The Tax Court denied a taxpayer’s motion to compel the IRS to produce redacted copies of all third-party tax opinions regarding son-of-boss transactions it had collected, as well as a list of the names and addresses of all law firms and accounting firms known to the IRS to have issued tax opinion letters regarding son-of-boss transactions because the opinion letters and the firm list were not relevant, the request did not appear reasonably calculated to lead to discovery of admissible evidence, and the materials were nondisclosable “return information” per Sec. 6103(b)(2).
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IRS Practice & Procedure
Appeals Mediation Process Expanded and Updated
The IRS expanded the number of cases that are eligible to go through mediation in Appeals and updated the mediation procedures (Rev. Proc. 2009-44).
Res Judicata Does Not Bar Taxpayer from Claiming NOL Carrybacks
The Tax Court ruled that the doctrine of res judicata did not bar a taxpayer from claiming net operating loss (NOL) carrybacks to 1999 and 2000, despite a prior deficiency case involving those years, because the statutory scheme for NOL carrybacks includes Sec. 6511(d)(2)(B) (i), which allows a refund attributable to an NOL carryback notwithstanding “the operation of any . . . rule of law,” which includes res judicata.
COD Information Reporting Rules Finalized
The IRS issued final regulations regarding information returns for cancellation of indebtedness by certain entities.
Guidance on Late Entity Classification Elections
The IRS released Rev. Proc. 2009-41, which gives eligible entities guidance on how to obtain relief when they make a late entity classification election. The relief is available for 3 years and 75 days after the requested effective date of the eligible entity’s classification election.
Tax Practitioners Face Increasing Regulation
Congress and the IRS have been focusing on regulating tax and financial services. Although the problems that are being addressed were not caused by CPAs, practitioners may be swept up in the solution.
IRS Practice and Procedures Committee Update
The IRS Practice and Procedures Committee held its semiannual meeting with executives of the Internal Revenue Service at the AICPA offices in Washington, DC, on May 18 and 19, 2009.
Making the Most of Qualified Offers
One little-used option for resolving tax issues while in IRS Appeals is to submit a qualified offer under Sec. 7430(g). Besides making the taxpayer eligible for an award of costs, the submission of a qualified offer will often focus the IRS’s attention on the taxpayer’s case and perhaps lead to an acceptable resolution.
Interest-Free Period Under Sec. 6601(c)
The IRS recently provided some guidance on when underpayment interest is suspended under Sec. 6601(c).
The National Taxpayer Advocate’s Annual Report to Congress (Part II)
This item outlines the recommendations of Nina Olson, the national taxpayer advocate, for legislative reforms to the Code as presented in her annual report to Congress.
Estimates and the Cohan Rule
When dealing with clients who have incomplete records, return preparers are frequently forced to use estimates whether they want to or not.
Tax Accrual Workpapers Not Protected by Work-Product Privilege
Sitting en banc, the First Circuit reversed the ruling of a panel of the court and held that a corporation’s tax accrual workpapers were not protected from an IRS summons by the work-product privilege.
Final Regs. on Treatment of Controlled Services Transactions Under Sec. 482
The IRS issued final regulations on the treatment of controlled services transactions under Sec. 482 and the allocation of income from intangible property (T.D. 9456). The regulations also modify existing Sec. 861 regulations on stewardship expenses.
ETAAC Makes Recommendations to Congress, Including Mandatory E-Filing
The Electronic Tax Administration Advisory Committee made 10 recommendations to help the IRS achieve its goal that 80% of all tax and information returns be e-filed.
Tax Preparer Penalties: Who Is a Preparer?
Recent changes to the tax preparer penalty statute expose signing and nonsigning tax preparers of income, estate, gift, and certain information returns to higher monetary penalties and make it vital that they understand who is a preparer under the new rules.
Two Courts Address Tax Shelter Exception to Tax Practitioner Privilege
The Tax Court and the Seventh Circuit recently decided cases dealing with the tax practitioner/client privilege under Sec. 7525.
Ninth Circuit Awards Litigation Costs Paid by Third Party
The Ninth Circuit reversed the Tax Court and held that a taxpayer could “incur” attorneys’ fees initially paid by a third party for purposes of an award of litigation costs under Sec. 7430.
Treasury Provides Roadmap for Shift in Tax Burden
On May 11, 2009, Treasury released General Explanations of the Administration’s Fiscal Year 2010 Revenue Proposals.
Supreme Court Grants Cert. in Bilski Case
The Supreme Court granted a writ of certiorari in the case of Bilski v. Doll; the Court agreed to review the Federal Circuit’s earlier decision in the case and possibly put to rest the question of when business methods are eligible for patent protection.
Textron: A Still Uncertain Future for Tax Accrual Workpapers
A significant case focusing on application of the work-product doctrine to tax accrual workpapers is Textron Inc., 507 F. Supp. 2d 138 (D.R.I. 2007). As litigation on this question enters its fourth year, it remains unclear to what extent the work-product doctrine protects tax accrual workpapers and how to effectively invoke that protection.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
