Document summaries for the week of September 3, 2018
Excise tax relief for RICs that have income inclusions under Sec. 965
The IRS provided guidance under Sec. 4982 for regulated investment companies on the treatment of amounts that Sec. 965 requires to be included in gross income under Sec. 951(a)(1) for the excise tax year ended Dec. 31, 2017. Rev. Proc. 2018-47 (9/6/18).
Adjustments for passive foreign investment company income
The taxpayers had originally omitted income from passive foreign investment companies (PFIC) they invested in until the investments were disclosed by UBS Bank’s response to a John Doe summons, at which time they filed amended returns. After the taxpayers disclosed the items on the amended returns, the IRS issued notices of deficiency for 2006, 2007, and 2008. The taxpayers argued that the deficiency notices were time-barred. The Tax Court had to determine whether PFIC income from earlier years was included in determining whether a six-year statute of limitation applied. The Tax Court held that non–current year PFIC income was not included. As a result, the IRS’s assessment was time-barred for 2007 and 2008, but not for 2006. Toso, 151 T.C. No. 4 (9/4/18).
Student loan payments qualify as alimony
The Tax Court held that payments the taxpayer made toward student loans incurred by his former spouse qualified as alimony payments. Vanderhal, T.C. Summ. 2018-41 (9/5/18).
Business payments to state or local tax credit programs are deductible business expenses
The IRS clarified in a news release that business taxpayers that make business-related payments to charities or government entities for which the taxpayers receive state or local tax credits can generally deduct the payments as business expenses. IR-2018-178 (9/5/18).
IRS issues quarterly interest rates for tax overpayments and underpayments
The IRS issued the rates for interest on tax overpayments and underpayments for the fourth calendar quarter of 2018. The interest rates will remain unchanged: 5% for overpayments (4% in the case of a corporation), 5% for underpayments, 2.5% for the portion of a corporate overpayment exceeding $10,000, and 7% for large corporate underpayments. Rev. Rul. 2018-25 (9/7/17).
S corp. did not overreport its gross receipts; shareholders not entitled to claimed deductions
An S corporation owned by two couples omitted $60,000 from its gross receipts, which the taxpayers unsuccessfully argued was a loan from a relative. They also claimed that the S corporation’s income should be reduced for cost of goods sold, but they failed to prove the costs were actually incurred. Finally, both couples claimed expenses for vehicles used in the S corporation’s business, but they failed to substantiate them. Berry, T.C. Memo. 2018-143 (9/4/18).
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.