Document Summaries for the Week of July 27, 2015


IRS issues 2016 mortality tables

The IRS issued updated static mortality tables for defined benefit pension plans that apply to calculate the funding target and other items for valuation dates occurring during calendar year 2016. Notice 2015-53 (7/31/15)



Tax Court denies charitable deduction for values of charitable remainder interests

Citing Sec. 664(e), the Tax Court denied an estate a charitable deduction for the values of certain charitable remainder interests and held that, where the payout from a charitable remainder trust is the lesser of the trust income or a fixed percentage, the IRS and the estate must use an annual distribution amount equal to the fixed percentage stated in the trust instrument to determine whether the estate is eligible for a charitable contribution deduction. Estate of Schaefer, 145 T.C. No. 4 (7/28/15)



IRS notice addresses Cadillac tax on high-cost employer health coverage

The IRS issued a notice  (supplementing Notice 2015-16)  addressing additional issues on the excise tax under Sec. 4980I, including the identification of the taxpayers that may be liable for the excise tax, employer aggregation, allocating the tax among  taxpayers, and paying  the  tax. Notice 2015-52 (7/31/15)



Graphic artist is liable for penalties

The Tax Court held that the taxpayer, a self-employed graphic artist who did not timely file her tax returns was liable for the penalty for failing to timely file, failing to timely pay the tax due, and the penalty for underpayment of estimated tax. In addition, she did not substantiate any of her business expenses, some of which (e.g., purchases at Saks Fifth Avenue and an online shoe retailer) appeared to be personal. Lau, T.C. Memo. 2015-137 (7/30/15)

IRS can collect frivolous return penalties

The Tax Court rejected the taxpayer’s argument that his compensation during 2005 was not taxable because he is a nonfederal worker and his compensation did not constitute wages, and it sustained the IRS’s collection by levy of the taxpayer’s unpaid liability for assessed Sec. 6702 frivolous return penalties and interest. Lovely, T.C. Memo. 2015-135 (7/27/15)



Tax Court finds cost-sharing regulation invalid

The Tax Court held that Regs. Sec. 1.482-7(d)(2) is invalid because the IRS (1) failed to support its belief that unrelated parties would share stock-based compensation costs, (2) failed to satisfy the reasoned decision-making standard in Motor Vehicle Mfrs. Ass’n of the U.S. v. State Farm Mutual Auto Ins. Co., 463 U.S. 29 (1983), and (3) had no reasonable explanation for adopting the regulation. Altera Corp., 145 T.C. No. 3 (7/27/15) (see related news story)



IRS issues updated Priority Guidance Plan

The IRS issued its updated list of 277 projects that are priorities for allocation of IRS resources during the period from July 2015 through June 2016. 2015–2016 Priority Guidance Plan (7/31/15)

Appeals Office did not abuse discretion in rejecting taxpayer’s OIC

The Tax Court held that the taxpayer was not entitled to raise his underlying liability in the Tax Court proceeding because he had a prior opportunity to do so and did not, and the IRS Appeals Office did not abuse its discretion in  sustaining the IRS’s collection actions and rejecting the taxpayer’s offer in compromise. Abu-Dayeh, T.C. Memo. 2015-136 (7/28/15)

Chief Counsel’s Office voices opinion on statute-of-limitation question

The Office of Chief Counsel contrasted its thoughts on a Supreme Court case (Gabelli v. SEC, No. 11-1274 (12/3/2012) that involved a statute of limitation that all parties agreed applied, to a situation where no  statute of limitation was readily identifiable that applied to Sec. 6707 penalties before changes made by the American Jobs Creation Act of 2004. CCA 201531019 (7/31/15)

IRS can issue amended deed to correct error in description of seized property

The Office of Chief Counsel advised that the IRS can issue an amended deed to correct the description of property that was seized and sold. CCA 201531018 (7/31/15)

Partners in non-TEFRA partnership can extend their own Sec. 6501 period

The Chief Counsel’s Office advised that, for a non-TEFRA partnership, only the partners  can extend their own Sec. 6501 statute-of-limitation period using individual Forms 872, Consent to Extend Time to Assess Tax; Form 872-P, Consent to Extend the Time to Assess Tax Attributable to Partnership Items, does not apply to a non-TEFRA partnership because the partnership cannot extend the limitations period. CCA 201531017 (7/31/15)

Only one Sec. 6701 penalty may be assessed against person submitting a false document

The Office of Chief Counsel advised that the IRS can assess only one Sec. 6701 penalty against a person for submitting a false document, even if the document results in multiple taxpayers understating their tax liability, and the IRS can assess only one penalty for all false documents that relate to a single retirement plan’s application for qualified status. CCA 201531015 (7/31/15)



Highway funding bill includes tax provisions

A short-term federal highway funding bill enacted July 31 contains several tax provisions, including changes to the due dates for partnership and C corporation tax returns and several other tax and information returns. It also overrules the Supreme Court’s Home Concrete decision, requires that additional information be reported on mortgage information statements, and requires consistent basis reporting between estates and beneficiaries. Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, H.R. 3236 (see related news story)



Final regs. issued on partners’ distributive shares when partnership interests change

The IRS issued final regulations on partners’ distributive shares of partnership items in any year in which there is a change in a partner’s interest in the partnership, whether because the partner disposed of its entire interest (or less than) or because a partner’s interest in the partnership was reduced as a result of the entry of a new partner or partners. T.D. 9728 (7/31/15) (see related news story)



Marijuana excise tax reduces amount realized on sale of property

The Office of Chief Counsel advised that a taxpayer who paid the state of Washington marijuana excise tax that is levied on marijuana producers, marijuana processors, and marijuana retailers should treat the expenditure as a reduction in the amount realized on the sale of property. Sec. 280E, prohibiting deduction or credit for expenditures in the sale of illegal drugs, does not preclude this result. CCA 201531016 (7/31/15)

Taxpayer can deduct cost of field-packing material

The Tax Court held that the class of items described in Sec. 464 as “feed, seed, fertilizer, or other similar farm supplies,” does not include packing materials as “similar farm supplies.” Therefore, the taxpayer was entitled, under Regs. Sec. 1.162-3, to deduct the cost of field-packing materials in the year of purchase, and not, as the IRS had argued, in the year they were used. Agro-Jal Farming Enters., Inc., 145 T.C. No. 5 (7/30/15)

IRS issues safe-harbor rule for ratable service contracts

A revenue procedure provides a new safe harbor under which a taxpayer using an accrual method of accounting may treat economic performance as occurring on a ratable basis for certain service contracts and provides procedures for obtaining automatic IRS consent to change to the method of accounting described in the procedure. Rev. Proc. 2015-39 (7/30/15) (see related news story)

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.