Document summaries for the week of Aug. 30, 2021

CORPORATIONS

Economic hardship exception does not apply to corporations

The Tenth Circuit upheld the validity of Regs. Sec. 301.6343-1(b)(4)(i), which restricts the application of the Sec. 6343(a)(1)(D) economic hardship exception to individual taxpayers. The holding affirmed a Tax Court decision that the taxpayer, a corporation, could not have an IRS levy released on economic hardship grounds. Seminole Nursing Home, Inc., No. 20-9005 (10th Cir. 9/2/21).

EMPLOYEE BENEFITS

IRS modifies interim remedial amendment deadline

The IRS issued a revenue procedure that modifies the interim amendment deadline set forth in Section 15.04(1) of Rev. Proc. 2016-37, as modified by Rev. Proc. 2017-41 and Rev. Proc. 2020-40. Under the revenue procedure, an interim amendment made to a pre-approved plan qualified under Sec. 401(a) is timely adopted if the amendment is adopted by the end of the second calendar year after the calendar year in which the change in qualification requirements is effective with respect to the plan. Rev. Proc. 2021-38 (9/1/21).

IRS procedure addresses opinion letters for certain Sec. 403(b) pre-approved plans

The IRS issued a revenue procedure setting forth IRS procedures for issuing opinion letters regarding the satisfaction in form of Sec. 403(b) pre-approved plans with respect to the requirements of Sec. 403(b) for the second remedial amendment cycle. The revenue procedure also sets forth the rules for determining when remedial amendment periods expire for Sec. 403(b) pre-approved plans. Rev. Proc. 2021-37 (9/1/21).

ESTATES, GIFTS & TRUSTS

IRS issues annual interest rates for valuing farm property under Sec. 2032A(e)(7)

The IRS issued a revenue ruling listing the average annual effective interest rates on new loans under the Farm Credit System that are used for purposes of Sec. 2032A(e)(7) when valuing property used for farming purposes. The revenue ruling also lists the states within each Farm Credit System Bank Territory. Rev. Rul. 2021-15 (8/27/21).

INDIVIDUALS

Voluntary retirement plan contributions are not necessary expenses

The Tax Court held that the IRS did not abuse its discretion in rejecting a taxpayer’s request that her account be placed into currently not collectible (CNC) status. Among other issues, the court agreed with the IRS that contributions to voluntary retirement plans (including Sec. 401(k) accounts) are not necessary expenses for purposes of CNC status. Webb, T.C. Memo. 2021-105 (8/31/21).

Court grants taxpayer innocent spouse relief after finding her employment prospects limited

The Tax Court held that a taxpayer who had received a significant settlement as a result of a car accident was entitled to innocent spouse relief because she would suffer economic hardship if obliged to pay the tax due for the year in issue and that she did not know and had no reason to know her ex-spouse would not or could not pay the tax due on the date the return was filed. The court concluded that the taxpayer’s current employment prospects were limited and that requiring her to pay the tax due for the year in issue would cause economic hardship, leaving her unable to pay her and her children’s reasonable basic living expenses. Curcio, T.C. Summ. 2021-31 (8/31/21).

Premium tax credit applicable percentage table for 2022

The IRS issued the applicable percentage table in Sec. 36B(b)(3)(A) for tax years beginning in calendar year 2022. This table is used to calculate an individual’s premium tax credit under Sec. 36B. Rev. Proc. 2021-36 (8/30/21).

IRS issues special per diem rates effective Oct. 1

The IRS issued a notice announcing the special per diem rates, effective Oct. 1, 2021, that taxpayers may use to substantiate the amount of expenses for lodging, meals, and incidental expenses when traveling away from home. The notice provides the special transportation industry rate, the rate for the incidental-expenses-only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method, and also modifies Notice 2020-71 to correct the portion of the year Sedona, Ariz., is a high-cost locality. Notice 2021-52 (9/3/21) (see related news story).

Couple’s whistleblower claim involving their landlord was not credible

The Tax Court, agreeing with the IRS Whistleblower Office, held that a married couple’s claim that their former landlord owned other properties from which she collected rents and did not report income was not credible and thus the couple were not entitled to a whistleblower award for such information. In addition, the court held that the IRS did not abuse its discretion when it did not offer the couple an opportunity to supplement their claim before rejecting it. Chow, T.C. Memo. 2021-106 (9/1/21).

Retiree can deduct losses from acting career against substantial retirement income

The Tax Court held that a taxpayer who devoted a substantial amount of time to becoming an actress was engaged in the trade or business of acting and was thus entitled to deduct related expenses, to the extent they were sufficiently substantiated, even though the resulting loss from her acting activity offset substantial retirement earnings from her prior Mary Kay business. However, the court also concluded that the taxpayer was not entitled to deduct contributions made to an alleged qualified plan because she could not prove that the income contributed to the plan was derived from a trade or business with respect to which the plan was established. Gaston, T.C. Memo. 2021-107 (9/2/21).

Court sustains IRS notice of intent to levy

The Tax Court held an IRS Office of Appeals did not abuse its discretion in upholding a notice of intent to levy relating to a taxpayer’s unpaid 2010 tax liability. The court also held that the taxpayer was not entitled to challenge her underlying tax liability for 2010 because she had received a notice of deficiency. Pazden, T.C. Memo. 2021-108 (9/2/21).

IRS PROCEDURE

Tax relief for victims of Hurricane Ida

The IRS announced that Louisiana victims of Hurricane Ida, which began Aug. 26, 2021, now have until Jan. 3, 2022, to file various individual and business tax returns and make tax payments. LA-2021-04 (8/31/21).

Dyed diesel fuel penalty relief for Louisiana

In response to shortages of undyed diesel fuel caused by Hurricane Ida, the IRS announced it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway for a number of parishes in the state of Louisiana. The relief is effective as of Aug. 29, 2021, and will remain in effect through Sept. 15, 2021. IR-2021-176 (9/1/21).

IRS extends period for telephone hearings for private activity bonds

The IRS issued a revenue procedure providing temporary guidance regarding the public approval requirement under Sec. 147(f) for tax-exempt qualified private activity bonds. Specifically, in light of the continuing COVID-19 pandemic, the revenue procedure extends until March 31, 2022, the period described in Section 4.02 of Rev. Proc. 2020-21, as modified by Rev. Proc. 2020-49, during which public hearings required for the bonds’ approval may be conducted by teleconference. Rev. Proc. 2021-39 (8/31/21).

Final regs. on contractors in IRS examinations

The IRS issued final regulations that implement new limitations on third-party contractors who assist in IRS examinations. The regulations reflect changes implemented by the Taxpayer First Act, P.L. 116-25. T.D. 9952 (9/2/21).

IRS will not issue rulings on certain self-dealing transactions

The IRS issued a revenue procedure that amplifies Rev. Proc. 2021-3, which sets forth areas relating to topics on which the IRS will not issue letter rulings or determination letters. In particular, the revenue procedure announces that the IRS will not issue letter rulings on whether certain transactions are self-dealing within the meaning of Sec. 4941(d). Rev. Proc. 2021-40 (9/3/21).

Appeals court upholds tax shelter promoter penalties

The Tenth Circuit affirmed a Tax Court decision that imposed penalties under Sec. 6700 against a tax shelter promoter. Lemay, No. 20-9001 (10th Cir. 9/2/21).