Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 13, 2020 – July 17, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here.
July 14, 2020: The IRS issued a news release on a proposed redesigned partnership form for tax year 2021 (filing season 2022). The proposed form is designed to provide greater clarity for partners on how to compute their US income tax liability with respect to items of international tax relevance, including claiming deductions and credits. Comments are due by September 14, 2020.
July 16, 2020: The IRS issued a notice requesting comments concerning consent to extend the time to assess tax with respect to gain recognition agreements covered by section 367 of the Internal Revenue Code (Code). Form 8838 is used to extend the statute of limitations for US persons who transfer stock or securities to a foreign corporation. The form is filed when the transferor makes a gain recognition agreement. This agreement allows the transferor to defer the payment of tax on the transfer. The IRS uses Form 8838 so that it may assess tax against the transferor after the expiration of the original statute of limitations. Comments are due on or before September 14, 2020.
July 16, 2020: The IRS released various prescribed rates for federal income tax purposes for August 2020, including the applicable federal rates under section 1274(d); the adjusted applicable federal rates under section 1288(b); the adjusted federal long-term rate and the long-term tax-exempt rate under section 382(f); the appropriate percentages for determining the low-income housing credit under section 42(b)(1); and the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest under section 7520.
July 17, 2020: The IRS provided a notice of public hearing on proposed regulations clarifying that certain deductions allowed to an estate or non-grantor trust are not miscellaneous itemized deductions and thus are not affected by the suspension of the deductibility of miscellaneous itemized deductions for taxable years beginning after December 31, 2017, and before January 1, 2026. The proposed regulations also provide guidance on determining the character, amount and allocation of deductions in excess of gross income succeeded to by a beneficiary on the termination of an estate or non-grantor trust. The public hearing is being held on Wednesday, August 12, 2020, at 10:00 am. The IRS must receive speakers’ outlines of the topics to be discussed at the public hearing by Wednesday, July 29, 2020.
July 17, 2020: The IRS released a Competent Authority Arrangement between the authorities of Switzerland and the United States regarding the interpretation of the term “North American Free Trade Agreement” (NAFTA). NAFTA is being superseded by the US-Mexico-Canada Agreement (USMCA). Entries in the United States-Switzerland convention and the memorandum of understanding referring to NAFTA will be understood to be references to USMCA.
July 17, 2020: The IRS issued a notice requesting comments on Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return and Schedule R-1 (Form 706), Generation-Skipping Transfer (GST) Tax. Form 706 is used by executors to report and compute the federal estate tax imposed by section 2001 and the federal GST tax imposed by section 2601. Schedule R-1 (Form 706) serves as a payment voucher for the GST tax imposed on a direct skip from a trust, which the trustee of the trust, must pay. Comments are due on or before September 18, 2020.
July 17, 2020: The IRS released a practice unit on the computation of an individual taxpayer’s foreign tax credit limitation.
July 17, 2020: The IRS issued a notice requesting comments on the source of compensation for labor or personal services under section 861. The request relates to TD 9212, which contains final regulations that describe the proper basis for determining the source of compensation for labor or personal services performed partly within and partly without the United States. Comments are due on or before September 18, 2020.
July 17, 2020: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums and Chief Counsel Advice).
Special thanks to Robbie Alipour in our Chicago office for this week’s roundup.