Document summaries for the week of July 6, 2020
IRS provides guidance on reporting qualified sick and family leave wages paid
The IRS issued guidance to employers on the requirement to report the amount of qualified sick leave wages and qualified family leave wages paid to employees under the Families First Coronavirus Response Act (FFCRA), P.L. 116-127. The IRS stated that employers are required to report these amounts either on Form W-2, box 14, or on a separate statement and noted that the required reporting provides employees who are also self-employed with information necessary for properly claiming qualified sick leave equivalent or qualified family leave equivalent credits under the FFCRA. Notice 2020-54 (7/8/20) (see related news story).
Couple cannot deduct majority of unreimbursed expenses
The Tax Court held that a married couple were not entitled to most of the deductions they took for unreimbursed partnership expenses for 2012, 2013, and 2014 and unreimbursed employee business expenses for 2014 because the expenses were not incurred in the conduct of a trade or business, were not substantiated, were deductible at the entity level and not at the individual level, or were personal. However, the court did find that the wife was allowed deductions for some of her unreimbursed employee business expenses because the IRS failed to meet its burden of proof. Simpson, T.C. Memo. 2020-100 (7/7/20).
Court rejects penalty imposed on taxpayer during a tumultuous period in her life
The Tax Court held that a taxpayer who received distributions from her retirement account was taxable on the distributions and, additionally, the portion of the distributions that did not qualify as being used for qualified higher education expenses was subject to the penalty tax under Sec. 72(t). However, the court determined that the taxpayer was not liable for any of the accuracy-related penalty assessed by the IRS because she exercised good faith in her reporting and the period during which the return was prepared was a very tumultuous period in her life. Seril, T.C. Memo. 2020-101 (7/8/20).
Final regs. issued on FDII and GILTI
The IRS issued final regulations on determining the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) under Sec. 250. T.D. 9901 (7/9/20) (see related news story).
IRS did not abuse its discretion in finding a couple were ineligible for an installment agreement
The Tax Court upheld collection actions by the IRS against a married couple who filed delinquent federal income tax returns for years 2013–2016 and failed to pay the full amounts of tax shown as due on those returns. The court concluded that the IRS settlement officer who worked with the taxpayers did not abuse her discretion in concluding that the taxpayers were ineligible for an installment agreement because, the court noted, the taxpayers could fully satisfy their tax liabilities by borrowing against the equity in their primary residence. Dodson, T.C. Memo. 2020-106 (7/9/20).
Chief Counsel addresses preparation of substitute returns for backup withholding
In a highly redacted memorandum, the Office of Chief Counsel addressed a request for advice regarding the proper computation of the tax liability for failing to do backup withholding on a substitute for return prepared under the authority of Sec. 6020(b). The Chief Counsel’s Office advised that its position is that there is no requirement that the Sec. 6020(b) return computations of liability take into consideration the amount of tax shown as paid on the Forms 4669, Statement of Payments Received, and that Sec. 3402(d) relieves liability only for the income tax withholding; the payer is not relieved from liability for any penalties or additions to the tax otherwise applicable in respect of such failure to deduct and withhold. PMTA-2020-09 (7/10/20).
Conservation easement deductions denied because appraisal requirement not met
In four related cases, the Tax Court held that partnerships were not entitled to a charitable contribution deduction for the donation of conservation easements because the conservation purpose underlying the easement was not protected in perpetuity and because the partnerships did not attach to their returns, as required by regulation, a fully completed appraisal summary on Form 8283, Noncash Charitable Contributions. The court noted that, instead of reporting cost basis information as the regulations require and as Form 8283 directs, the partnerships attached an explanation that simply asserted that the information was not necessary. The four cases involved the same entity, HRH Investments, LLC. Village at Effingham, LLC, T.C. Memo. 2020-102 (7/9/20); Riverside Place, LLC, T.C. Memo. 2020-103 (7/9/20); Maple Landing, LLC, T.C. Memo. 2020-104 (7/9/20); Englewood Place, LLC, T.C. Memo. 2020-105 (7/9/20).
IRS issues annual depreciation guidance
The IRS issued (1) tables of limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2020; and (2) a table of amounts that must be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2020. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by Sec. 280F(d)(7) and, for purposes of the guidance, the term “passenger automobiles” is defined to include trucks and vans. Rev. Proc. 2020-37 (7/8/20) (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.