A recent case decided by the US Tax Court reminds us that when you litigate a case in Tax Court, what happened during the Internal Revenue Service (IRS) examination and Appeals bears very little relevance (if any) once you get to court. Generally, Tax Court’s proceedings are de novo, and the court looks solely to the IRS’s position in the Notice of Deficiency (Notice). The Revenue Agent’s Report and other statements made by the IRS before the issuance of the Notice are typically ignored.

In Moya v. Commissioner, 152 TC No. 11 (Apr. 17, 2019), the IRS determined deficiencies related to the disallowance of certain business expense deductions. The taxpayer did not assign error to the disallowance, but instead argued that the Notice was invalid because the IRS had violated her right to be informed and her right to be heard under an IRS news release and an IRS publication outlining various rights of taxpayers. Specifically, the taxpayer asserted that she had requested that her examination proceedings be transferred to California after she had moved from Las Vegas to Santa Cruz, and that the IRS had violated the her rights by providing vague and inconsistent responses to, and by ultimately denying, her request. Continue Reading What Happens At Exam, Stays At Exam!

When you do not pay your taxes, the Internal Revenue Service (IRS) has the power to file a “lien” on your property under Internal Revenue Code section 6321. The lien attaches “upon all property and rights to property, whether real or personal, belonging to such person.” Practically, this means that the IRS is giving notice that you owe it money and its debt gets priority to most debts that occur after the lien notice is filed. Historically, the lien law has been interpreted strictly and “foot faults” can invalidate the lien. A recent case, however, provides that if the federal tax lien uses the incorrect name, the lien may still be established and enforceable.

The taxpayer and his wife purchased their home as joint tenants in 1975. The taxpayer became the sole owner of the property after his wife passed away. In July 2007, the taxpayer filed federal income tax returns for tax years 2000 to 2004. Based on those returns, the IRS assessed taxes, penalties and interest, which remained outstanding at the time of his death in July 2009. On August 9, 2010, the government recorded a notice of federal tax lien (the Tax Lien Notice) against the taxpayer with the appropriate recorder of deeds in an amount equal to the previously assessed amounts. The Tax Lien Notice omitted the second “l” in the taxpayer’s first name, and failed to include a legal description or permanent index number for the property. The Tax Lien Notice did identify the correct address. Continue Reading Seventh Circuit Upholds Lien Notice despite Incorrect Name

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 15 – 19, 2019.

April 16, 2019: The IRS issued Revenue Ruling 2019-12 providing monthly tables of prescribed rates under numerous Code sections, including the applicable federal rate for May.

April 16, 2019: The IRS issued Notice 2019-29 providing guidance on the corporate bond monthly yield curve, spot segment rates under Section 417(e)(3) and the 24 month average segment rates under Section 430(h)(2).

April 17, 2019: The IRS released Proposed Regulations offering highly anticipated additional guidance related to investment in opportunity zones.

April 17, 2019: The IRS issued numerous corrections for Treasury Decision 9847 providing guidance under Section 199A of the code.

April 18, 2019: The IRS released Proposed Regulations relating to rules for electing small business trusts with nonresident alien beneficiaries.

April 18, 2019: The IRS issued a News Release detailing a six year plan to modernize the agency’s IT systems.

April 19, 2019: The IRS issued Revenue Procedure 2019-19 providing updated information regarding the Employee Plans Compliance Resolution System.

Special thanks to Terence McAllister in our New York office for this week’s roundup.

Most tax professionals are aware of the common-law “mailbox rule,” which provides that proof of proper mailing creates a rebuttable presumption that the document was physically delivered to the addressee. Internal Revenue Code (Code) section 7502 was enacted to codify the mailbox rule for tax purposes. Thus, for documents received after the applicable deadline, the document will be deemed to have been delivered on the date the document is postmarked. To protect taxpayers against a failure of delivery, Code section 7502 also provides that when a document is sent by registered mail, the registration serves as prima facie evidence that the document was delivered, and the date of registration is treated as the postmark date. In other words, if the Internal Revenue Service (IRS) claims not to have received a document, the presumption arises that such document was delivered so long as the taxpayer produces the registration.

Continue Reading Ninth Circuit Allows IRS to Overrule Common-Law Mailbox Rule

The Internal Revenue Service (IRS) Large Business and International (LB&I) Division continues to churn out new audit “campaigns.” For our prior coverage, please click here. The most recent set of campaigns were announced on April 16, 2019, bringing the grand total to 53 campaigns since the program’s initial release on January 13, 2017. The IRS explains that the goal of the campaigns is to “improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.”

Continue Reading IRS Announces More LB&I Campaigns!

Borenstein v. Commissioner is an interesting opinion involving the intersection of canons of statutory construction and jurisdiction. Recently, the US Court of Appeals for the Second Circuit reversed the US Tax Court’s holding in Borenstein that the court lacked jurisdiction to order a refund of an undisputed overpayment made by the taxpayer. The case, which we discussed in a prior post, involved interpreting statutory provisions dealing with claims for a refund after a notice of deficiency was issued. The Tax Court’s holding was based on the application of the plain meaning rule to Internal Revenue Code (Code) Section 6512(b)(3), which limit its jurisdiction to order refunds of overpayments.

Continue Reading Second Circuit Weighs in on Tax Court’s Refund Jurisdiction

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 8 – 12, 2019.

April 8, 2019: The IRS issued a news release warning taxpayers against rushing to file their returns and recommending they file for an extension if needed.

April 9, 2019: The IRS issued a news release seeking volunteers for the taxpayer advocate panel. The application process is open through May 3, 2019.

April 10, 2019: The IRS issued corrections to final regulations (TD 9846) implementing Section 965 of the code.

April 11, 2019: The IRS released Revenue Procedure 2019-18 providing a safe harbor for professional sports teams when determining the value of player and staff-member contracts for the purpose of recognizing gain or loss on a trade, staff-member contract or draft pick.

April 11, 2019: The IRS issued corrections to proposed regulations (REG–104464–18) dealing with the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI).

April 12, 2019: The IRS issued a news release announcing 50 million people still needed to file their 2018 returns as the deadline approaches.

April 12, 2019:  IRS Commissioner Chuck Rettig released a message thanking taxpayers for filing their returns.

Special thanks to Terence McAllister in our New York office for this week’s roundup.

Many states and localities give incentives for business to move or transact in their locations. There has always been a question of whether these incentives are taxable income under federal income tax law. Internal Revenue Code (IRC) section 118, as amended by the Tax Cuts and Jobs Act, P.L. 115-97, provides that “[i]n the case of a corporation, gross income does not include any contribution to the capital of the taxpayer….(b) For purposes of subsection (a), the term “contribution to the capital of the taxpayer” does not include—…(2) any contribution by any governmental entity or civic group (other than a contribution made by a shareholder as such).”

In a recent case, the US Tax Court ruled that certain cash grants given by the State of New Jersey fit squarely within IRC section 118, and were not taxable to the corporate taxpayer. Brokertec Holdings, Inc. v. Commissioner, T.C. Memo. 2019-32.

Continue Reading Tax Court Rules State Corporate Incentives Are NOT Taxable Income Under Federal Law

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 1 – 5, 2019.

April 2, 2019: The IRS issued a news release providing tips on payment options, penalty waivers, refunds and other filing related recommendations.

April 3, 2019: The IRS issued a notice inviting individuals to apply for positions with the Taxpayer Advocacy Program (TAP) from April 8 – May 3.

April 3, 2019: The IRS issued Revenue Procedure 2019-17 providing guidance regarding qualified residential rental projects financed with tax exempt bonds under Section 142(d) of the code.

April 3, 2019: The IRS issued a news release reminding taxpayers who make quarterly payments that the first estimated quarterly payment for 2019 is due Monday, April 15.

April 4, 2019: The IRS issued a news release reminding taxpayers with foreign assets of the annual April 15 Foreign Bank and Financial Accounts (FBAR) filing deadline.

April 5, 2019: The IRS issued a news release dispelling what the agency terms five myths about tax refunds.

April 5, 2019: The IRS released Treasury Decision 9855 specifying which return to use for taxpayers who owe excise taxes under Sections 4960, 4966, 4967 or 4968 of the code.

April 5, 2019: The IRS issued final regulations authorizing the disclosure of certain expense items from business tax returns to the Census Bureau.

Special thanks to Terence McAllister in our New York office for this week’s roundup.

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of March 25 – 29, 2019.

March 25, 2019: The IRS issued Proposed Regulations under Section 301 of the code updating existing regulations to reflect changes made by the Technical and Miscellaneous Revenue Act of 1988.

March 25, 2019: The IRS issued Proposed Regulations partially withdrawing and re-proposing 2016 proposed regulations addressing transactions where property of a corporation becomes property of a real estate investment trust (REIT) following certain corporate distributions of controlled corporation stock.

March 26, 2019: The IRS issued Notice 2019-22 announcing the phase out of the Section 30D plug-in electric drive motor vehicle credit for purchasers of eligible General Motors’ vehicles beginning April 1, 2019.

March 27, 2019: The IRS issued Announcement 2019-03 providing an annual report on advance pricing agreements and the Advance Pricing and Mutual Agreement Program.

March 28, 2019: The IRS withdrew proposed regulations (REG-143686-07) that provided guidance on the allocation and recovery of basis in corporate stock redemptions under Section 301 of the code.

March 28, 2019: The IRS issued Revenue Procedure 2019-15 providing a waiver from time requirements for individuals electing to exclude their foreign earned income who must leave a country due to war, civil unrest or similar circumstances.

March 28, 2019: The IRS issued Notice 2019-24 providing adjustments to the limitation on housing expenses under Section 911 of the code.

March 29, 2019: The IRS issued Revenue Ruling 2019-11 providing guidance to taxpayers regarding the inclusion in income of recovered state and local taxes in the current year when the taxpayer deducted state and local taxes paid in a prior year.

March 29, 2019: The IRS withdrew proposed regulations (REG-124627-11) that provided guidance on the continuity of interest requirement under Section 368 of the code.

Special thanks to Terence McAllister in our New York office for this week’s roundup.