SCACPA Podcast 023

SCACPA's Weekly Federal Tax Update

Lynn Nichols Federal Tax Update Podcast

August 13, 2018, edition

Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week’s topics include:

1. IRS Likely to Trounce 199A Trust Planning Strategy

Wealth planning advisers eager to help their clients take advantage of the new passthrough deduction by setting up multiple non-grantor trusts to claim multiple deductions may soon have to undo all that effort.

[Tax Notes Today; 7/23/2018; Article by Jonathan Curry]

2. Group Fails to Meet Operational Test; Exempt Status Revoked

The IRS revoked the tax-exempt status of a group that promoted tourism and improved the conditions of the tourism business environment of a particular area, finding that the group wasn't operated exclusively for charitable purposes.

[LTR 201829015; 1/16/2018; rel. 7/20/2018]

3. IRS May Rely On, but Not Adopt, Grouping Rules in 199A Regs

The IRS may look to the passive activity loss grouping and material participation rules when drafting the passthrough deduction regulations, but it isn’t likely to completely adopt them.

[Tax Notes Today; 7/24/2018; Article by Eric Yauch]

4. Partners Agreed to Extension of Limitations Period for Assessment

The Tax Court, in a Son-of-BOSS case, held that Forms 872-I signed by two partners extended the limitations period for the IRS to assess taxes against them attributable to partnership items, noting that the IRS forms didn’t extend the statute for returns but for the assessment of income tax due on those returns.

[Inman Partners et al. v. Commissioner; No. 15953-06; T.C. Memo 2018-114; 7/23/2018]

5. Shareholders Liable for Transaction Lacking Economic Substance

The Ninth Circuit reversed a Tax Court decision involving an asset and stock sale and a third party that was designed as a tax avoidance scheme.

[Tax Notes Today;7/25/2018; Article by Emily Foster]

Former Shareholders Liable for Taxes on Asset Sale as Transferees

The Ninth Circuit, reversing a Tax Court decision, held the former shareholders of a closely held corporation liable as transferees for the taxes owed on the proceeds from an asset sale, finding that a stock sale transaction lacked economic substance beyond tax avoidance and the former shareholders are liable for the taxes under applicable state law.

[Slone, Norma L. et al. v. Commissioner; No. 16-73349; No. 16-73351; No. 16-73354; No. 16-73356; 7/24/2018]

6. IRS Argues $33 Million Charitable Deduction Decision Was Correct

The IRS’s denial of a $33 million charitable deduction was intended to halt a scheme in which multiple taxpayers claimed a deduction for the same property.

[Tax Notes Today; 7/25/2018; Article by Eric Yauch]

Government Argues Tax Court Properly Denied Charitable Deduction

In a brief for the D.C. Circuit, the government argued that the Tax Court correctly held that a partnership wasn’t entitled to a $33 million charitable contribution deduction because it failed to comply with substantiation requirements and the Tax Court correctly held that accuracy-related penalties apply to any resulting underpayment.

[Jeff Blau v. Commissioner; USDC DC; Gov. Brief; No. 17-1266; 7/23/2018]

7. (a)OPR Reaches Settlement Agreement With Enrolled Agent

The IRS has announced that the Office of Professional Responsibility and a tax practitioner who violated rules of conduct under Circular 230 have reached a settlement agreement that includes a monetary penalty.

[IR-2018-155; 7/25/2018]

(b) OPR Censures Practitioner for Providing Misleading Information

The IRS has announced that a tax practitioner was censured by the Office of Professional Responsibility for violating conflict of interest rules under Circular 230.

[IR-2018-154; 7/25/2018]

8. Husband Relieved From Tax on Some of Wife's Embezzlement Income

The Tax Court held that an individual is entitled to innocent spouse relief from taxes attributable to income his wife embezzled during one of two tax years, finding that although he lacked actual knowledge of the embezzlement when they filed their return that year, he learned of it when she was arrested before they filed the following year.

[Jacobsen, Rick E. v. Commissioner; No. 25348-15; T.C. Memo. 2018-115; 7/25/2018]