Document summaries for the week of July 27, 2020
Tax document summaries for the week of July 27–31, 2020, covering corporations and IRS procedure.
State economic grants were not capital contributions
The Third Circuit reversed a Tax Court decision and held that cash grants from the state of New Jersey to a business were not contributions to capital under Sec. 118 but were taxable income to the company. BrokerTec Holdings, Inc., No. 19-2603 (3d Cir. 7/28/20).
Final regs. on business interest expense deduction limitation
The IRS issued final regulations under Sec. 163(j), which limits the deduction for business interest expense. T.D. 9905 (7/28/20) (see related news story).
Proposed regs. on business interest expense deduction limitation
The IRS issued proposed regulations that provide additional guidance on various business interest expense deduction limitation issues not addressed in simultaneously issued T.D. 9905. REG-107911-18 (7/28/20) (see related news story).
IRS provides safe harbor for management of residential living facilities to be treated as real property trade or business
The IRS issued a proposed revenue procedure that provides a safe harbor under which a trade or business that manages or operates a qualified residential living facility may be treated as a real property trade or business solely for purposes of qualifying as an electing real property trade or business under Sec. 163(j)(7)(B). Notice 2020-59 (7/28/20) (see related news story).
Sec. 163(j) aggregation rule FAQs
The IRS posted FAQs on the Sec. 448(c)(2) aggregation rules that apply for purposes of the gross receipts test under Sec. 163(j). FAQs Regarding the Aggregation Rules Under Section 448(c)(2) That Apply to the Section 163(j) Small Business Exemption (7/28/20) (see related news story).
Regs. on recapture of excess employment tax credits
The IRS issued temporary and proposed regulations on the recapture of excess employment tax credits under the Families First Coronavirus Response Act (FFCRA), P.L. 116-127, and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136. T.D. 9904 and REG-111879-20 (7/27/20) (see related news story).
Court upholds notice of tax lien
The Tax Court held that the IRS did not abuse its discretion in upholding the filing of a notice of federal tax lien (NFTL) with respect to a taxpayer’s unpaid federal income tax liabilities for 2013 and 2014, as well as associated interest and additions to tax, in a case where the settlement officer concluded in the notice of determination that the taxpayer “did not present any relevant challenge” to the appropriateness of the NFTL. The primary issue in the case concerned collection alternatives. Biggs-Owens, T.C. Memo. 2020-113 (7/30/20).
IRS issues temporary relief relating to certain rehabilitation credit requirements
As a result of the ongoing COVID-19 pandemic, the IRS is providing temporary relief under Sec. 7508A(a) with respect to certain requirements relating to the rehabilitation credit under Sec. 47. Specifically, the relief applies to taxpayers with deadlines under Sec. 47 that relate to (1) the 24- or 60-month measuring period under the substantial rehabilitation test in Sec. 47(c)(1)(B) and Regs. Sec. 1.48-12(b)(2), and (2) the deadline for a Tax Cuts and Jobs Act, P.L. 115-97, transition rule relating to certain qualified rehabilitation expenditures paid or incurred after 2017. Notice 2020-58 (7/31/20).
Proposed regs. on new small business accounting rules
The IRS issued proposed regulations on the simplified tax accounting rules for small businesses enacted by the law known as the Tax Cuts and Jobs Act, P.L. 115-97. REG-132766-18 (7/30/20) (see related news story).
IRS to accept faxed duplicate copies of Form 3115 for automatic method changes
The IRS announced that it is temporarily allowing taxpayers that file Form 3115, Application for Change in Accounting Method, to make an automatic method change request to fax the duplicate copy of the request, instead of mailing a paper copy. Temporary Procedure to Fax Automatic Consent Forms 3115 Due to COVID-19 (7/29/20) (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.