allowance paid to them as part of their compensation, arguing that the exclusion has a secular purpose and effect and doesn’t violate the Establishment Clause. Clergy Argue Rental Allowance Exclusion Is Constitutional A group of ministers and churches filed a brief in the Seventh Circuit urging the court to reverse a decision that held unconstitutional section 107(2), which allows ministers to exclude from income a rental allowance paid to them as part of their compensation, arguing that it is a logical adaptation of the convenience-of-the-employer doctrine. Fact Sheet Outlines Tax Law Changes to Depreciation Deductions The IRS has released a fact sheet on the new rules and limitations for depreciation and expensing under the Tax Cuts and Jobs Act, addressing changes to section 179 expensing, first-year bonus depreciation, depreciation limits on luxury cars, the treatment of some farm property, and the applicable recovery period for real property. [FS-2018-9, 4/20/2018]   Government Argues Corporation Wasn’t Entitled to Expense Deductions In a brief for the Tenth Circuit, the government argued that employees who participated in an S corporation’s employee stock ownership plan were related persons under section 267 and the S corporation couldn’t deduct any accrued but unpaid expenses owed to either its direct or indirect shareholders, including ESOP participants. [Steven M. Petersen et al. v. Commissioner; No. 17-9003; No. 17-9004]        Shareholders Argue Tax Court Erred in Decision on ESOP Participants In a brief for the Tenth Circuit, shareholders of an S corporation argued that the Tax Court erred in holding that employees who participated in the S corporation’s employee stock ownership plan were related persons under section 267 and by disallowing the corporation’s deductions for unpaid payroll and vacation pay.   Court to Decide if School Treasurer Knew of Lapse in Tax Payments A U.S. district court, denying summary judgment to the government, found material factual disputes in an employee payroll tax case filed by the volunteer treasurer of a private school’s board of directors who argued he was not responsible for collecting or paying payroll taxes for the school. [Bibler, David H. v. United States; USDC S OH, No. 2:I7-cv-I34, 4/23/2018]   Financial Satisfaction Rising Thanks to Tax Cuts, AICPA Finds According to a survey conducted by the Harris Poll and published by the American Institute of CPAs on April 26, Americans’ personal financial satisfaction reached a record high in the first quarter of 2018, reflecting the cuts to personal taxes under the 2017 tax law, and 68 percent of respondents said they were satisfied with their personal finances. [AICPA News Release, 4/26/2018]

Lynn Nichols Federal Tax Update Podcast April 2, 2018, edition   Listen as Lynn Nichols provides commentary on 10 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . . Economic Analysis: A Spreadsheet to Calculate the New Passthrough Deduction In economic analysis, Martin A. Sullivan discusses the difficulties new section 199A presents to owners of passthrough businesses. [Tax Notes Today; 4/2/2018; Article by Martin A. Sullivan]   Interest Deductibility Guidance Settles Unanswered Questions The IRS released expected initial guidance on business interest expense limitations that address several questions for which practitioners had been clamoring for answers since the new tax law was enacted, but they yearn for more. [Tax Notes Today; 4/3/2018; Article by Emily Foster] IRS Issues Guidance on Business Interest Expense Limitations The IRS has issued guidance describing regulations that it intends to issue to help taxpayers comply with section 163(j), which was amended by the Tax Cuts and Jobs Act to provide new rules limiting the deduction of business interest expense for tax years beginning after December 31, 2017. [Notice 2018-28; 2018-16 IRB 1; 4/2/2018]   IRS Announces Guidance on Business Interest Expense Limitation The IRS has announced the release of guidance for computing the business interest expense limitation under section 163(j), as amended by Tax Cuts and Jobs Act. [IR-2018-82; 4/2/2018]   Tax Court Upholds Disallowance of Alimony Deduction The Tax Court held that the IRS properly disallowed an attorney's alimony deduction because under Arkansas law his obligation to pay his former wife’s share of their 2009 federal income tax, joint credit card debt, and property taxes survives her death and therefore does not meet all the requirements to qualify as alimony. [Davidson v. Commissioner; No. 24619-15; T.C. Memo. 2018-38; 4/2/2018]   Business Owner’s Loans Flunk the Bad Debt Test The Tax Court, sustaining some accuracy-related penalties but not others, held that an individual used one of his real estate business’s funds to pay another of his companies’ debts, finding that these purported loans weren’t deductible as bad debts but instead were taxable distributions and wages. [Povolny Group Inc. et al v. Commissioner; No. 5935-14; No. 5936-14; T.C. Memo. 2018-37; 4/2/2018]   Tax Court Finds Retirement Benefits Subject to Self-Employment Tax The Tax Court, in a summary opinion, held that retirement benefits received by a businesswoman from a cosmetics company are deferred compensation subject to self-employment tax under section 1401 because they were "derived by an individual from any trade or business carried on by that individual." [Sherman v. Commissioner; No. 13052-16S; T.C. Summ. Op. 2018-15;4/2/2018]   Responsible Person’ Dispute Keeps Payroll Tax Case Alive A U.S. district court, denying summary judgment to the government in a trust fund recovery penalty case, found genuine issues of material fact over whether an individual was a responsible person under section 6672 who willfully failed to pay a company’s payroll taxes. [Ireland, Mike L. v. United States; No. 2:17-cv-02014; 4/2/2018]   Tax Court Upholds Disallowance of Passthrough Loss Deduction The Tax Court held that the IRS properly disallowed a couple’s passthrough loss deduction, finding that their real estate activities could not be grouped with their aircraft chartering activities to determine whether they materially participated in the latter, and that the loss from the chartering activities was a passive loss because they did not materially participate. [Brumbaugh, Charles and C.E. Holifield v. Commissioner; No. 9161-14; T.C. Memo. 2018-40; 4/3/2018]   Partnership Denied $1.8 Million Deduction for Easement Donation The Tax Court, declining to impose a penalty, held that a land development partnership wasn’t entitled to a $1.8 million charitable contribution deduction for the donation of a conservation easement, finding that the easement was donated with the expectation of receiving a substantial benefit and that the value of the easement was zero. [Wendell Falls Development LLC et al. v. Commissioner; No. 3494-14; T.C. Memo. 2018-45, 4/4/2018]   Restless Retiree’s Costs to Remodel House Are Capital Expenditures The Tax Court, in a summary opinion, held that a couple may not deduct expenses related to a house remodeling project meant to occupy the husband’s time during retirement, finding that his activity was not a trade or business and that expenses incurred to improve the house, a capital asset, may only be treated as capital expenditures. [Havener, Shane et ux. v. Commissioner; No. 4506-16S; T.C. Summ. Op. 2018-17; 4/4/2018]   Reconstruction of Mileage Logs Falls Short of Substantiation Rules The Tax Court, sustaining an accuracy-related penalty, held that an attorney with multiple law offices wasn’t entitled to a deduction for his business-related vehicle expenses, finding that his attempt to reconstruct the expenses failed to satisfy section 274(d)’s strict substantiation requirements. [Velez, Alavaro G. v. Commissioner; No. 23718-15; T.C. Memo. 2018-46, 4/5/2018]

Lynn Nichols Federal Tax Update Podcast April 2, 2018, edition   Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include: OUR PROGRAM THIS WEEK INCLUDES . . . . . . NYSBA Tax Section Submits Report on Qualified Business Income Karen Sowell of the New York State Bar Association Tax Section has submitted comments to address various technical and interpretative issues that have arisen as a result of the addition of section 199A by the Tax Cuts and Jobs Act (P.L. 115-97). [Tax Notes Today; 3/26/2018]     Third Circuit Affirms Drug Technology Royalties Were Ordinary Income A divided panel of the Third Circuit affirmed a Tax Court decision that held that a pharmaceutical scientist didn’t transfer all substantial rights to the liquisolid drug technology he developed and, thus, subjected royalties he received under a licensing agreement with a drug company to treatment as ordinary income and not capital gains under section 1235. [Spireas , Spiridon v. Commissioner; CA 3; No. 17-1084; 3/26/2018]    Grants Received for Building Restoration Were Taxable Income A U.S. district court, denying a partnership’s request to amend its complaint, held that $11 million in grants the partnership received from the New York State Empire State Development Corp. for restoration of a former federal building constituted income for federal income tax purposes and were not excludable from income. [Uniquest Delaware LLC et al. v. United States; WD NY; No. 1:15-cv-00638 ; 3/27/2018]      No Hardship distribution from 401(k) to pay off student loans [INFO 2018-0001; 1/11/2018; rel. 3/30/2018    IRS Advises on Exchanges Involving Construction of Replacement Property [INFO 2018-0003; 1/5/2018; rel. 3/30/2018   IRS Outlines ‘Dependent’ Qualification for Non-Citizen Children [INFO 2018-0004; 2/8/2018; rel. 3/30/2018]

Lynn Nichols Federal Tax Update Podcast March 19, 2018, edition   Listen as Lynn Nichols provides commentary on 10 Items pertaining to current developments in U.S. tax law. This week’s topics include: Attractiveness of S Corporations After 2017 Larry Crumbley and James R. Hasselback discuss how the Tax Cuts and Jobs Act made significant changes that apply to S corporations, and they compare advantages and disadvantages of S corporation and C corporation status. [Tax Notes Today, 3/12/2018, Article]  Individual Can Amend Complaint to Make False Information Returns ClaimA U.S. district court granted a pro se individual leave to amend her complaint against Amazon Services LLC that alleged the company improperly reported income for her to the IRS that resulted in a tax liability; she now may make a cognizable claim under section 7434 that Amazon willfully filed false information returns for her. Employer-Provided Tax Prep Services Are Includable in Employee IncomeIn a legal memorandum, the IRS ruled that tax preparation services provided by a U.S. corporation for the benefit of its employees working in foreign countries are includable in the gross income of those employees at the fair market value of the services. [ILM 201810007; 11/28/2017, released 3/9/2018]  Payments to Property Owners Not Reportable IncomeThe IRS ruled that subsidiaries that are required by a state to make payments to, or incur costs on behalf of, eligible property owners don’t have to provide information returns for those costs or payments; the IRS declined to rule on the effect of future compensatory payments to additional property owners because those payments are the subject of current litigation. [LTR 201810004; 12/8/2017, released 3/9/2018]  JCT Reviews Federal Tax Provisions That Expired in 2017The Joint Committee on Taxation, in a report (JCX-5-18) prepared for a March 14 House Ways and Means Tax Policy Subcommittee hearing, listed federal tax provisions that expired in 2017 and staff revenue estimates of making these provisions permanent. [ JCX-5-18; 3/14/2018] Decisions to Revoke S Corp Elections Not Just About the RatesSubchapter S corporations that may be lured by lower rates to convert to C corporation status might face some unanticipated and undesirable consequences if they overlook broader tax implications and longer-term strategic considerations. [Tax Notes Today; 3/14/2018; Article by Emily L. Foster] IRS Ending Offshore Voluntary Disclosure ProgramThe IRS has announced (IR-2018-52) that it will begin to ramp down and end the 2014 Offshore Voluntary Disclosure Program on September 28, 2018, urging U.S. taxpayers with undisclosed foreign financial assets to use the program before it closes. [IR-2018-52; 3/13/2018]  New LB&I Compliance Campaigns Include 3 Partnership IssuesThe IRS Large Business and International Division has announced five more campaigns, including three dealing with partnership issues. [Tax Notes Today; 3/14/2018, Article by Stephanie Cumings] LB&I Plans Exams of Spinoff Costs Without Explicit RulesThe IRS intends to enforce the requirement that taxpayers capitalize facilitative costs for tax-free distributions in spinoff transactions despite a dearth of guidance on how that should be done. [Tax Notes Today; 3/15/2918, Article by Emily Foster]   IRS Curbs Benefit Plan With No Meaningful BenefitsEmployees who don’t receive benefits under a floor-offset plan, while the highly paid executives do, can’t be counted for purposes of the plan’s minimum participation requirement, according to the IRS Office of Chief Counsel. [Tax Notes Today; 3/15/2018, Article by Stephanie Cumings] Tax Court Holds Short Sale, Debt Cancellation Was Single TransactionThe Tax Court, declining to impose an accuracy-related penalty, held that a couple’s short sale of a townhouse and resulting debt forgiveness on their mortgage was a single transaction for which they recognized neither a gain nor loss. [Simonsen, Karl F. et ux. v. Commissioner; No. 29698-14; 150 T.C. No. 8, 3/14/2018]

Lynn Nichols Federal Tax Update Podcast March 19, 2018, edition   Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include: IRS Publishes List of Practitioners Subject to Disciplinary Action The IRS has published a list of attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers who have received disciplinary sanctions for violating the regulations governing practice before the IRS. [Announcement 2018-4; 2018-10 IRB 401; 3/5/2018]   Business Network Loses Exemption The IRS revoked the tax-exempt status of an organization described in section 501(c)(3) because its primary activity is operating a networking event for business owners and investors, which is not an exempt purpose. [LTR 201809011; 9/21/2017]   Tax Court Invalidates Scheme to Bypass Roth IRA Limits A group of taxpayers is on the hook for excise taxes after the Tax Court invalidated their scheme to contribute funds to a foreign sales corporation and then Roth IRAs. [Tax Notes Today; 3/5/2018; Article by Velarde and Madara]      Family Directly Contributed to Roth IRAs, Liable for Excise Taxes The Tax Court, declining to sustain additions to tax, held that funds a couple and their daughter routed from their business through a Bermuda-based foreign sales corporation to their Roth IRAs were contributions from the individuals and held them liable for excise taxes under section 4973 for excess contributions to the retirement accounts.                                                                                                            [Mazzei, Celia et al. v. Commissioner; No. 16702-09; No. 16779-09; 150 T.C. No. 7; 3/5/2018] Architect Was Real Estate Professional, Allowed Rental Loss Deduction The Tax Court, in a summary opinion, held that an architect qualified as a real estate professional during the 2013 tax year and the IRS improperly disallowed a loss deduction for his rental real estate activities under the passive activity loss limitations in section 469. [Franco, Jose et ux. v. Commissioner; No. 22469-16S; T.C. Summ. Op. 2018-9; 3/6/2018]   Company Co-Owner Liable for Trust Fund Recovery Penalties A U.S. district court held that one of the owners of a construction contracting company was a responsible person who willfully failed to pay the company’s employment tax liabilities; the court granted the government a nearly $1 million judgment against him for trust fund recovery penalties. [Davis, Kelly D. v. United States; USSDC CO; No. 1:13-cv-00450; 3/6/2018]   Wife Wasn’t a Real Estate Professional, Losses Limited The Tax Court, sustaining accuracy-related penalties, held that a couple’s rental real estate activities were passive and their losses for those activities were limited under section 469(i), finding that the wife didn’t spend the required time participating in real estate activities to qualify as a real estate professional. [Farrokh E. Pourmirzaie et ux. v. Commissioner; No. 25558-14; T.C. Memo. 2018-26; 3/8/2018]   Lawyer’s Losses From Real Estate Activities Were Capital The Tax Court, in a summary opinion, held that a practicing attorney wasn’t engaged in the trade or business of buying and selling real estate, so his losses from his real estate activities were not subject to ordinary loss treatment, but deductible as capital losses. [Bruce Joseph Levitz v. Commissioner; No. 15393-14S; T.C. Summ. Op. 2018-10; 3/8/2018]   IRS Releases Practice Unit on Shareholder Debt Owed by S Corp The IRS released a practice unit on debt basis for an S corporation shareholder, addressing what qualifies as bona fide debt and whether that debt is owed directly to the shareholder creating debt basis. [SCO/C/53_04_02_01-04 (2016); updated 1/19/2018; 3/8/2018]

Lynn Nichols Federal Tax Update Podcast March 5, 2018, edition   Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include:   Formula-Driven Tax Law Provisions Cause Havoc for Businesses Businesses are challenging the efficacy and burden of the formulaic approach that taxwriters adopted in structuring several provisions of the Tax Cuts and Jobs Act. [Tax Notes Today; 2/20/2018; Article by Emily Foster]   Second Circuit Upholds New York’s Donor Disclosure Requirement The Second Circuit, partially affirming a district court, held that a New York state requirement that registered charities disclose donor information doesn’t violate the First Amendment and is not preempted by federal tax law, finding that the requirement doesn’t impermissibly chill speech or act as a prior restraint on donation solicitation. [Citizens United et al. v. Eric T. Schneiderman; CA 2; No. 16‐3310; 2/15/2018  ]   No Debt Cancellation Reporting Required for Write-offs The IRS ruled that a taxpayer is not required to file Forms 1099-C, "Cancellation of Debt," to report discharge of indebtedness because none of the identifiable events listed in reg. section 1.6050P-1(b)(2) occurred. [Letter Ruling 201807008; 11/14/2017]   Interest Expense Deduction Notice Expected in Coming Weeks The Treasury Department plans to issue a notice in the coming weeks tackling some of the biggest issues with business interest expense deductions under the Tax Cuts and Jobs Act. [Tax Notes Today; 2/21/2018; Article by Emily Foster]   Unadjusted Basis Rule Raises Like-Kind Exchange Questions The Tax Cuts and Jobs Act has both raised questions about how the newly restricted like-kind exchange provision will interact with the other changes and placed pressure on definitions connected to the new restriction. [Tax Notes Today; 2/21/2018; Article by Nathan Richman]   Gauging the Height of the Specified Service Business Guardrail Daniel L. Mellor examines the limited guidance available on the key definitional element of the new 20 percent deduction for passthrough income under the Tax Cuts and Jobs Act, specifically, the incorporation of section 1202(e)(3)(A) in defining a “specified service business.” [Tax Notes Today; 2/21/2018; Article by Daniel L. Mellor, JD, LLM]       AICPA Seeks Guidance on Qualified Business Income of Passthroughs Annette Nellen of the American Institute of CPAs has asked for guidance on the section 199A deduction for qualified business income of passthrough entities, asserting that taxpayers and practitioners need clarity to comply with their 2018 tax obligations and to make informed decisions on tax planning issues. [Tax Notes Today; Letter from AICPA to Treasury Officials; 2/21/2018   IRS Set to Accept Returns Claiming Retroactively Renewed Tax Benefits The IRS has announced it is ready to process 2017 tax returns claiming three tax benefits that were renewed retroactively under the Bipartisan Budget Act, but taxpayers who filed earlier in the season and want to claim one of the benefits must use an amended return, which can’t be filed electronically and can take up to 16 weeks to process. [IR-2018-33; 2/22/2018]   IRA Distribution Wasn’t Excludable as Transfer Incident to Divorce The Tax Court held that distributions an individual received from his IRA to make payments to his estranged wife were not excludable from his gross income under section 408(d)(6) as transfers incident to divorce because he did not make a nontaxable transfer of the funds to an IRA in his wife’s name as he was ordered to do by a state court. [Kirkpatrick, John R; T.C. Memo. 2018-20; 2/22/2018   AICPA Offers TCJA Technical Corrections to Taxwriting Committees In a February 22 letter to Senate Finance Committee and House Ways and Means Committee leaders, the American Institute of CPAs suggested technical corrections for the Tax Cuts and Jobs Act, such as changes to the effective date of the net operating loss provision, to the property class life of qualified improvement property, and to the charitable deduction limitation. [Tax Notes Today; AICPA letter; 2/22/2018]

Lynn Nichols Federal Tax Update Podcast Feb. 26, 2018, edition   Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law. This week’s topics include: No Plans to Apply Reasonable Compensation Beyond S Corps There are no plans to apply the reasonable compensation exclusion to qualified business income under the new 20 percent passthrough business deduction to entities other than subchapter S corporations, according to a Treasury official. [Tax Notes Today; 2/12/2018]     Tax Equity Industry Struggling to Adapt to TCJA The new tax law’s corporate-friendly changes welcomed by most businesses have left investors and brokers involved in the tax credit financing industry spinning. [Tax Notes Today; 2/14/2018]     IRS to Close Carried Interest ‘Loophole’ Prompted by New Law Fund managers using shell companies to avoid stricter limits on the use of carried interest aren't likely to see the tax benefits they were expecting.   [Tax Notes Today; 2/15/2018]     Statute’s Clear Language Sinks Capital Asset Argument A nonrefundable deposit received as part of a failed real estate transaction can’t be treated as a capital gain, the U.S. Court of Appeals for the Eleventh Circuit held. [Tax Notes Today; 2/15/2018]    Forfeited Deposit From Failed Property Sale Is Not Capital Gain The Eleventh Circuit, affirming the Tax Court, held that a nonrefundable deposit a partnership received in a contract for the sale of property wasn’t entitled to capital gains treatment when the buyer defaulted, finding that the property wasn’t a capital asset under section 1221 because it was used in the partnership’s hotel and restaurant business. [CRI-Leslie LLC et al. v. Commissioner; CA 11; No. 16-17424; 2/15/2018]      TIGTA: IRS Failed to Notify Over 458,000 Identity Theft Victims The IRS did not notify most victims of employment identity theft that their identities were being used by others for employment in 2017 because an IRS programming error limited notification only to new victims, the Treasury Inspector General for Tax Administration said in a February 12 report. [ Treasury Report 2018-40-016; 2/12/2018]   First Circuit Upholds Deficiency Against Engine Parts Dealer The First Circuit, finding no error, affirmed a Tax Court decision that upheld an IRS deficiency determination that reduced a wholesale engine and engine parts dealer’s cost of goods sold, that reduced deductions for employee compensation paid to the company president’s sons, and that assessed an accuracy-related penalty. [ Transupport Inc. v. Commissioner; CA 1; No. 17-1265; 2/14/2018]

Joseph C. Mandarino is a Partner with Smith, Gambrell & Russell, LLP, in Atlanta. Mr. Mandarino's practice focuses on tax and finance. He is well versed in a wide variety of businesses and transactions. Mr. Mandarinos practice also includes representation in tax controversy work. Mr. Mandarino writes and speaks extensively on a wide range of business, tax and finance topics. He has published over 100 articles in journals and in-house newsletters, and has participated in over 150 presentations and seminars. His articles have appeared in the National Law Journal, Mergers & Acquisitions magazine, Tax Notes Today, the Journal of Real Estate Taxation, the Journal of S Corporation Taxation, the Journal of Multistate Taxation, Tax & Finance Newsletter, the Journal of Taxation and Regulation of Financial Institutions, the ABA Probate & Property Journal, and the NYU Institute on Federal Taxation. In addition, he has spoken at meetings and seminars organized by numerous organizations, including the American Bar Association, the White House Conference on Small Business, the U.S. Small Business Administration, the Georgia Electronic Commerce Association, the Federation of Exchange Accommodators, the International Reinsurance Conference, the Service Corps of Retired Executives, the American Health Lawyers Association, the Southeastern Health Law and Policy Forum, and the United Way, as well as several panel-type TV discussion programs.