Document Summaries for the Week of Aug. 1, 2016


Interim guidance issued for CPEOs

The IRS issued interim guidance for persons seeking certification as certified professional employer organizations. Notice 2016-49 (8/5/16).



Proposed regs. issued on valuation of transferred interests

The IRS issued proposed regulations on the valuation of interests in corporations and partnerships for estate, gift, and generation-skipping transfer tax purposes. REG-163113-02 (8/2/16) (see related news story).



New rules proposed for tuition expenses

The IRS issued proposed regulations that would revise the rules for reporting and claiming tax credits or a deduction for qualified tuition and related expenses. REG-131418-14 (8/1/16) (see related news story).

No deduction allowed for unsubstantiated expenses

The Tax Court held that the taxpayer was not entitled to several deductions for expenses for which he either lacked substantiation or lacked a basis in law for deducting and that his expenses for renting his house were limited to the rental income earned because he used the house as his residence. The court said that because the taxpayer did not establish a depreciable basis for another property, which he had not proved he owned, no loss could be deducted on its sale. It also rejected his claim that he could deduct against dividend income expenses incurred to maintain short positions in stock, saying no legal authority supported that claim. Szanto, T.C. Memo. 2016-145 (8/1/16).

Bankruptcy estate is not liable for taxpayer’s self-employment tax

The Tax Court held that a taxpayer who was going through bankruptcy in 2007, and earned self-employment income in that year, was liable for self-employment tax on that income. The court rejected the taxpayer’s argument that his bankruptcy estate was liable for the tax. Sisson, T.C. Memo. 2016-143 (8/1/16).

Taxpayer is liable for civil fraud penalty on evasion of tax on over $800,000 of income

The Tax Court held that a taxpayer who was a lawyer intentionally understated his income by over $800,000 and evaded the payment of tax that he knew he owed on that income. Because the taxpayer failed to submit credible evidence showing that some specific part of the underpayment was not due to fraud and he had been convicted of filing a false federal tax return, the court concluded the taxpayer was also liable for the Sec. 6663 civil fraud penalty. Schwartz, T.C. Memo. 2016-144 (8/1/16).

Taxpayer can deduct expenses related to EMBA degree as unreimbursed business expenses

The Tax Court held that a taxpayer could deduct, as unreimbursed business expenses under Sec. 162, costs relating to his pursuit of an executive master of business administration (EMBA) degree. The courses the taxpayer chose to fulfill his degree requirements, the court noted, did not qualify him for a new trade or business because he was not qualified to perform new tasks or activities with the conferral of his degree even though he lost his job while he was pursuing the degree and obtained another job when he finished. Kopaigora, T.C. Summ. 2016-35 (8/2/16).

Taxpayer failed to show that he was entitled to a dependency exemption or education credit for college-age son

The Tax Court held that the taxpayer was not entitled to a dependency exemption deduction for his son because he failed to show that his son was either a qualifying child or a qualifying relative. As a result, the taxpayer was also not entitled to an American opportunity tax credit for his son’s tuition payments. Cook, T.C. Summ. 2016-36 (8/2/16).



Taxpayer does not have to produce documents for IRS

The Second Circuit Court of Appeals held that a taxpayer does not have to comply with IRS summonses to produce documents related to his offshore accounts, holding that the foregone-conclusion doctrine did not apply to permit the IRS to avoid the taxpayer’s Fifth Amendment privilege against self-incrimination. Greenfield, No. 15-543 (2d Cir. 8/1/16) (see related news story).

Whistleblower award is based on criminal fine and civil forfeitures as well as tax restitution payments

The Tax Court held that, as part of the whistleblower award to which a couple was entitled, the proceeds collected by the IRS on which the award is based includes the criminal fine and civil forfeitures, in addition to the tax restitution payments. The court rejected the IRS’s argument that only the tax restitution payments constituted collected proceeds for purposes of an award under Sec. 7623(b). Whistleblower 21276-13W, 21277-13W, 147 T.C. No. 4 (8/3/16).

Guidance on ITIN renewals

Individuals whose individual taxpayer identification numbers (ITINs) will expire this year under new Code provisions may renew them starting in October, under instructions issued by the IRS. Notice 2016-48 (8/4/16) (see related news story).


Regulations issued on early election of partnership audit procedures

The IRS issued temporary regulations governing elections to have the newly enacted partnership audit procedures apply to certain tax years beginning before Jan. 1, 2018. T.D. 9780 (8/4/16) (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.