Document Summaries for the week of May 9, 2022
Tax document summaries for the week of May 9–13, 2022, covering employee benefits, individuals, and more.
IRS extends relief from requirement that certain elections be witnessed in person
The IRS issued a notice providing a six-month extension, through Dec. 31, 2022, of the temporary relief provided in Notice 2021-40 from the requirement in Regs. Sec. 1.401(a)-21(d)(6)(i) that certain participant elections be witnessed in the physical presence of a plan representative or a notary public (the physical presence requirement). The IRS is extending this relief in response to the continuing COVID-19 pandemic. Notice 2022-27 (5/13/22).
Taxpayer materially participated in aerospace companies
The Tax Court held that for the tax years 2014, 2015, and 2016, a taxpayer who owned a group of aerospace companies materially participated in his aerospace activities, with the result that income from those activities is treated as nonpassive income. The court also held that (1) yacht activities conducted by the taxpayer during the same years were per se passive rental activities, and (2) the taxpayer was not liable for accuracy-related penalties because he had reasonable cause and acted in good faith with respect to his underpayments of tax. Rogerson, T.C. Memo. 2022-49 (5/12/22).
No abuse of discretion where IRS declined to reconsider couple's installment agreement
The Tax Court granted an IRS motion for summary judgment after concluding that an IRS settlement officer (SO), who sustained a proposed levy against a couple who owed tax liabilities of more than $128,000, did not abuse his discretion by declining to reconsider the couple's rejected installment agreement. The court agreed with the SO's conclusion that the proposed levy action balanced the need for efficient tax collection with any legitimate concerns of the couple about intrusiveness. Jackson, T.C. Memo. 2022-50 (5/12/22).
No deduction allowed for upgrading to business class for business trips to Korea
The Tax Court held that a taxpayer was not entitled to numerous deductions taken on her 2015 tax due to lack of substantiation. The court allowed a deduction of $500 for bags of used clothes given to Goodwill and Dress for Success but nothing for amounts paid to upgrade to business class for business trips to Korea. Harrison, T.C. Summ. 2022-6 (5/12/22).
IRS offers tax relief for victims of New Mexico wildfires
The IRS announced that victims of wildfires and straight-line winds beginning April 5, 2022, in parts of New Mexico now have until Aug. 31, 2022, to file various individual and business tax returns and make tax payments. NM-2022-05 (5/10/22).
Taxpayer did not meet burden of showing she signed Form 872 under duress
The Tax Court held that a taxpayer did not meet her burden of showing that she signed Form 872, Consent to Extend the Time to Assess Tax, under duress. The court found that the IRS Appeals officer in the case demonstrated significant competence in IRS procedures and administration, and the court concluded that his testimony in the matter was supported by, and made sense in light of, other evidence in the record. Evert, T.C. Memo. 2022-48 (5/9/22).
Whistleblower's complaint about sequestration reduction dismissed
The Tax Court dismissed for lack of jurisdiction a whistleblower's appeal of the IRS's sequestration reduction in his whistleblower award check after concluding that the receipt by the taxpayer of the whistleblower award check was not a separate "final determination" that would provide the court with jurisdiction under Sec. 7623(b)(4) to review the award check and the sequestration reduction. The court had previously held, in Lewis, 154 T.C. 124 (2020), that it was appropriate for the IRS's Whistleblower Office to apply a sequestration reduction to the taxpayer's award check. Lewis, T.C. Memo. 2022-47 (5/9/22).