Document Summaries for the Week of Jan. 23, 2017


Proposed rules on nuclear decommissioning costs

Proposed regulations provide rules under Sec. 468A concerning deductions for amounts contributed to a qualified nuclear decommissioning reserve fund and the use of the amounts in those funds to decommission nuclear plants. REG-112800-16 (1/23/17).



Defined benefit plan mortality tables issued

The IRS issued proposed regulations prescribing the mortality tables to be used by most defined benefit pension plans. REG-112324-15 (1/23/17).



CEO allowed no reasonable cause defense

The U.S. District Court for the Northern District of California held that a chief executive officer was liable for his companies’ trust fund recovery penalty taxes, rejecting his reasonable cause defense because the Ninth Circuit, to which an appeal of the case would lie, does not accept that reasonable cause can negate liability under Sec. 6672. Liddle, No. 14-cv-04761-BLF (N.D. Cal. 1/23/17).



Lawyer’s home refinancing expenditures are not deductible business expenses

The Tax Court held that, while expenses a lawyer incurred in refinancing his home may have benefited his law firm because he used the funds to finance his failing law practice, the expenses were not deductible because the primary reason for the expenses, to avoid losing the house and its equity, was personal. As an alternative, the court found that even if the refinancing primarily benefited the taxpayer’s law firm, the expenses were not deductible because he did not substantiate the amount of those expenditures. Goldsmith, T.C. Memo. 2017-20 (1/26/17).

Taxpayer fails to substantiate propane purchases; no refundable fuel tax credit allowed

The Tax Court held that a taxpayer was not entitled to a refundable fuel tax credit under Sec. 34(a)(3) for certain propane purchases that he claimed he made on behalf of a not-for-profit church where he volunteered, because he failed to carry his burden of establishing that the church used any of that propane in its educational program’s space heaters or for any other purpose during the year for which he claimed the credit, 2011. The taxpayer’s bank statements and other records suggested that the taxpayer made the propane purchases for which he claimed the credit and supplied the fuel to the church in 2009 and 2010. Ibeagwa, T.C. Memo. 2017-19 (1/26/17).



Regulations on dividend equivalent rules

Final, temporary, and proposed regulations provide guidance to nonresident alien individuals and foreign corporations that hold certain financial products providing for payments that are contingent upon or determined by reference to U.S.-source dividend payments. The regulations also provide guidance to withholding agents that are responsible for withholding U.S. tax with respect to a dividend equivalent, as well as certain other parties to Sec. 871(m) transactions and their agents. T.D. 9815; REG-135122-16 (1/24/17)

Final regs. provide guidance on PFICs

The IRS issued final regulations to provide guidance on determining ownership of a passive foreign investment company (PFIC) and on certain annual reporting requirements for shareholders of PFICs to file Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. The regulations also provide guidance on an exception to the requirement for certain shareholders of foreign corporations to file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. T.D. 9806 (1/23/17).



Executive order requires relief from PPACA fiscal burdens

An executive order requires all agencies with authorities and responsibilities under the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, to exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the PPACA that would impose a fiscal burden on any state or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications. Executive Order: Minimizing the Economic Burden of the Patient Protection and Affordable Care Act (1/24/17).

Agencies required to institute regulatory freeze

Heads of executive departments and agencies were told not to submit regulations to the Office of the Federal Register, to withdraw submitted but not yet published regulations, and to postpone for 60 days the effective date of published but not yet effective regulations. Memorandum for the Heads of Executive Departments and Agencies (1/20/17).



IRS updates list of tribes that have settled tribal trust cases

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 2017-2 (1/23/17).



Regs. issued on qualifying income exception for publicly traded partnerships

The IRS issued final regulations under Sec. 7704(d)(1)(E) relating to the qualifying-income exception for publicly traded partnerships to not be treated as corporations for federal income tax purposes. T.D. 9817 (1/24/17).



S shareholders not entitled to deduction for trust fund recovery penalties incurred in prior years

The Tax Court held that a couple who were shareholders of an S corporation that was administratively dissolved in 2007 but that filed a tax return for 2012 showing no assets, income, or other tax items other than a deduction of $180,911 relating to trust fund recovery penalties could not deduct the losses passed through by that S corporation as an ordinary business loss. The court concluded that, even if the corporation’s liability for the penalties arose from the conduct of a prior trade or business, the S corporation was not entitled to the deduction because the corporation no longer existed, and, even if it did exist, no deduction would have been allowed because the payment related to nondeductible trust fund recovery penalties assessed against the couple. Brown, T.C. Memo. 2017-18 (1/24/17).

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.