Document Summaries for the Week of July 4, 2016
IRS notifies potential donors of stipulated decision
The IRS served notice to potential donors of a stipulated Tax Court decision in declaratory judgment proceedings under Sec. 7428 that, effective Jan. 15, 2016, the listed organization, the Arseny and Olga Kovshar Private Charitable Foundation, is not qualified as an organization described in Sec. 501(c)(3), is not exempt from taxation under Sec. 501(a), and is not an organization described in Sec. 170(c)(2). Announcement 2016-23 (7/5/16).
Sec. 501(c)(4) notification procedure issued
The IRS set forth the procedure for an organization to notify the IRS that it is operating as an organization described in Sec. 501(c)(4). T.D. 9775; Rev. Proc. 2016-41 (7/8/16) (see related news story).
Taxpayer cannot deduct mortgage interest on girlfriend’s home
The Tax Court held that a taxpayer was not entitled to deductions for qualified residence interest that he claimed on Schedule A, Itemized Deductions. The taxpayer, who said he paid the amounts in cash and therefore had no record of the payments, failed to show that he paid any mortgage interest on the home, which was owned by his girlfriend, or that he held any ownership interest in the residence. Jackson, T.C. Summ. 2016-33 (7/5/16).
Profit motive present, but penalties still apply
The Tax Court held that a taxpayer who restored vintage Plymouth automobiles was entitled to some of the deductions from the venture because, even though his business practices were unsophisticated, he ran it in a business-like manner. However, the taxpayer failed to substantiate many of the expenses from that activity and his patent law practice, so the court disallowed those deductions and upheld the IRS’s penalties. Main, T.C. Memo. 2016-127 (7/5/16).
Failure to make good-faith effort to ascertain tax liability leads to accuracy-related penalty
The Tax Court held that a couple was liable for an accuracy-related penalty resulting from unreported income. The court found that the couple, who had their return prepared by a tax professional, did not make a good-faith effort to ascertain their 2012 tax liability correctly because they failed to review the return before it was filed. Sweeney, T.C. Summ. 2016-32 (7/5/16).
Taxpayer who received deficiency notice was precluded from challenging underlying tax liabilities
The Tax Court held that an IRS settlement officer did not abuse her discretion by determining that the IRS should proceed with collection activities against the taxpayer. The court noted that, because the taxpayer received a notice of deficiency, he was thereby precluded under Sec. 6330(c)(2)(B) from challenging the underlying tax liabilities in a subsequent IRS hearing or in a Tax Court proceeding. He was also subject to the $5,000 penalty for filing frivolous returns. Evans, T.C. Summ. 2016-34 (7/5/16).
IRS announces disciplinary sanctions
The IRS Office of Professional Responsibility announced recent disciplinary sanctions against attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers. Announcement 2016-21 (7/5/16).
List of Indian tribes that have settled tribal trust cases updated
The IRS updated the appendix to Notice 2013-1, which lists the Indian tribes that have settled tribal trust cases against the United States. Notice 2016-41 (7/5/16).
Tax Court lacks jurisdiction to review propriety of crediting couple’s overpayment to earlier year
The Tax Court held that, because the IRS established that the crediting of a couple’s 2011 tax overpayment to a 2009 tax liability was consistent with established practice, the documentation that the IRS submitted was reliable evidence that the overpayment was, in fact, credited. In addition, the court found that, because Sec. 6402 allows for the crediting of refunds shown on a return before a final determination of the taxpayer's tax liability for the year covered by the return, the couple’s 2011 overpayment was credited against their 2009 tax liability under Sec. 6402 and, consequently, the Tax Court had no jurisdiction to review the propriety of the credit. Luque, T.C. Memo. 2016-128 (7/7/16).
National taxpayer advocate releases report to Congress
The national taxpayer advocate issued her annual report to Congress. FY 2017 Objectives Report to Congress (7/7/16) (see related news story).
Guidance issued on money market fund accounting methods
The IRS issued final regulations and a revenue procedure providing a simplified method of accounting for gains and losses on shares in money market funds. T.D. 9774; Rev. Proc. 2016-39 (7/7/16) (see related news story).
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.