Document summaries for the week of Dec. 25, 2017
IRS issues December interest rate notice
The IRS issued guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3), and the 24-month average segment rates under Sec. 430(h)(2). In addition, the notice provides guidance as to the interest rate on 30-year Treasury securities under Sec. 417(e)(3)(A)(ii)(II), as in effect for plan years beginning before 2008, and the 30-year Treasury weighted average rate under Sec. 431(c)(6)(E)(ii)(I). Notice 2017-76 (12/26/17).
Guidance on pre-2009 Sec. 457A deferrals
The IRS provided guidance on the application of Secs. 409A and 457A and the transition provisions enacted as part of Sec. 457A that generally provide that amounts deferred and attributable to services performed before Jan. 1, 2009, that would otherwise have been subject to inclusion in income under Sec. 457A, are includible in gross income in the later of the last tax year beginning before 2018 or the date of vesting. Notice 2017-75 (12/26/17).
Tax-exempt hospital group must allocate remuneration paid by aggregated group members subject to Sec. 162(m)(6) deduction limit
The Office of Chief Counsel was asked whether remuneration paid to an individual by a tax-exempt hospital and by a covered health insurance provider, both of which are part of an aggregated group, is otherwise deductible by the tax-exempt hospital in light of the deduction limitation under Sec. 162(m)(6). The Chief Counsel’s Office advised that the remuneration paid by the tax-exempt hospital is otherwise deductible and is taken into account in applying the deduction limitation under Sec. 162(m)(6), but the limitation must be allocated pro rata between the two entities. CCA 201752008 (12/29/17).
Master’s degree and certificate of clinical competency qualified taxpayer for new jobs
The Tax Court held that a taxpayer was not eligible for an education expense deduction on her 2013 return because it appeared that the tasks and activities that the taxpayer was qualified to perform after earning a master’s degree and a certificate of clinical competency, which qualified her as a medical speech pathologist, were significantly different from those she could perform before. Specifically, the court noted that, before, the taxpayer could not work at a hospital and perform “barium swallow studies,” tasks that she was eligible to perform afterward. Colliver, T.C. Summ. 2017-93 (12/26/17).
Failure to properly substantiate travel, meals, and entertainment expenses precludes their deduction
The Tax Court held that a taxpayer’s activities as an insurance agent and educator during 2013 constituted trades or businesses under Sec. 162. However, the court denied the taxpayer’s deductions for travel, meals, and entertainment expenses because, the court said, the taxpayer had failed to satisfy the heightened substantiation requirements of Sec. 274(d). Gollnick, T.C. Summ. 2017-94 (12/26/17).
Court denies innocent spouse relief after finding no evidence of abuse or financial control by ex-husband
The Tax Court held that a taxpayer was not entitled to innocent spouse relief from her 2013 joint tax return liability after the court reviewed the relevant factors in Rev. Proc. 2013-34 and concluded that those factors did not favor relief for the taxpayer. The court noted that there was no evidence of abuse or exercise of financial control by the taxpayer’s ex-husband and concluded that the taxpayer should have known of the understatement reflected on the return. Lessard, T.C. Summ. 2017-95 (12/27/17).
IRS properly assessed 40% penalty on charitable deduction denied by IRS
The Tax Court held that, regarding a 40% penalty assessed on a couple for a conservation easement charitable deduction that was subsequently denied, the IRS complied with the requirements of Sec. 6751(b) in assessing the penalty even though the notice of deficiency mistakenly included only a 20% penalty. Because the IRS corrected the penalty amount in its answer to the taxpayers’ tax court petition, the couple was liable for the 40% penalty. The court also denied a deduction for the repayment of proceeds from a state tax credit that had been sold and had to subsequently be repaid when the charitable deduction was denied. Roth, T.C. Memo. 2017-248 (12/28/17).
IRS suspends application of new Sec. 1446(f) for dispositions of certain publicly traded partnership interests
The IRS issued a notice announcing the suspension of the application of new Sec. 1446(f) in the case of a disposition of certain publicly traded partnership interests. The notice provides background on new Sec. 864(c)(8) and Sec. 1446(f) and describes the revised timeline for the application of new Sec. 1446(f) to a disposition of certain interests in publicly traded partnerships. Notice 2018-08 (12/29/17).
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.