Scacpa's Weekly Federal Tax Update

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-102508-1

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 reso

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 settlem

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 estat

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

Lynn Nichols Federal Tax Update Podcast August, 16 2019, Episode 44 Listen as Lynn Nichols provides commentary on 4 Items pertaining to current developments in U.S. tax law. Extension Granted to File S Corp Asset Disposition Election The IRS granted an extension for a limited liability company to make a section 336(e) election regarding the LLC’s acquisition of the stock of an S corporation from an S corporation shareholder. [LTR 201930001, 4/29/2019, rel. 7/26/2019]   S Corporation’s Reorganization Won't Trigger Gain The IRS ruled that an S corporation whose shareholders disagreed over the business operation could form two new S corporations and contribute half of the assets to each in liquidation of the parent company without triggering gain and that the earnings and profits and accumulated adjustment accounts of the new companies will be allocated under section 312(h). [LTR 201930011, 4/30/2019, rel. 7/26/2019]   Guidance Issued on Making, Revoking Bonus Depreciation Elections The IRS has issued g

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 Camp

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

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 Limit

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 sharehold

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 o

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

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 sta

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 l

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

Lynn Nichols Federal Tax Update Podcast March, 14 2019, Episode 34 Listen as Lynn Nichols provides commentary on 7 Items pertaining to current developments in U.S. tax law. 

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

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]

Lynn Nichols Federal Tax Update Podcast February, 06 2019, Episode 31 Listen as Lynn Nichols provides commentary on 3 Items pertaining to current developments in U.S. tax law. This week’s topics include: S Corporation Denied Deduction for Energy Efficient Buildings A U.S. district court granted the government summary judgment in a suit seeking the return of erroneous refunds it made to a couple, finding that their electrical contracting S corporation wasn’t entitled to deductions under section 179D for energy efficient commercial building property because the buildings were not placed in service in the year they claimed. [United States v. Dennis F. Quebe et ux.; No. 3:15-cv-00294, 1/25/2019]   Fifth Circuit Vacates Late-Filing Penalty Decision for Government The Fifth Circuit vacated a district court decision that held that a couple’s reliance on their accountant to e-file their return didn’t provide reasonable cause for their late filing and granted the government summary judgment, finding that there i

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