Document summaries for the week of Feb. 26, 2018
IRS notifies donors of stipulated decisions
The IRS served notice to potential donors of stipulated decisions by the U.S. Tax Court that two organizations are qualified under Sec. 501(c)(3) and described in Sec. 170(c)(2) and that a third organization is not thus qualified or described. Announcement 2018-01, Announcement 2018-02, Announcement 2018-03 (2/26/18).
IRS extends certain hurricane relief for Puerto Rico and U.S. Virgin Islands residents
The IRS issued guidance extending the relief provided in Notice 2017-56 to 268 days, effective beginning Sept. 6, 2017, and ending May 31, 2018, for residents of Puerto Rico and the U.S. Virgin Islands who evacuated or could not return because of Hurricane Irma or Hurricane Maria. Absent this relief, most of those individuals might otherwise lose their status as “bona fide residents” of the territories for tax filing and reporting purposes. Notice 2018-19 (2/27/18).
Income from selling gravel mined from Native American land is not excludable from income
The Tax Court held that income a couple earned from selling gravel mined from Seneca Nation land is taxable income that is not excluded either by treaty or by the General Allotment Act of 1887. The court also held that the couple were liable for additions to tax under Sec. 6651(a)(1) but found that, they were not liable for a penalty under Sec. 6662(a), because the IRS had not met its burden of production. Perkins, 150 T.C. No. 6 (3/1/18).
Taxpayer liable for deficiencies on substitute returns where he failed to prove IRS’s determinations were incorrect
The Tax Court sustained tax deficiencies shown on substitute returns prepared by the IRS for a taxpayer who failed to file returns for 2010, 2011, and 2012. The court found that the taxpayer failed to prove by a preponderance of the evidence that the IRS determinations were incorrect. Rushing, T.C. Memo. 2018-23 (2/28/18).
Court asks IRS to clarify why it precluded taxpayer’s challenge
The Tax Court partially granted an IRS motion for summary judgment after finding a taxpayer liable for unpaid income tax for his 2003 through 2006 tax years. However, the court remanded a portion of the case to IRS Appeals, which the court directed to clarify the grounds on which it relied in precluding the taxpayer from challenging his 2007 and 2009 tax liabilities. Walker, T.C. Memo. 2018-22 (2/26/18).
IRS intends to issue regulations on taxation of carried interests
The IRS announced that it intends to issue regulations providing guidance on the application of Sec. 1061, which provides rules relating to the taxation of carried interests. According to the IRS, those regulations will provide that the term “corporation” for purposes of Sec. 1061(c)(4)(A) does not include an S corporation, thereby preventing taxpayers from using S corporations to avoid the three-year holding period rule for carried interests. Notice 2018-18 (3/1/18) (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.