Document summaries for the week of July 31, 2017
Revised procedures for suspension of benefits for certain DB plans
The IRS revised the procedures for applying for Treasury Department approval of a suspension of benefits under a multiemployer defined benefit pension plan that is in critical and declining status under Sec. 432(e)(9). Rev. Proc. 2017-43 (7/31/17).
Union Pacific wins $75 million refund suit
A railroad is entitled to a $75 million refund for taxes paid under the Railroad Retirement Tax Act, the Eighth Circuit held. The Act does not require the railroad to pay taxes when it paid its employees in company stock or made ratification payments to union-member employees. Union Pacific R.R. Co., No. 16-3574 (8th Cir. 8/1/17).
Taxpayer cannot deduct vehicle expenses where wholly owned corporation owned the vehicle
The Tax Court held that a taxpayer, who worked as an independent contractor for FedEx, was not entitled to deductions for unsubstantiated contract labor, depreciation, and Sec. 179 expenses relating to a vehicle used for the FedEx work, and vehicle repair and maintenance expenses. The vehicle at issue was leased by a corporation incorporated by the taxpayer and that corporation, the court said, had presumably deducted the lease expenses. Drah, T.C. Memo. 2017-149 (7/31/17).
Tax benefits denied where taxpayer failed to prove that his child lived with him for more than half the year
The Tax Court held that a taxpayer was not entitled to (1) a dependency exemption deduction, (2) a child tax credit, (3) an earned income tax credit (EITC), and (4) head of household filing status. The court found that the taxpayer failed to establish that his daughter had the same principal place of abode as the taxpayer for more than one-half the year, and failed to show he provided more than half of her support, and thus the child was not the taxpayer’s qualifying child or qualifying relative within the meaning of Sec. 152(c) or Sec. 152(d). Gachette, T.C. Summ. 2017-59 (7/31/17).
Transferee liable for company's tax bill
The Eleventh Circuit held that a taxpayer is liable as a transferee under Sec. 6901 for his former employer's unpaid taxes, even though he was a victim of fraud by other shareholders of the company. Kardash, No. 16-14254 (11th Cir. 8/4/17).
Losses from CARDS transactions are not deductible; taxpayers liable for 40% penalty
The Tax Court held that a partnership and its partners were not entitled to deduct losses and fees associated with Custom Adjustable Rate Debt Structure (CARDS) transactions for tax year 2000 because the transactions lacked economic substance. The Tax Court also sustained the IRS’s determination that the taxpayers were liable for the 40 percent accuracy-related penalty for gross valuation misstatements with respect to the losses because the taxpayers failed to establish the reasonable cause and good-faith defense to the penalty. Curtis Investment Co., LLC, T.C. Memo. 2017-150 (8/2/17).
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.