Document Summaries for the Week of Oct. 5, 2015


IRS did not abuse its discretion in finding that ESOP was not qualified

The Tax Court held that the IRS did not abuse its discretion in determining that an employee stock ownership plan (ESOP) was not qualified under Sec. 401(a) and the related trust was not exempt from tax under Sec. 501(a). According to the Tax Court, the ESOP (1) exceeded the contribution limits under Secs. 401(a)(16) and 415(c); and (2) failed to follow the plan terms by not obtaining a proper valuation of the stock for any plan year. DNA Pro Ventures, Inc. Employee Stock Ownership Plan, T.C. Memo. 2015-195 (10/5/15).

IRS updates weighted average interest rates, yield curves, and segment rates for October

The IRS issued  the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3), and the 24-month average segment rates under Sec. 430(h)(2) for October 2015. The IRS also issued guidance on the interest rate for 30-year Treasury securities under Sec. 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Sec. 431(c)(6)(E)(ii)(I). Notice 2015-71 (10/9/15).

IRS issues updated fee for health insurance policies

According to the IRS, the applicable dollar amount that must be used to calculate the fee imposed by Sec. 4375 (the health insurance policy fee paid by issuers of the policy) and Sec. 4376 (the fee applicable to self-insured health plans) for policy years and plan years that end on or after October 1, 2015, and before October 1, 2016, is $2.17. These fees are increased each fiscal year by reference to the per capita increase in the amount of national health expenditures. Notice 2015-60 (10/9/15). 



Taxpayers’ fraudulent transfers under Florida law result in liability as transferees

In an earlier Tax Court decision (T.C. Memo. 2015-51), the Tax Court held that the IRS had established that certain transfers to the taxpayers from their business were fraudulent under Florida law and that the taxpayers were liable as transferees under Sec. 6901(a). In response to the taxpayers’ motion for reconsideration, the court held that the business was solvent for one of the years at issue but that the transfers were still fraudulent and caused the business’s insolvency. Thus, the earlier result was unchanged. Kardash, T.C. Memo. 2015-197 (10/6/15).  

Business deduction for telephones limited due to lack of substantiation

The Tax Court held that a couple were not entitled to a deduction in excess of the amount the IRS allowed for telephone expenses because, of the five telephone lines owned by the taxpayers, nothing substantiated which telephone service and how much of the charges should be allocated to the husband’s trade or business. The couple was also not entitled to a deduction for miscellaneous expenses and a casualty loss and were liable under Sec. 6662(a) for a portion of the accuracy-related penalty assessed. Wideman, T.C. Summ. 2015-61 (10/5/15).

No innocent spouse relief when taxpayer admitted he knew about omitted income

A taxpayer who signed Form 4549, Income Tax Examination Changes, agreeing that he was liable for the fraud penalty for each of the years at issue could not argue that he was unaware of the omissions from income for those years. In addition, other evidence suggested that he knew of the omitted income. Thus, the Tax Court held that he was not entitled to equitable innocent spouse relief. Williams, T.C. Memo. 2015-198 (10/7/15).



OECD issues final BEPS reports

The Organisation for Economic Co-operation and Development issued final reports under its Action Plan on Base Erosion and Profit Shifting (BEPS) to address corporate international tax avoidance and harmonize global tax rules. BEPS 2015 Final Reports (10/5/15) (see related news story).



Failure to provide proof of estimated payments precludes consideration of collection alternative

The Tax Court held that, where a couple provided no proof of estimated payments they said they made to the IRS, the IRS Appeals Office did not abuse its discretion in refusing to consider the taxpayers’ collection alternative and sustaining the IRS’s collection action. Friedman, T.C. Memo. 2015-196 (10/6/15).

IRS announces relief from tax deadlines for South Carolina flood victims

South Carolina residents who live or have businesses in counties that have been declared eligible for disaster assistance by the Federal Emergency Management Agency will be given an automatic extension for any tax filing and payment deadlines falling on or after Oct. 1, 2015, and before Feb. 16, 2016. IR-2015-112 (10/7/15) (see related news story).

Newsletter Articles


Year-End Tax Planning and What’s New for 2016

A look at year-end tax planning strategies for individuals and businesses, as well as recent federal tax law changes affecting this year’s tax returns.


CPAs Contend With Tax ID Theft

Tax-related identity theft fraud remains a widespread problem that is often difficult for victims and their tax preparers to correct.