Document Summaries for the Week Feb. 27, 2017

EMPLOYEE BENEFITS

IRS extends period for furnishing written qualified small employer HRA notices to eligible employees

The IRS has extended the period for an employer to furnish an initial written notice to its eligible employees regarding a qualified small employer health reimbursement arrangement (QSEHRA) under Sec. 9831(d) (which was enacted Dec. 13, 2016) to 90 days after the IRS issues guidance on how to  furnish the written notice. An eligible employer (generally an employer with fewer than 50 full-time employees, including full-time equivalent employees, that does not offer a group health plan to any of its employees) may provide a QSEHRA to its eligible employees and must notify its employees of the QSEHRA within 90 days of the enactment of the new provision or be subject to a penalty under Sec. 6652(o). The due date for the notice (90 days after enactment) is Mar. 13, 2017, but the IRS is extending the notice due date until after guidance is issued. Notice 2017-20 (2/27/17).

INDIVIDUALS

Court rejects taxpayer’s positions, warns of future Sec. 6673 penalty

The Tax Court held that (1) it would not grant a taxpayer’s motion to reopen the record in his case because it would be pointless; (2) the IRS properly verified that notices of deficiency for 2008 and 2009 were mailed to the taxpayer; (3) the taxpayer could not challenge his underlying tax liabilities for 2008 and 2009 because he did not properly raise them during his CDP hearing; and (4) the IRS did not abuse its discretion by denying the taxpayer a face-to-face hearing because it would not have been productive, considering other opportunities he had been given. The court did reject the IRS’s argument that the taxpayer should pay a penalty under Sec. 6673(a)(1) for frivolous and groundless arguments but admonished the taxpayer that if he persisted in maintaining groundless positions or instituting or maintaining proceedings primarily for delay, he could expect a penalty in the future. Ertelt, T.C. Memo. 2017-41 (3/1/17).

Charitable contribution deduction of airplane does not fly with IRS

The Tax Court held that a taxpayer was not entitled to a charitable contribution deduction of $338,080 for his alleged gift to a charitable organization of an interest in a 40-year-old airplane. The court concluded that the taxpayer failed to satisfy the substantiation requirements of Sec. 170(f)(12) because he did not provide a contemporaneous written acknowledgment from the donee organization meeting the requirements of Sec. 170(f)(12)(B). Izen, 148 T.C. No. 5 (3/1/17). 

IRS PROCEDURE

IRS provides state population figures

The IRS provided the resident population figures for the 50 states, the District of Columbia, Puerto Rico, and the insular areas for purposes of determining the 2017 calendar-year state housing credit ceiling under Sec. 42(h), the private activity bond volume cap under Sec. 146, and the private activity bond volume limit under Sec. 142(k). Notice 2017-19 (2/27/17).

S CORPORATIONS

S corporation owner lacked sufficient basis to deduct corporation’s losses

The Tax Court held that the sole owner of an S corporation did not have sufficient basis in his S corporation at the end of 2010 on account of his obligation for the S corporation’s debt to a bank and thus could not deduct $110,480 of losses that had flowed through to him from the S corporation. According to the court, the taxpayer presented no evidence to support a finding that the bank looked primarily to him, as opposed to the S corporation, for repayment of the loan. Tinsley, T.C. Summ. 2017-9 (2/28/17).