Document Summaries for the Week of Sept. 28, 2015
Refund claim for foreign tax credits is untimely
The Office of Chief Counsel advised that a corporation’s claim for refunds relating to foreign tax credits was not timely filed because it was filed more than 10 years after the return was due (without regard to any extension) for the tax year. Further, no informal claim existed before the refund claim was filed because an informal claim exists only if the taxpayer asserts a claim, and the corporation merely informed the IRS of future plans to file a claim. Finally, the IRS did not waive the refund claim requirement by considering the claim after the limitation period had expired because the waiver doctrine applies only if the IRS considers a claim during the limitation period. CCM 201540012 (10/2/15).
Taxpayers’ refund claims relating to foreign tax credits were timely filed
The Office of Chief Counsel advised that two taxpayers’ refund claims relating to foreign tax credits were timely because the taxpayers made the election under Sec. 901 to deduct foreign taxes paid for the years at issue within the 10-year period prescribed by Sec. 6511(d)(3)(A), and the taxpayers filed their claims for refund based on a net operating loss carried from a tax year within the statute-of-limitation period prescribed by Sec. 6511(d)(2)(A) or 6511(c) as extended by agreement. CCM 201540010; CCM 201540011 (10/2/15).
IRS Tax Exempt/Government Entities Division releases list of priorities
The IRS Tax Exempt/Government Entities Division outlined its priorities for fiscal year 2016. TE/GE Priorities for FY 2016 (10/1/15).
Tax-exempt organizations file declaratory judgment suits
The IRS gave notice to potential donors that various organizations listed in the announcement recently filed timely declaratory judgment suits under Sec. 7428 challenging revocation of their status as eligible donees under Sec. 170(c)(2). Sec. 7428(c) gives donors protection for up to $1,000 in donations during the period between the date the revocation notice was published in the Internal Revenue Bulletin and the date a court first determines the organization is not described in Sec. 170(c)(2). Announcement 2015-25 (9/28/15).
Taxpayer did not qualify for medical expense exception for early withdrawal from IRA account
The Tax Court held that the taxpayer was liable for the 10% addition to tax on an early distribution she received from her IRA account and for tax on the IRA distribution itself. While she said that she used the money to pay for her son’s medical expenses, she did not qualify for the exception in Sec. 72(t)(2)(B) for a dependent’s medical expenses paid during the tax year because she did not claim her son as a dependent and failed to demonstrate that her son qualified as one. Ireland, T.C. Summ. 2015-60 (10/1/15).
Form 8300 reporting required for multiple, successive pawn loans between the same parties in a one-year period
The Office of Chief Counsel advised that, for reporting transactions on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, multiple, successive pawn loans between the same parties collateralized with the same personal property are related transactions when the debt from one loan is, in practical terms, shifted to a subsequent loan, even if the loans are separate transactions under state law. Thus, if a pawner pays a pawnbroker in the course of a one-year period more than $10,000 in cash in connection with those related transactions, the pawnbroker must file Form 8300 reporting the transactions. CCM 201540013 (10/2/15).
Taxpayer escapes penalties on employment tax assessments
The Tax Court held that the owner of a defunct disregarded entity proved that the business issued and filed Forms W-2 for the first quarter of 2007. The court thus rejected the Sec. 6651 penalty the IRS assessed for that quarter and the penalties the IRS assessed for all the tax periods at issue. However, IRS Appeals’ determination to proceed with collection by levy of the IRS’s employment tax assessments for 2005 and 2006 was sustained. Scott Labor, LLC, T.C. Memo. 2015-194 (9/29/15).
Amount received from California agency is taxable income
The Tax Court held that the $3,843 the taxpayer received during 2011 from the Health & Human Services Agency of the County of San Diego, Calif., was includible as nonemployee compensation in his gross income for 2011. Hussein, T.C. Summ. 2015-59 (9/29/15).
Lack of evidence proving loan was worthless precludes bad debt deduction
Because a couple did not prove to the court that a loan to a friend’s business became wholly worthless in 2008 or 2009, the Tax Court held they could not deduct the loan as a bad debt for either of those years. Cooper, T.C. Memo. 2015-191 (9/28/15).
Discharge of credit card debt results in taxable income
The Tax Court held that the taxpayer had to recognize discharge-of-indebtedness income as a result of a settlement of his credit card account. The taxpayer’s reliance on alleged statements of the credit card company and IRS employees that hardship rules would permit him to exclude this income were unpersuasive. Dunnigan, T.C. Memo. 2015-190 (9/28/15).
Guidance issued on extension of replacement period for livestock sold on account of drought
The IRS issued guidance on extending the replacement period under Sec. 1033(e) for livestock sold on account of drought in specified counties. Notice 2015-69 (9/29/15).
IRS supplements list of countries qualifying for automatic information exchanges
The IRS issued a revenue procedure adding 16 countries to the list in Rev. Proc. 2014-64 of the countries the IRS has determined that it is appropriate to have an automatic exchange of the information collected under Regs. Secs. 1.6049-4(b)(5) and 1.6049-8, which require reporting deposit interest paid to nonresident aliens. Rev. Proc. 2015-50 (9/29/15).
IRS updates information for exemption from Sec. 4371 excise tax
The IRS updated the mailing address and contact numbers for foreign insurers or reinsurers that request a closing agreement for an exemption from the Sec. 4371 excise tax, formalized certain requirements for obtaining a closing agreement, and made a corresponding change to the form closing agreements in Rev. Proc. 2003-78. Rev. Proc. 2015-46 (9/28/15).
Court finds no abuse of discretion in failure to withdraw a Notice of Federal Tax Lien
The Tax Court held that the IRS Appeals Office did not abuse its discretion in failing to withdraw a Notice of Federal Tax Lien (NFTL) because the NFTL filing was permitted and met all applicable requirements. Shenk, T.C. Memo. 2015-193 (9/28/15).
Partnership cannot remove jurisdiction from Tax Court by conceding items
The Tax Court rejected a partnership’s arguments that adjustments in a final partnership administrative adjustment (FPAA) were improper and did not confer jurisdiction on the Tax Court because they were not disputed or contested items. According to the court, the partnership cannot remove from the Tax Court’s jurisdiction the determinations in the FPAA, and the explanation of items, by conceding these adjustments. American Milling, LP, T.C. Memo. 2015-192 (9/28/15).
IRS asks for comments on defining property qualifying for the energy credit
The IRS anticipates issuing regulations under Sec. 48 to define certain types of property qualifying for the energy credit. These regulations have not been updated since 1987, before the types of property listed were added to Sec. 48(a)(3)(A). As a result, it is requesting comments, by Feb. 16, 2016, on how to define these types of property, specifically, certain equipment using solar energy; certain equipment used to produce, distribute, or use energy derived from a geothermal deposit; qualified fuel cell property; qualified microturbine property; combined heat and power system property; qualified small wind energy property; and equipment using the ground or groundwater as a thermal energy source. Notice 2015-70 (10/2/15).
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.