Document summaries for the week of July 20, 2020
Tax document summaries for the week of July 20–24, 2020, covering individuals, international, and IRS procedure.
Court upholds IRS levy action in employment tax dispute with tax-exempt organization
The Tax Court sustained a proposed levy action by the IRS against a Sec. 501(c)(3) organization that failed to pay employment taxes, as well as interest, penalties, and an addition to tax, for the period ending March 31, 2016. The court rejected the taxpayer’s argument that it was entitled to claimed credit elect overpayments that would fully offset the balance of employment tax due as well as the additional amounts owed, after noting that the IRS was entitled to, as it did, credit any overpayment by the taxpayer to another liability of the taxpayer. Congregation Bais Yaakov, T.C. Summ. 2020-21 (7/22/20).
Couple escapes liability for 40% penalty but not for two 20% penalties
The Tax Court held that the IRS did not secure timely written supervisory approval for a 40% penalty assessed under Secs. 6662(b)(6) and (i) for a couple’s failure to disclose a transaction lacking economic substance. However, the Tax Court also found that the IRS did secure timely approval for two alternative 20% penalties, determined for negligence or a substantial understatement of income tax under Secs. 6662(b)(1) and (2). The court rejected the couple’s assertion that the IRS did not conduct a meaningful review of the penalty determination, noting that a supervisor’s signature sufficed to demonstrate its approval. Oropeza, T.C. Memo. 2020-111 (7/21/20).
Final regs. on GILTI subject to high foreign tax rate
The IRS issued final regulations on the treatment of global intangible low-taxed income (GILTI) subject to a high rate of foreign tax. T.D. 9902 (7/21/20) (see related news story).
Prop. regs. on GILTI high-tax exclusion
The IRS issued proposed regulations conforming the Sec. 951A global intangible low-taxed income (GILTI) high-tax exclusion with the Subpart F high-tax exception. REG-127732-19 (7/21/20) (see related news story).
IRS should not have prevented taxpayer from disputing liability at CDP hearing
The Tax Court held that, if a taxpayer who the IRS said was a responsible person with respect to unpaid employment taxes received Letter 1153 but did not receive the subsequent correspondence (Letter 5157), then, in the trust fund recovery penalty (TFRP) hearing held by the IRS Office of Appeals, that office did not allow the taxpayer to dispute his underlying TFRP liability pursuant to Sec. 6330(c)(2)(B). The court said the taxpayer should not have been precluded from later disputing that liability at a Collections Due Process (CDP) hearing and that Appeals might have thus abused its discretion. Barnhill, 155 T.C. No. 1 (7/21/20).
IRS issues inflation adjustments for premium tax credit items
The IRS issued calendar-year 2021 indexing adjustments for the applicable percentage table in Sec. 36B(b)(3)(A)(i) for calculating an individual’s premium tax credit under Sec. 36B. The IRS also updated the required contribution percentage in Sec. 36B(c)(2)(C)(i)(II), which is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage under Sec. 36B, for plan years beginning after calendar year 2020. Rev. Proc. 2020-36 (7/21/20).
IRS creates Enterprise Digitalization and Case Management
The IRS announced the creation of the Enterprise Digitalization and Case Management office, which is designed to improve IRS business processes and modernize its systems. IR-2020-166 (7/21/20).
No charitable deduction for conservation easement not protected in perpetuity
The Tax Court held that a partnership could not take a charitable contribution deduction for the donation of a conservation easement because the conservation purpose underlying the easement was not protected in perpetuity as Sec. 170(h)(5)(A) requires. The court agreed with the IRS that the easement deed contravened the requirement that the grantee receive, in the event the easement is extinguished, a proportionate share of the proceeds upon any subsequent sale of the property and found that it was improper to require that the grantee’s share of the proceeds be reduced by carve-outs both for donor improvements and for claims against the donor. Belair Woods, LLC, T.C. Memo. 2020-112 (7/22/20).
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.