Document Summaries for the Week of Dec. 27, 2021
Tax document summaries for the week of Dec. 27–31, 2021, covering employee benefits, IRS procedure, and more.
IRS provides indexing factor for use by group health plans and health insurance issuers
The IRS issued a revenue procedure that provides the indexing factor to be used by group health plans and health insurance issuers to calculate the qualifying payment amount (QPA) for items or services provided on or after Jan. 1, 2022, and before Jan. 1, 2023. Temporary regulations, jointly issued with the Departments of Health and Human Services and Labor and the Office of Personnel Management in July 2021 (1) provide the methodology for calculating the QPA, which is generally the plan's median contracted rate for the same or similar item or service, indexed for inflation, and (2) provide that Treasury and the IRS will identify the annual indexing factor in guidance, rounded to 10 decimal places. Rev. Proc. 2022-11 (12/28/21).
ESTATES, TRUSTS & GIFTS
Valuation of stock should consider any pending merger
The Office of Chief Counsel advised that, for purposes of valuing shares of stock in a company for gift tax purposes, a hypothetical willing buyer and willing seller of the shares should consider a pending merger involving the company. Further, the Chief Counsel's Office stated that, in the instant situation, a donor did not retain a qualified annuity interest in a trust when the donor used an outdated appraisal that did not take into account all the facts and circumstances of a pending merger. CCA 202152018 (12/30/21).
Agreement with Malta on meaning of 'pension fund'
The IRS issued the text of a Competent Authority Arrangement entered into by the United States and Malta under paragraph 3 of Article 25 (Mutual Agreement Procedure) of the United States–Malta income tax treaty, regarding the meaning of "pension fund" for purposes of the treaty. Announcement 2021-19 (12/27/21).
IRS can levy on state tax refund of couple who failed to report over $330,000 of income
The Tax Court held that the IRS Office of Appeals did not abuse its discretion in sustaining a levy on a couple's state tax refund in order to collect a tax liability arising from a year in which the couple failed to report more than $330,000 in wages. The court concluded that the IRS settlement officer (SO) did not abuse her discretion in denying the couple's request for a face-to-face Collection Due Process (CDP) hearing and that correspondence between the couple and the SO constituted a CDP hearing in this case. Bunton, T.C. Memo. 2021-141 (12/28/21).
Tax court holds that taxpayer's collection review case is moot
The Tax Court granted an IRS motion to dismiss a taxpayer's collection review case on the grounds of mootness. The court concluded that the taxpayer, who had owed trust fund recovery penalties (TFRPs), had fully paid his TFRP liabilities for the period at issue and agreed with the IRS's position that no further IRS action would be taken against the taxpayer because there was no outstanding tax liability on which further collection action could be based. The court noted that the taxpayer, who had argued that his payments were deposits rather than a payment of tax, had received all the relief that Sec. 6330 authorized the Tax Court to provide, and if the taxpayer wants to seek a refund or overpayment credit or other relief, then any legal remedy would lie in a U.S. district court or the U.S. Court of Federal Claims rather than in the Tax Court. Ahmed, T.C. Memo. 2021-142 (12/28/21).
Tax Court agrees that whistleblower's information was not specific and credible
The Tax Court granted summary judgment to the IRS in a case in which a taxpayer filed a whistleblower claim in which he attempted to show that a certain individual (i.e., the target) was a dual citizen of the United States and a foreign country and was subject to, and failed to pay, substantial amounts of federal taxes. The court determined that the taxpayer did not provide specific and credible information sufficient to establish that the target was a citizen of the United States at birth and thus the IRS Whistleblower Office did not abuse its discretion in rejecting the taxpayer's claim for lack of specific and credible information. Whistleblower 15977-18W, T.C. Memo. 2021-143 (12/29/21).
Chief Counsel interprets an FMIS report for a False Claims Act case
In response to a request for the Chief Counsel's Office to interpret a Financial Management Information Systems Report (FMIS Report) for a False Claims Act (FCA) case involving health care fraud, the Office of Chief Counsel advised that, where there were payments to a relator and a 3% working capital fund, the deduction of such payments is not precluded by Sec. 162(f). The Chief Counsel's Office also stated that, based on its understanding of 42 U.S.C. Section 1395i and the procedures applicable to FCA health care fraud cases, net payments to "HHCF --CENTER FOR MEDICARE & MEDICAID" are deductible and net payments to "TRTF --TREASURY HCF TRUST FUND" are not deductible. CCA 202152004 (12/31/21).
IRS abused its discretion in sustaining Notice of Federal Tax Lien
The Tax Court held that an IRS settlement officer did not fulfill her duty of verification under Sec. 6330(c)(1) with respect to tax deficiency assessments on a taxpayer who alleged that he never received the notices of deficiency from the IRS. As a result, (1) the court concluded that it could not sustain the IRS's conclusion that applicable legal and administrative requirements had been met with respect to the assessment of deficiencies on the taxpayer for 2004 through 2012 as required by Sec. 6330(c)(1); and (2) the court found that IRS Appeals abused its discretion in sustaining the filing of a Notice of Federal Tax Lien with respect to the taxpayer's unpaid income tax liabilities for 2004 through 2012. Pfetzer, T.C. Memo. 2021-145 (12/30/21).
Collection action against taxpayer who failed to file 2014 tax return sustained
The Tax Court sustained an IRS collection action against a taxpayer who failed to file her 2014 tax return and held that an IRS settlement officer's (SO's) unwillingness to accept the taxpayer's delinquent 2014 return for filing was not an abuse of discretion. The court concluded that it is not an abuse of discretion for an SO to sustain a collection action against a taxpayer where the taxpayer has proposed no alternative. Starcher, T.C. Memo. 2021-144 (12/30/21).
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.