Document Summaries for the Week of Aug. 3, 2015


Services performed for joint venture are capital contributions

The IRS Office of Chief Counsel advised that costs of services performed on behalf of a joint venture are not deductible businesses expenses under Sec. 162, but a corporation may treat them as capital contributions, thus increasing the corporation’s basis in the joint venture. CCM 20153101F (7/31/15)

Subsidiary’s expenditures did not constitute qualified chemical security expenditures for Sec. 45O credit purposes

The IRS National Office declined to rule on whether a taxpayer’s subsidiary was an eligible agricultural business in the trade or business of distributing specified agricultural chemicals under Sec. 45O(e)(2), which provided a 30% credit for qualified chemical security expenditures paid or incurred after June 18, 2008, and before Jan. 1, 2013. However, the National Office did advise that product manufacturing expenditures incurred by the subsidiary in compliance with certain rules, regulations, and specifications did not constitute qualified chemical security expenditures under Sec. 45O(d). TAM 201532034 (8/7/15)


employee benefits

IRS corrects regs. on multiemployer plan benefit suspension

The IRS posted corrections to temporary and proposed regulations that were issued in June regarding suspension of benefits by multiemployer pension plans that are projected to have insufficient funds to pay the full benefits to which individuals will be entitled. T.D. 9723 (correction, 8/6/15); REG-102648-15 (correction, 8/6/15)



IRS plans to accept certified professional employer organization applications in 2016

The IRS announced on its website that it plans to begin accepting applications for professional employer organization certification beginning July 1, 2016. Certified professional employer organization status under Secs. 3511 and 7705 was created at the end of 2014. Voluntary Certification for Professional Employer Organizations (8/5/15)



Vehicles not meeting definition of off-highway vehicles are subject excise tax

The IRS Office of Chief Counsel concluded that the taxpayer’s vehicles did not meet the definition of off-highway vehicles in Sec. 7701(a)(48) and that the vehicles were thus subject to the Sec. 4051 excise tax on their first retail sale. CCA 201532032 (8/7/15) 



No deduction allowed for loss where amounts were never included in income

The Tax Court held that a taxpayer was not entitled to over $700,000 in deductions relating to a loss from a Ponzi scheme because the amount the taxpayer said was owed, but never paid, had never been included in income. Haff, T.C. Memo. 2015-138 (8/3/15) (see related news story)

No innocent spouse relief where taxpayer failed to meet burden of proof

The taxpayer was not entitled to innocent spouse relief because she failed to meet her burden of proving that abuse affected her ability to challenge items on her tax return, the Tax Court held. Minix, T.C. Summ. 2015-44 (8/3/15)

Tax return preparer cannot take home office deduction

The Tax Court held that the taxpayer, a tax return preparer, did not satisfy any of the Sec. 280A(c)(1) exceptions that would allow a deduction for the business use of her two homes. Nor could the taxpayer use the business standard mileage rate to compute a business deduction for a car she did not own or lease. Flying Hawk, T.C. Memo. 2015-139 (8/4/15)

Couple who materially participated in boat charter activity escape PAL limitations

The Tax Court held that a couple were not subject to the passive activity loss limitations of Sec. 469 for the losses from their boat charter activity because they materially participated in the charter business. Further, the court allowed additional deductions for travel expenses in excess of the amounts the IRS allowed and concluded that the couple were not liable for accuracy-related penalties. Kline, T.C. Memo. 2015-144 (8/5/15)

Noncustodial parent did not sufficiently substantiate dependency exemption deduction

The Tax Court held that a noncustodial parent did not sufficiently substantiate his claim to a dependency exemption deduction for one of his three minor children and thus was not entitled to a child tax credit or head-of-household filing status. Porter, T.C. Memo. 2015-141 (8/5/15)

Abused wife entitled to innocent spouse relief

The Tax Court held that the taxpayer, who was involved in a relationship with a history of domestic abuse, was entitled to innocent spouse relief despite her ex-husband’s objection. Sapp, T.C. Memo. 2015-143 (8/5/15)

IRS corrects ABLE account proposed regulations

The IRS posted corrections to the proposed regulations it issued in June regarding ABLE accounts; most of the corrections change Code section references from “529” to “529A.” REG-102837-15 (correction 8/7/15)



Chief Counsel clarifies foreign base sales company income regulation

The Office of Chief Counsel advised that the third sentence of Regs. Sec. 1.954-3(a)(1)(i), relating to foreign base  company sales income, did not eliminate the 50% manufactured or processed limitation on the definition of agricultural commodities for purposes of the agricultural commodities exception in Regs. Sec. 1.954-3(a)(1)(ii). CCA 201532033 (8/7/15) 



Failure to submit documents precludes taxpayer from challenging underlying tax liability

The Tax Court held that, because the taxpayer failed to submit documents and information relating to his 2009 federal income tax liability as part of his collection due process (CDP) administrative appeal after being given an opportunity to do so, he was precluded in this CDP case from challenging his 2009 tax liability. Gardner, T.C. Summ. 2015-43 (8/3/15)

IRS did not abuse its discretion in sustaining a levy

The Tax Court held that the IRS did not abuse its discretion in sustaining a levy on a corporation that failed to pay its 2004 tax liability. Del-Co Western, T.C. Memo. 2015-142 (8/5/15)



Budget effects of tax extenders estimated

The staff of the Joint Committee on Taxation prepared a report on the estimated revenue effects of the proposed Tax Relief Extension Act of 2015, which would temporarily extend a number of expired tax provisions. A Report to the Congressional Budget Office of the Macroeconomic Effects of the “Tax Relief Extension Act of 2015,” as Ordered to Be Reported by the Senate Committee on Finance (JCX-107-15) (8/4/15)



IRS to issue regs. on transfers of property to partnerships with foreign partners

The IRS announced that it intends to issue regulations under Sec. 721(c) to ensure that, when a U.S. person transfers certain property to a partnership that has foreign partners related to the transferor, income or gain attributable to the property will be recognized either immediately or periodically. The IRS also announced that it intends to issue regulations under Secs. 482 and 6662 applicable to controlled transactions involving partnerships to ensure the appropriate valuation of those transactions. Notice 2015-54 (8/6/15) (see related news story)

Former partner was still TMP, Tax Court holds

The Tax Court held that, although the entity designated as a partnership’s tax matters partner (TMP) was no longer a member of the partnership, it was still the TMP with authority to execute a Form 872-P, Consent to Extend the Time to Assess Tax Attributable to Partnership Items. Further, the Form 872-P was valid and extended the partnership’s statute of limitation. Summit Vineyard Holdings, LLC, T.C. Memo. 2015-140 (8/4/15)

Tax Insider Articles


Business meal deductions after the TCJA

This article discusses the history of the deduction of business meal expenses and the new rules under the TCJA and the regulations and provides a framework for documenting and substantiating the deduction.


Quirks spurred by COVID-19 tax relief

This article discusses some procedural and administrative quirks that have emerged with the new tax legislative, regulatory, and procedural guidance related to COVID-19.