Document summaries for the week of Sept. 21, 2020

ESTATES, TRUSTS & GIFTS

Final regs. on deductible trust and estate expenses

The IRS issued final regulations clarifying that certain expenses incurred by, and certain excess deductions upon the termination of, an estate or nongrantor trust are not affected by the suspension of miscellaneous itemized deductions for tax years 2018 through 2025. T.D. 9918 (9/21/20) (see related news story).

INDIVIDUALS

Court grants innocent spouse relief to taxpayer who gave up spousal support in divorce

The Tax Court granted innocent spouse relief with respect to a 2010 joint tax liability to a taxpayer who, as part of her divorce agreement, agreed to waive spousal support and any rights to her husband’s business assets in exchange for her husband’s assumption of their 2010 tax liability. The court noted that the taxpayer did not receive a significant benefit from the nonpayment of the 2010 taxes, while her husband did receive a benefit from the nonpayment, including earning Social Security credits. Robinson, T.C. Memo. 2020-134 (9/23/20).

IRS announces Spanish-language version of Form 1040

The IRS announced that for the first time, the 2020 version of Form 1040, U.S. Individual Income Tax Return, will be available in Spanish. The IRS also announced other expansions of its multilingual resources. IRS Tax Tip 2020-125 (9/24/20).

INTERNATIONAL

Final regs. on CFC downward attribution rules

The IRS issued ownership attribution rules for determining the status of corporations as controlled foreign corporations (CFCs) and whether their shareholders are U.S. shareholders. T.D. 9908 (9/21/20) (see related news story).

IRS PROCEDURE

Lenders should not file information returns for forgiven PPP loans

The IRS notified lenders that they should not file information returns or furnish payee statements under Sec. 6050P to report the amount of qualifying forgiveness with respect to covered loans made under the Paycheck Protection Program (PPP). According to the IRS, when all or a portion of the stated principal amount of a covered loan is forgiven because the eligible recipient satisfies the applicable forgiveness requirements, an applicable entity is not required to, for federal income tax purposes only, and should not, file a Form 1099-C, Cancellation of Debt, information return with the IRS or provide a payee statement to the eligible recipient under Sec. 6050P as a result of the qualifying forgiveness. Announcement 2020-12 (9/22/20) (see related news story).

IRS failed to obtain supervisory approval for certain penalties assessed on couple

The Tax Court held that, with respect to the penalties asserted on a married couple under Sec. 6662 for the 2013 tax year, the IRS did not satisfy the supervisory approval requirements of Sec. 6751(b)(1) with respect to the penalties asserted under Sec. 6662(a), Secs. 6662(b)(2) and (6), and Sec. 6662(i), but did satisfy such requirements with respect to the penalty asserted under Sec. 6662(b)(1). With respect to the 2014, 2015, and 2016 tax years, the court held that the IRS satisfied all of the requirements of Sec. 6751(b)(1) regarding the penalties asserted under Secs. 6662(a), Secs. 6662(b)(1), (2), and (6), and Sec. 6662(i). Patel, T.C. Memo. 2020-133 (9/22/20).

IRS provides tax relief for victims of Hurricane Sally

The IRS announced that victims of Hurricane Sally in areas designated by the Federal Emergency Management Agency now have until Jan. 15, 2021, to file various individual and business tax returns and make tax payments. IR-2020-222 (9/24/20).

Chief Counsel releases additional examples of disclosures of third-party tax information

The Office of Chief Counsel supplemented CC-2006-003 and CC-2006-006 to provide five additional examples, in Q&A format, relating to disclosures of third-party tax information in syndicated conservation easement matters. For example, in Q&A-3, the Chief Counsel’s Office advises that, pursuant to Sec. 6103(l)(4)(B), third-party returns or return information can be disclosed to the IRS Office of Professional Responsibility as part of a referral or investigation of a tax return preparer or appraiser. CC-2020-008 (9/25/20).

Chief Counsel responds to request for guidance on ‘qualified disclosure’

The Office of Chief Counsel responded to a request for guidance about the scope of the term “qualified disclosure,” as it is used in Section 2201(d) of the Taxpayer First Act, P.L. 116-25, and whether the term is limited to disclosures related to a taxpayer’s loan application, or whether it also covers other types of disclosures provided through the Income Verification Express Service (IVES) program. In a highly redacted memorandum, the Chief Counsel’s Office noted that the congressional committee reports underlying Section 2201 directly address the scope of “qualified disclosure” and state clearly that Congress did not intend to exclude non-loan-related uses of IVES, but also advised that federal courts generally hold that legislative history does not warrant the construction of a statute that is inconsistent with its plain terms. PMTA-2020-10 (9/25/20).

TAX ACCOUNTING

Final regs. on bonus depreciation

The IRS issued final regulations providing guidance on additional first-year (bonus) depreciation under Sec. 168(k). T.D. 9916 (9/21/20) (see related news story).

IRS lists circumstances that extend 4-year replacement period for livestock sold on account of drought

The IRS issued guidance explaining the circumstances under which the four-year replacement period under Sec. 1033(e)(2) is extended for livestock sold on account of drought. An appendix to the guidance contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending Aug. 31, 2020, and taxpayers may use this list to determine if an extension is available. Notice 2020-74 (9/22/20).