Document summaries for the week of Nov. 4, 2019

Tax document summaries for the week of Nov. 4–8, 2019, covering corporations, individuals, and more.

CORPORATIONS

Federal Circuit modifies and affirms opinion on infrastructure grant

The Federal Circuit modified and reissued an opinion after a rehearing en banc. The revised opinion affirmed a lower court’s determination that the amount of an infrastructure cash grant under Section 1603 of the American Recovery and Reinvestment Act of 2009, P.L. 111-5 (which provides such grants in lieu of Sec. 48 tax credits), was correct. WestRock Virginia Corp., No. 2018-1877 (Fed. Cir. 11/4/19).

 

EMPLOYEE BENEFITS

Retirement plan contribution limits issued for 2020

The IRS issued a notice providing the annual cost-of-living adjustments (COLAs) for retirement-related plans, such as 401(k) plans and individual retirement plans, for 2020. The notice also provides adjustments relating to the limits on deferrals under certain deferred compensation plans and the income limitations for determining the retirement savings contributions credit. Notice 2019-59 (11/6/19) (see related news story).

Life expectancy tables updated

The IRS issued proposed regulations to update the life expectancy and distribution period tables in Regs. Sec. 1.401(a)(9)-9 to reflect current life expectancies. The tables are used to calculate required minimum distributions from qualified retirement plans, IRAs, and so forth. REG-132210-18 (11/8/19).

 

INDIVIDUALS

Court affirms return preparer's conviction

The Fifth Circuit affirmed a tax return preparer's conviction (and 64-month prison sentence) for willfully assisting the preparation of false tax returns, but it directed the lower court to reconsider the amount of restitution he must pay. Ramseur, No. 18-11591 (11/5/19).

Taxpayer can deduct travel costs of monitoring timberland

The Tax Court held that travel costs a taxpayer incurred in visiting timber properties he owned were deductible as ordinary and necessary travel and away-from-home expenses incurred in monitoring his business properties. The court found that the taxpayer substantiated his travel costs by using the federal per-diem and mileage rates and that he was therefore entitled to the deductions. Maki, T.C. Summ. 2019-34 (11/4/19).

Lawyer cannot deduct multiple expenses due to lack of substantiation; penalties upheld

The Tax Court held that a lawyer who operated his own law firm was not entitled to various deductions relating to the law practice due to lack of substantiation. Further, the taxpayer was not entitled to a $4,000 deduction for tuition and fees due to lack of substantiation, was not entitled to head-of-household status because he was married and living with his wife, had more than $100,000 of unreported income, and was liable for penalties the IRS had assessed. Tabe, T.C. Memo. 2019-149 (11/5/19).

 

INTERNATIONAL

Arm's-length price under Sec. 482

The Office of Chief Counsel advised that nothing in the regulations, by itself, prohibits information from being considered in calculating the arm's-length price under Sec. 482 solely by virtue of the information becoming available to the taxpayer or the IRS after the date of the transaction. However, the information must meet all other applicable standards of relevance and reliability — which may vary based on the type of information or transfer-pricing method used or other facts and circumstances — and actual timing constraints may apply such as, for example, statutes of limitation and Regs. Secs. 1.482-1(a)(3) and (g)(4). CCA 201945026 (11/8/19).

Appeals court affirms $800,000 penalty for failure to file FBAR

The Federal Circuit affirmed a Court of Federal Claims decision that the taxpayer willfully failed to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), in 2007 and that the IRS properly assessed an $803,530 penalty for this failure. Norman, No. 2018-2408 (11/8/19).

 

IRS PROCEDURE

Regs. require electronic reporting of health insurance provider information

The IRS issued final regulations that require certain covered entities engaged in the business of providing health insurance for U.S. health risks to electronically file Form 8963, Report of Health Insurance Provider Information. T.D. 9881 (11/8/19).

2020 inflation-adjusted amounts and tax tables issued

The IRS issued the 2020 annual inflation adjustments for many tax provisions as well as the 2020 tax rate tables for individuals and estates and trusts. Rev. Proc. 2019-44 (11/6/19) (see related news story).

 

PARTNERSHIPS

CFO of corporate partner was correct individual to sign partnership return

The Office of Chief Counsel advised that, all else being proper, a partnership return signed by the CFO of a corporation that is the sole general partner of a partnership is a valid return under the test in Beard, 82 T.C. 766 (1984), even though the signer signed his e-file Signature Authorization (Form 8879-PE) using a different title, rather than in his capacity as the CFO of the partner corporation. Citing Consolidated Apparel Co., 17 T.C. 1570 (1952), the Chief Counsel's Office noted that courts have held that if a signee was actually the correct individual to sign a return, the fact that a return was not signed in the correct capacity will not render the return invalid. CCA 201945027 (11/8/19).

 

S CORPORATIONS

Prop. regs. issued on eligible terminated S corporations

The IRS issued proposed regulations defining “eligible terminated S corporation” (ETSC) and providing rules relating to distributions by an ETSC after the company’s post-termination transition period. REG-131071-18 (11/4/19).

 

TAX ACCOUNTING

Automatic accounting method change procedures updated

The IRS issued a revenue procedure that updates the list of accounting method changes to which the automatic change procedures in Rev. Proc. 2015-13, as clarified and modified, apply. Rev. Proc. 2019-43 (11/8/19) (see related news story).

Newsletter Articles

TAX REFORM

Traps for the unwary: Tax Cuts and Jobs Act changes

By now many of us are familiar with the various provisions of the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97. Here is a list of changes together with (perhaps) unexpected nuances.

DEDUCTIONS

Qualified business income deduction regs. and other guidance issued

The package includes final regulations, guidance on how to calculate W-2 wages, a safe-harbor rule for rental real estate businesses, and new proposed rules on the treatment of previously suspended losses.