SCACPA's Weekly Federal Tax Update

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**SCACPA’s Weekly Federal Tax Update**

Lynn Nichols has been explaining federal tax law to audiences since 1969. He is now partnering with SCACPA to launch a series of podcasts that answer questions stemming from the Tax Cuts and Jobs Act. He’ll describe in each installment how the actions of the IRS and the U.S. Tax Court affect how you should interpret the tax code. Listen to each new episode, and you’ll better understand how the new tax laws work.

Latest Episodes:

Federal Tax Update with Lynn Nichols #49 Oct 07, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #48 Sep 26, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #47 Sep 12, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #46 Sep 05, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #45 Aug 21, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #44 Aug 16, 2019

Show notes

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 guidance (Rev. Proc. 2019-33) that allows a taxpayer to make a late election, or to revoke an election, under section 168(k) for some property acquired by the taxpayer after September 27, 2017, and placed in service by the taxpayer during its tax year that includes September 28, 2017.

[Rev. Proc. 2019-33; 2019-34 IRB 1, 7/31/2019]

IRS Updates Practice Unit on Income Sourcing for TCJA Changes

The IRS updated a prior international practice unit on how the sourcing rules apply to nonresident aliens to incorporate changes made by the Tax Cuts and Jobs Act for tax years beginning after December 31, 2017.

[USB/C/014_02_01-05, 7/31/2019]

Federal Tax Update with Lynn Nichols #43 Aug 01, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #42 Jul 11, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #41 Jun 04, 2019

Show notes

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]

Federal Tax Update with Lynn Nichols #40 May 22, 2019

Show notes

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]

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