Document summaries for the week of Jan. 14, 2019
Organization lacks standing to challenge revenue ruling
The Fifth Circuit held that an organization that applied for tax-exempt status under Sec. 501(c)(4) as a social welfare organization did not have standing to challenge the constitutionality of Rev. Rul. 2004-6. Because the organization had no taxable income, the court held, it was not injured by the IRS’s application of the six factors in the revenue ruling and therefore has no standing to sue. Freedom Path, Inc., No. 18-10092 (5th Cir. 1/16/19).
Underpayment penalty waived for certain individuals
The IRS announced that it is waiving the Sec. 6654 penalty for underpayment of estimated income tax for certain individuals who would otherwise have been required to make estimated tax payments for 2018 on or before Jan. 15, 2019. The waiver applies to individuals whose total withholding and estimated tax payments equal or exceed 85% of the tax shown on their 2018 tax return. Notice 2019-11 (1/16/19) (see related news story).
Failure to file valid return keeps limitation period open
The Ninth Circuit affirmed a Tax Court decision holding a married couple liable for a tax deficiency. The IRS’s action against the couple was not barred by the Sec. 6501 statute of limitation because they never filed a valid tax return for the year at issue, the court held. The court also affirmed a $10,000 sanction for filing a frivolous return under Sec. 6673(a)(1)(B). Waltner, No. 17- 72261 (9th Cir. 1/17/19).
Final regs. issued on Sec. 965
The IRS issued final regulations under Sec. 965, the transition tax that applies to the last tax year of a deferred foreign income corporation that begins before Jan. 1, 2018. T.D. XXXX (1/16/19) (see related news story).
Prop. regs. on hybrid arrangements
The IRS issued proposed regulations implementing Secs. 245A(e) and 267A regarding hybrid dividends and certain amounts paid or accrued in hybrid transactions or with hybrid entities. REG-104352-18 (1/14/19).
IRS issues updated contingency plan
The IRS issued an updated contingency plan governing its tax season operations during the partial government shutdown. Fiscal Year 2019 Lapsed Appropriations Contingency Plan (1/15/19) (see related news story).
Tax Court releases no opinions
The U.S. Tax Court remains closed due to the partial government shutdown and did not release any opinions for the week of Jan. 14, 2019.
IRS issues no determination letters
The IRS issued no private letter rulings, technical advice memoranda, or Chief Counsel advice for the week of Jan. 14, 2019.
Qualified real property expense election procedures issued
The IRS described how taxpayers can elect under Sec. 179(a) to expense the cost of qualified real property and how to change the depreciation computation for certain assets to the Sec. 168(g) alternative depreciation system for tax years beginning before 2018. Rev. Proc. 2019-08 (1/14/19).
Final regs. issued on Sec. 199A deduction
The IRS issued final regulations on the deduction available for qualified business income under Sec. 199A. The final regulations adopt with modifications proposed regulations (REG-107892) issued in August 2018. T.D. XXXX (1/18/19) (see related news story).
Prop. regs. issued on previously suspended losses and Sec. 199A
The IRS issued proposed regulations that provide guidance on the treatment of previously suspended losses that constitute qualified business income for purposes of Sec. 199A. The proposed regulations also provide guidance on the determination of the Sec. 199A deduction for taxpayers that hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts. REG-134652-18 (1/18/19) (see related news story).
IRS issues guidance on calculating W-2 wages for purposes of Sec. 199A deduction
The IRS issued a revenue procedure that provides three methods for calculating W-2 wages (1) for purposes of Sec. 199A(b)(2), which, for certain taxpayers, provides a limitation based on W-2 wages to the amount of the Sec. 199A deduction available for qualified business income (QBI); and (2) for purposes of Sec. 199A(b)(7), which, for certain specified agricultural and horticultural cooperative patrons, provides a reduction to the Sec. 199A deduction based on W-2 wages. The first method (the “unmodified box” method) allows for a simplified calculation while the second and third methods (the “modified box 1” method and the “tracking wages” method) provide greater accuracy. Rev. Proc. 2019-11 (1/18/19) (see related news story).
Proposed Sec. 199A revenue ruling provides safe harbor for rental real estate enterprises
The IRS issued a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of Sec. 199A and related regulations. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure and, if an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of Sec. 199A if the enterprise otherwise meets the definition of trade or business in Regs. Sec. 1.199A-1(b)(14). Notice 2019-07 (1/18/19) (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.