Document Summaries for the Week of Jan. 4, 2016
IRS to issue employee plan guidance in anticipation of eliminating the five-year remedial amendment cycle system
In anticipation of its elimination, effective Jan. 1, 2017, of the five-year remedial amendment cycle system for individually designed plans under the Employee Plans determination letter program, the IRS said that it will issue guidance with respect to (1) Cycle A elections made by controlled groups and affiliated service groups; (2) expiration dates on determination letters issued before Jan. 4, 2016; and (3) an extension of the deadline for certain employers to adopt a defined contribution preapproved plan and apply, if permissible, for a determination letter within the current six-year cycle. Notice 2016-3 (1/4/16).
Donee reporting rules withdrawn
The IRS withdrew proposed regulations it issued in September that would have allowed charities to file information returns with the IRS and donors instead of providing contemporaneous written acknowledgments of charitable donations (REG-138344-13) (see related news story).
Couple liable for substantial penalties relating to denied deduction for conservation easement contribution
The Tax Court held that a couple were not entitled to a conservation easement deduction because they failed to include a qualified appraisal with their tax return. The court also found them liable for a 20% penalty under Secs. 6662(a) and (b)(1) for disregarding rules and regulations and the 40% gross-valuation-misstatement penalty under Sec. 6662(h). Gemperle, T.C. Memo. 2016-1 (1/4/16).
IRS can go after taxpayer who did not report $400,000 “gift” from ex-boyfriend
The Tax Court held that the IRS was not collaterally estopped from litigating a state court’s finding that cash and property received by a taxpayer from a former boyfriend were gifts because the taxpayer failed to demonstrate that the IRS was in privity with a party to the state court action. The court also denied the taxpayer’s motion for summary adjudication that the doctrine of rescission applied to eliminate from her gross income the $400,000 that she received from the former boyfriend, which she claimed she repaid in a subsequent year, because she did not in the year of receipt repay the amount or recognize a liability under an existing and fixed obligation to repay it. Blagaich, T.C. Memo. 2016-2 (1/4/16).
Form 8332 can be used to give a noncustodial parent the dependency exemption for all future years
In addressing whether a noncustodial parent or the custodial parent should be allowed a dependency exemption, the Office of Chief Counsel advised that Form 8332, Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent, may be executed to apply to all future years. Under Regs. Sec. 1.152-4(e)(1)(ii), a Form 8332 that specifies all future years is treated as specifying the first tax year after the tax year of execution and all tax years after that. In this case, the custodial parent’s claim that she did not sign the form has no effect on this because her remedy is against the noncustodial parent, not the IRS. However, if she did not intend to release the dependency exemption for all future years, the regulations under Sec. 152 allow her to revoke the release for the first calendar year after the year in which she revokes the release. CCA 201602009 (1/8/16).
Letter ruling procedures revised
The IRS issued its annual revised procedures for letter rulings and information letters issued by its associate chief counsel in the areas of Corporate, Financial Institutions and Products, Income Tax and Accounting, International, Passthroughs and Special Industries, Procedure and Administration, and Tax Exempt and Government Entities. The procedures have also been revised for determination letters issued by the IRS divisions of Large Business and International, Small Business/Self-Employed, Wage and Investment, and Tax Exempt and Government Entities. Rev. Proc. 2016-1 (1/4/16).
IRS updates procedures for technical advice
The IRS explained when and how its associate chief counsel in the areas of Corporate, Financial Institutions and Products, Income Tax and Accounting, International, Passthroughs and Special Industries, Procedure and Administration, and Tax Exempt and Government Entities provide technical advice memoranda (TAMs) to a director or an area director. The IRS also explained taxpayers’ rights when a field office requests a TAM regarding a tax matter. Rev. Proc. 2016-2 (1/4/16).
IRS issues domestic no-rulings list
The IRS issued its annual list of domestic tax issues on which it will not issue letter rulings or determination letters. Rev. Proc. 2016-3 (1/4/16).
Updated procedures for guidance on tax-exempt issues
The IRS updated the procedures for furnishing guidance to taxpayers on issues under the jurisdiction of the commissioner, Tax Exempt and Government Entities Division. Rev. Proc. 2016-4 (1/4/16).
Procedures issued for determination letters on exempt status
The IRS updated and merged Rev. Procs. 2015-5 and 2015-9 into one annual revenue procedure and provided the procedures for issuing determination letters on the exempt status of certain organizations under Secs. 501 and 521. Rev. Proc. 2016-5 (1/4/16).
Rules updated for determination letters on qualified plans
The IRS revised its procedures for issuing determination letters on the qualified status of employee plans under Secs. 401(a), 403(a), 409, and 4975. Rev. Proc. 2016-6 (1/4/16).
IRS issues international no-rulings list
The IRS issued its annual list of international tax issues on which it will not issue rulings or determination letters. Rev. Proc. 2016-7 (1/4/16).
Guidance on employee plan and exempt organization determination letters
The IRS issued guidance on complying with its user fee program pertaining to requests for employee plan letter rulings, determination letters, advisory letters, and Voluntary Correction Program submissions and for determination letters submitted by or on behalf of exempt organizations on matters under the jurisdiction of the IRS’s Tax Exempt and Government Entities Division. Rev. Proc. 2016-8 (1/4/16).
Failure to put offer on the table precludes finding that IRS abused its discretion in sustaining a proposed levy action
The Tax Court held that the IRS did not abuse its discretion by sustaining a proposed levy action against the taxpayer. The court noted that while the taxpayer may have indicated his interest in an installment agreement, he never proposed a specific amount or set forth a payment schedule. Rebuck, T.C. Memo. 2016-3 (1/5/16).
Chief Counsel’s office addresses the effect of Sec. 6213(f) on the assessment statute expiration date
The Office of Chief Counsel addressed a question about the effect of Sec. 6213(f), which normally suspends the period for filing a Tax Court petition if the taxpayer has a bankruptcy case pending. When a taxpayer has consented to assessment during the Sec. 6213(f) tolled period by waiving the restrictions on assessment, it is no different than if the taxpayer gets a notice of deficiency and immediately signs a waiver and consents to assessment and then files a petition with the Tax Court. CCA 201602011 (1/8/16).
IRS personnel should have Form 872 signed in same manner as related tax return
The Office of Chief Counsel, advised that IRS personnel should ensure that a Form 872, Consent Fixing Period of Limitation Upon Assessment of Income Tax, is signed the same way that the tax return is signed. If a name has changed between the signing of the return and the Form 872, the Form 872 should be signed with the “new name, formerly known as” formula (Internal Revenue Manual Section 184.108.40.206.2). However, the Chief Counsel’s Office noted, if the Form 872 is signed in a different manner than the tax return, it is still valid. CCA 201602010 (1/8/16).
Levy was not part of electronic federal payment levy program
The Office of Chief Counsel advised that a particular levy was not part of the electronic federal payment levy program and thus could not be a Sec. 6331(h) levy because of current IRS practice. In that case, the Chief Counsel’s Office said, the levy fell either under Sec. 6331(a) (allowing the IRS to levy on whatever payment is due at the time of the levy), or Sec. 6331(e) (allowing the IRS to levy on the payment now due, and the future stream of payments due in the future). CCA 201602008 (1/8/16).
Payments to attorney not subject to Sec. 6331(h) levy
The Office of Chief Counsel advised that, even though payments to an attorney may be considered federal payments, the IRS has implemented Sec. 6331(h) by servicing electronic levies only on other federal agencies in a program called the “Federal Payment Levy Program.” It does not rely on Sec. 6331(h) to serve any other type of levies. The payment is instead subject to a Sec. 6331(a) or (e) levy and the definition of wages is broad enough to treat these payments as continuous wage levies. CCA 201602007 (1/8/16).
Levies are treated as wage levies
The Office of Chief Counsel advised that even though payments to an attorney may be considered federal payments, the IRS has only implemented Sec. 6331(h) by servicing electronic levies on other federal agencies in the “Federal Payment Levy Program.” It does not rely on Sec. 6331(h) to service any other levies and this payment is thus treated as either an (a) or an (e) (wage) levy. CCA 201602006 (1/8/16).
Chief Counsel’s office recommends describing a transaction as a deed in lieu of as opposed to a foreclosure
With respect to an issue involving a bad debt deduction, the Office of Chief Counsel advised that Form 886-A, Explanations of Items, describe the underlying transaction as a deed in lieu of foreclosure (instead of a foreclosure sale). According to the Chief Counsel’s Office, the Form 866-A should specifically set forth the facts supporting a deed in lieu of foreclosure characterization to make it clear, in the event the case goes to appeals, that there is no bid price under Reg. 1.166-6(b), and therefore, no bad debt deduction. CCA 201602005 (1/8/16).
IP PIN notices sent with wrong tax year
Notices sent to identity theft victims that contain the identity protection personal identification numbers (IP PINs) they must use to file their tax returns mistakenly state that the IP PIN is for the 2014 tax year, rather than the correct 2015 tax year. Filing Season Update on IP PINs (1/5/16) (see related news story).
IRS provides tax relief to Mississippi storm victims
The IRS announced that victims of storms in counties in Mississippi that have been declared disaster areas by the Federal Emergency Management Agency will have until May 16, 2016, to file their tax returns and pay any taxes due. Workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief. IR-2016-02 (1/7/16).
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.