It took five years, but the Internal Revenue Service (IRS) has finally released some guidance on the taxation of cryptocurrencies! On October 9, 2019, the IRS released Revenue Ruling 2019-24 and several “frequently asked questions” (and answers) which deal with some (but not all) of the federal income tax issues involved with cryptocurrencies.
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The Large Business and International Division of the Internal Revenue Service (IRS) developed the Compliance Assurance Process (CAP) program to improve large corporate taxpayer compliance with US federal tax obligations through the use of real-time issue resolution tools and techniques.
On September 12, 2019, the IRS announced that it was accepting applications—for the first time
On July 31, 2019, the Internal Revenue Service (IRS) Large Business and International (LB&I) division formally withdrew its Directive (LB&I-04-0118-005) instructing examiners on transfer pricing selection related to stock based compensation (SBC) in Cost Sharing Arrangements (CSAS). See here for IRS Notice of Withdrawal.
The Directive was issued January 12, 2018, after the Tax Court’s opinion in Altera which invalidated Treasury Regulation § 1.482-7A(d)(2). The IRS appealed Altera and issued Directive LB&I-04-0118-005, which we previously discussed here. The Directive instructed examiners to “[s]top opening issues related to stock-based compensation (SBC) included in cost-sharing arrangements (CSAS) intangible development costs (IDCs) until the Ninth Circuit issues an opinion in the Altera case on appeal.” At the time, the IRS indicated that it would issue further guidance once Altera was finally decided. On June 7, 2019, the Ninth Circuit reversed the Tax Court’s decision.
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On July 19, 2019, the Internal Revenue Service (IRS) Large Business & International (LB&I) division announced the approval of six new campaigns. As in the past, the IRS stated that “LB&I’s goal is to improve return selection, identify issues representing a risk of non-compliance, and make the greatest use of limited resources.” This brings the total number of campaigns to 59! LB&I’s campaign announcements and approved campaigns are available on the IRS’s website.
The six new LB&I campaigns are listed below, verbatim by title and description.
S Corporations Built in Gains Tax
C corporations that convert to S corporations are subjected to the Built-in Gains tax (BIG) if they have a net unrealized built-in gain and sell assets within 5 years after the conversion. This tax is assessed to the S corporation. LB&I has found that S corporations are not always paying this tax when they sell the C corporation assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. Treatment streams for this campaign will be issue-based examinations, soft letters, and outreach to practitioners.
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The IRS has released new informal guidance (“Questions and Answers”) regarding section 965, containing information on making successive installment payments, filing transfer agreements as a result of certain acceleration or triggering events, and other matters related to S corporation shareholders making the section 965(i) election.
Consistent with prior advice issued by the IRS (see coverage
The enactment of the Taxpayer First Act, H.R. 3151 (116th Cong.) (TFA) brings with it several changes to the procedures and operations of the Internal Revenue Service (IRS). The TFA touches on the following subjects:
This post does not discuss each subject, but rather focuses on changes to the IRS Appeals process.
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The IRS is using a new tool from its arsenal to enforce compliance for tax refund and credit claims: the Internal Revenue Code Section 6676 penalty. Taxpayers and their advisers need to be aware of the mechanics of this penalty and how best to avoid it being sustained.
Andrew R. Roberson, Kevin Spencer and Evan
The concept of limited scope representation is not a new one in the legal arena. Rule 1.2(c) of the ABA Model Rules of Professional Conduct provides that “A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.” This rule has been broadly embraced by states. The idea of limited representation in Tax Court cases has been floating around for years. It has mostly come up in the context of pro se taxpayers who appear at calendars calls. There may be one or more volunteers willing to assist the taxpayer but are unable to enter an appearance on the spot for various reasons (e.g., inability to conduct a conflicts search, uncertainty as to whether the taxpayer will be responsive in the future, inability to determine whether case has merit). In this situation, the volunteer is usually not allowed to speak on the taxpayer’s behalf to the Court to try to assist with resolving the case and handling procedural matters.
In 2018, Special Trial Judge Carluzzo and Special Trial Judge Panuthos invited suggestions for better assisting unrepresented and low-income taxpayers in the Tax Court. In response, the American Bar Association Section of Taxation recommended that the Tax Court consider amending its rules to permit counsel to enter an appearance for a limited time or purpose. At the time of the recommendation, approximately 69% of all Tax Court petitioners and 91% of petitioners in small tax cases were self-represented. The Section of Taxation pointed out that many self-represented petitioners before the Tax Court do not understand the law or court rules and therefore are unable to make an effective legal argument. This results in inefficiencies in the Tax Court, as well as inequality because the IRS is always represented by counsel.
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In Kearse v. Commissioner, T.C. Memo 2019-53, the Tax Court held the Internal Revenue Service (IRS) abused its discretion as part of the taxpayer’s Collection Due Process hearing (CDP hearing) because the Appeals officer failed to properly verify that the assessment of the taxpayer’s unpaid 2010 liability was preceded by a duly mailed notice of deficiency.
The taxpayer, well-known to sports fans, was Jevon Kearse. Mr. Kearse, nicknamed “The Freak” for his athletic ability, played for 11 seasons in the National Football League and tallied 74 career sacks as a dominating defensive end. Based on the description of events by the Tax Court, Mr. Kearse’s attorneys outmaneuvered the IRS similar to the way Mr. Kearse had offensive tackles tripping over their shoestrings.
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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.
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