Document summaries for the week of Sep. 20, 2021

CORPORATIONS

IRS updates regulations on corporate distributions

The IRS issued final regulations that update the Sec. 301 regulations to reflect statutory changes made by the Technical and Miscellaneous Revenue Act of 1988, P.L. 100-647. Those changes provided that the amount of a distribution of property made by a corporation to its shareholder is the fair market value of the distributed property. T.D. 9954 (9/22/21).

EMPLOYEE BENEFITS

IRS updates weighted average interest rates, yield curves, and segment rates

The IRS issued a notice that provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Sec. 417(e)(3), and the 24-month average segment rates under Sec. 430(h)(2). In addition, the notice provides guidance on the interest rate on 30-year Treasury securities under Sec. 417(e)(3)(A)(ii)(II) in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Sec. 431(c)(6)(E)(ii)(I). Notice 2021-54 (9/21/21).

INDIVIDUALS

Tax Court disallows couple's unsubstantiated car and retirement plan deductions

The Tax Court held that a married couple was not entitled to deduct approximately $20,000 relating to the alleged business use of their 1969 Camaro after finding implausible their arguments that their personal use of the Camaro was limited to a few trips to buy groceries. In addition to other deductions the court disallowed due to lack of substantiation, the court also found that because the couple could not substantiate the origins of a $60,000 contribution to a retirement plan, they were not entitled to a deduction for that contribution. Parker, T.C. Memo. 2021-111 (9/23/21). 

Taxpayer's consent to ex-husband's loan precludes innocent spouse relief

The Tax Court held that a taxpayer was not entitled to innocent spouse relief with respect to a 2010 tax liability attributable to her ex-husband with whom she filed a joint return for that year. The court noted that the 2010 tax liability attributable to the ex-husband, who intervened in the instant case, partially arose from the ex-husband defaulting on Thrift Savings Plan loans to which the taxpayer had consented, and she knew the tax liability resulting from the default would not be paid when she signed the joint tax return. Goode, T.C. Summ. 2021-34 (9/23/21).

INTERNATIONAL

Final regs. on calculation of QBAI for FDII and GILTI

The IRS issued final regulations under Secs. 250 and 951A (respectively, foreign-derived intangible income, or FDII, and global intangible low-taxed income, or GILTI) addressing the calculation of qualified business asset investment (QBAI) for qualified improvement property under the alternative depreciation system. The regulations also contain transition rules relating to the impact on loss accounts of net operating loss carrybacks allowed by reason of the Coronavirus Aid, Relief, and Economic Security  (CARES) Act, P.L. 116-136. T.D. 9956 (9/21/21) (see related news story).

IRS PROCEDURE

IRS extends replacement period for livestock sold on account of drought

The IRS issued a notice that explains the circumstances under which the four-year replacement period under Sec. 1033(e)(2) is extended for livestock sold on account of drought. The Appendix to the notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions during the 12-month period ending Aug. 31, 2021, and taxpayers may use this list to determine if an extension is available. Notice 2021-55 (9/24/21).

Tax Court lacks jurisdiction to order TIPRA payment refund

In a case on remand from the Ninth Circuit, the Tax Court held that it did not have jurisdiction to order the refund of a Tax Increase Prevention and Reconciliation Act (TIPRA), P.L. 109-222, payment. Sec. 7122(c), enacted by TIPRA, requires that submission of an offer in compromise be accompanied by a payment of 20% of the amount of the offer. The court found that neither Secs. 6320 and 6330 nor established precedent give it jurisdiction to order a refund of these payments. Brown, T.C. Memo. 2021-112 (9/23/21).