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IRS Targets Private Foundations That May Be Used by Wealthy Taxpayers in Tax Planning

By Andrew R. Roberson, Kevin Spencer and Brian Moore on Jun 26, 2020
Posted In IRS Audits, IRS Guidance, Tax Reform, Tax Refunds

In remarks at the NYU Tax Controversy Forum on June 18, 2020, Internal Revenue Service (IRS) officials indicated that the agency is analyzing the use of private foundations for tax planning. Ms. Tamera Ripperda, who is the commissioner of the Tax Exempt and Government Entities (TEGE) Division and previously served as the industry director for the Global High Wealth in the Large Business and International (LB&I) Division, said the agency is focusing on cross-division collaborations to target high-income, high-wealth taxpayers. The TEGE Division has trained more than 400 LB&I agents this year on the use of private foundations in tax planning for high-net-worth individuals. Additionally, the divisions are using data analytics to identify linkages between LB&I and TEGE cases. Commissioner Ripparda stated that TEGE has identified more than 1,000 private foundations “that have linkages or that are interwoven into these global high-wealth enterprises,”...

Weekly IRS Roundup April 27 – May 1, 2020

By McDermott Will & Emery on May 5, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 27 – May 1, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. April 28, 2020: The IRS published Large Business and International (LB&I) Process Unit on the substantiation of foreign tax credits for individuals. For an individual to claim a foreign tax credit, individual taxpayers must submit Form 1116 with their US federal income tax return. At the request of the IRS, the taxpayer must provide evidence supporting the foreign taxes claimed on Form 1116. April 28, 2020: The IRS published LB&I Concept Unit on the installment method under IRC § 453. An installment sale occurs when a seller receives at least one payment in a tax year after the disposition. An installment sale is reported on a Form 6252. April 30, 2020: The IRS issued Revenue Procedure 2020-29,...

Despite NOL Carrybacks, IRS Continues to Deny Refunds of Section 965 Transition Tax Overpayments

By Justin G. Crouse on Apr 29, 2020
Posted In Tax Refunds, Uncategorized

In a series of frequently asked questions (FAQs) addressing the interaction of recently enacted net operating loss (NOL) carryback provisions and section 965, the IRS stated that taxpayers may not receive a refund of any section 965 tax payment unless and until the payment exceeds the “entire income tax liability for section 965.” The IRS further stated that such amount “includes all amounts to be paid in installments under section 965(h) in subsequent years.” This position – that taxpayers are not entitled to a refund of an overpayment of the section 965 tax liability unless and until the overpayment amount exceeds the full eight years of installment payments – is consistent with the IRS’s previously published position in PMTA 2018-016 (and as discussed in our prior analyses, here and here). Access the full article.

New Revenue Ruling 2020-8 Helps Taxpayers Seek COVID-19 Tax Refund Claims

By Kevin Spencer, Andrew R. Roberson and Le Chen on Apr 23, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

Recently, in Revenue Ruling 2020-8, the Internal Revenue Service (IRS) announced that it was suspending Revenue Ruling 71-533, which had addressed the interaction of two Internal Revenue Code (IRC) provisions regarding limitations periods on refund claims, pending reconsideration of the holding of the earlier Revenue Ruling. Under IRC section 6511(d)(2)(A), a taxpayer generally must make a refund claim relating to an overpayment attributable to a net operating loss (NOL) carryback no later than three years after the taxable year in which the NOL was generated. Under IRC section 6511(d)(3)(A), a taxpayer generally must make a refund claim relating to an overpayment attributable to a foreign tax credit carryback no later than ten years after the taxable year in which the foreign taxes were paid. Revenue Ruling 71-533 had addressed a situation that implicated both of these provisions. Specifically, the taxpayer at issue in the ruling had incurred a NOL in 1969,...

IRS Flexes Its Administrative Summons Power in Recent Tax Case

By Kevin Spencer, Andrew R. Roberson and Macdonald Norman on Apr 22, 2020
Posted In Appellate Courts, Tax Refunds, Trial Courts, Uncategorized

The United States Court of Appeals for the Tenth Circuit’s recent opinion in Standing Akimbo, LLC v. United States, No. 19-1049 (10th Cir. April 7, 2020), reminds us of the Internal Revenue Service’s (IRS) ability to obtain the information it needs to examine taxpayers’ returns using its powerful summons tool. In May 2017, the IRS began auditing Standing Akimbo, LLC (Standing Akimbo), a Colorado limited liability company operating as a medical-marijuana dispensary. The audit focused on whether Standing Akimbo improperly claimed business deductions that were prohibited under Internal Revenue Code (IRC) section 280E. Generally, IRC section 280E provides that no deduction or credit is allowed for any amount paid or incurred in the carrying of a business if such business trafficks in controlled substances that are prohibited by Federal law. While legal under Colorado law, marijuana is still classified as a controlled substance under Federal law, and specifically...

More Guidance on CARES Act Refund Claims

By Alex Ruff, Andrew R. Roberson and Kevin Spencer on Apr 14, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

On April 8, 2020, the Internal Revenue Service (IRS) released a statement telling taxpayers that guidance would be forthcoming on refund claims related to the Coronavirus Aid, Relief and Economic Security Act, or the CARES Act. Consistent with that promise, on April 13, 2020, the IRS issued guidance describing temporary procedures permitting the submission via fax of Form 1139, Corporation Application for Tentative Refund, and Form 1045, Application for Tentative Refund. For our prior discussion of CARES Act refund guidance issued by the IRS, see here. Before the new guidance, Forms 1139 and 1045 could be filed only via paper copy delivered through the USPS or by a private delivery service. However, per the newly issued guidance, the IRS stated that, starting on April 17, 2020, and until further notice, the IRS will accept submissions via fax of eligible refund claims on Forms 1139 and 1045. The claims, however, must be filed pursuant to sections 2303 and...

CARES Act Update: IRS Provides Guidance to Partnerships to Take Advantage of Liquidity Benefits

By Kevin J. Feeley, David Sherwood, Alex Ruff, Andrew R. Roberson and Kevin Spencer on Apr 13, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

On April 8, 2020, the Internal Revenue Service (IRS) issued Rev. Proc. 2020-23 in response to the Coronavirus Aid, Relief and Economic Security (CARES) Act. Rev. Proc. 2020-23 eases restrictions on partnerships’ ability to file amended tax returns and issue amended Schedules K-1 in order for their partners to avail themselves of the retroactive tax relief provided by the CARES Act. Access the full article.

Weekly IRS Roundup April 6 – 10, 2020

By McDermott Will & Emery on Apr 13, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of April 6 – 10, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. April 8, 2020: The IRS announced that four LB&I campaigns related to agricultural chemicals security credit, partial disposition election for buildings, restoration of sequestered alternative minimum tax credit carryforward and work opportunity tax credit have been retired. Even though these issues are no longer LB&I campaigns, such issues may still be identified and included in the scope of an LB&I examination. April 8, 2020: The IRS released Revenue Procedure 2020-23, allowing for eligible partnerships to file amended partnership returns for taxable years beginning in 2018 and 2019 by using Form 1065, US Return of Partnership Income, checking the “Amended Return” box and issuing an amended Schedule...

IRS Postpones Virtually All Deadlines Until July 15, 2020, in Response to COVID-19

By Andrew R. Roberson, Brian Moore, Carlyn S. McCaffrey and Justin Jesse on Apr 10, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

In Notice 2020-23, the Internal Revenue Service further expanded relief for taxpayers in response to the Coronavirus (COVID-19) pandemic. Individuals, corporations, trusts, estates and other taxpayers that ordinarily would have had a filing, payment or other deadline between April 1, 2020, and July 15, 2020, now qualify for an extension. Access the full article.

CARES Act Refund Claim Guidance

By Justin Jesse, Andrew R. Roberson and Kevin Spencer on Apr 10, 2020
Posted In IRS Guidance, Tax Refunds, Uncategorized

The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, provides tax relief to taxpayers in certain situations. Some of these provisions may generate refunds for prior years, such as the relaxation of restrictions on the use of net operating losses (NOLs) and interest deductions as well as the retroactive availability of additional depreciation related to qualified improvement property. For our prior discussions of these, and other CARES Act provisions, see here. Naturally, it would be beneficial to taxpayers to obtain such refunds to increase cash liquidity during the COVID-19 pandemic. Under normal circumstances, there are two ways corporate taxpayers can seek tax refunds: (1) filing an amended return; or (2) requesting a “quick refund” by filing Form 1139, Corporation Application for Tentative Refund. Normally, a corporate taxpayer must file Form 1139 within 12 months of the close of the taxable year in which the NOL arose. Then, the Internal...

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