Document Summaries for the week of May 23, 2022
Tax document summaries for the week of May 23–27, 2022, covering IRS procedure, individuals, and partnerships.
Taxpayer's donation failed to meet strict substantiation requirements
The Tax Court held that a taxpayer who donated a large collection of Native American jewelry and artifacts to the Wheelwright Museum of the American Indian in New Mexico was not entitled to a charitable donation deduction because the deed received by the taxpayer from the museum did not satisfy the substantiation requirements in Sec. 170(f)(8)(B). The court noted that, while the deed provided that the donation was unconditional and irrevocable, it also stated that "all rights, titles and interests held by the donor in the property are included in the donation, unless otherwise stated in the Gift Agreement" and no gift agreement was included as part of the return and thus the taxpayer did not satisfy the strict substantiation requirements of Sec. 170(f)(8)(B). Albrecht, T.C. Memo. 2022-53 (5/25/22).
IRS issues inflation adjustment factor and reference price for renewable electricity
The IRS published the inflation adjustment factor and reference price for calendar year 2022 for the renewable electricity production credit under Sec. 45. The guidance also provides the credit amounts for calendar year 2022 under Sec. 45. Notice 2022-20 (5/23/22).
IRS issues depletion percentages for marginal properties
The IRS issued a notice that provides that, under Sec. 613A(c)(6)(C), the applicable percentage for purposes of determining percentage depletion on marginal properties for calendar year 2022 is 15%. The IRS stated that the applicable percentage is the percentage (not greater than 25%) equal to the sum of 15% plus 1 percentage point for each whole dollar by which $20 exceeds the reference price for crude oil for the calendar year preceding the calendar year in which the tax year begins. The reference price determined under Sec. 45K(d)(2)(C) for the 2021 calendar year is $65.90, the IRS stated. Notice 2022-24 (5/23/22).
Partnership's founder failed to substantiate partnership's entitlement to various expenses
The Tax Court held that (1) a biotechnology partnership had unreported income of $6,000, $21,578, and $7,000 in tax years 2009–2011, respectively; (2) the partnership's founder and largest interest owner largely failed to establish the partnership's entitlement to deductions for various business expenses reported for each of the tax years at issue; (3) the partnership was subject to a $230,979 recapture tax for excess amounts received as a qualified therapeutic discovery project grant; (4) the founder failed to substantiate a $200,000 loan to the partnership from his wife in tax year 2009; (5) the founder failed to substantiate a $100,000 capital contribution to the partnership from his wife in tax year 2011; and (6) the partnership was not liable for Sec. 6663 civil fraud penalties at the partnership level for any of the tax years at issue. The court also concluded that it lacked subject matter jurisdiction to determine the founder's outside basis in the partnership-level proceeding and that the IRS had conflated the founder's tax-basis capital account with his outside basis in the partnership. Genecure, LLC, T.C. Memo. 2022-52 (5/23/22).
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.