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Weekly IRS Roundup October 1 – 5, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 1 – 5, 2018:

October 1, 2018: The IRS announced in Notice 2018-78 that the deadline for the basis election under Treas. Reg. § 1.965-2 was extended from prior to the publication of final Internal Revenue Code (Code) Section 965 regulations to 90 days after the issuance of the final Code Section 965 regulations.

October 3, 2018: The IRS issued Rev. Proc. 2018-53, which sets out the procedure for taxpayers requesting private letter rulings with respect to divisive reorganizations under Code Sections 355 and 368(a)(1)(D).

October 3, 2018: The IRS issued Notice 2018-76 providing transitional guidance on the deductibility of expenses for certain business meals under Code Section 274 in an entertainment context and stated that it intended to publish proposed regulations on the matter. For more information, see our post here.

October 4, 2018: The IRS released a reminder that calendar-year taxpayers who placed qualifying property in service during 2017 but intend to elect not to claim the new 100 percent depreciation deduction under Code Section 168(k) must file the election before October 15, 2018.

October 5, 2018: The IRS released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandum and Chief Counsel Advice).

Special thanks to Alex Lee in our DC office for this week’s roundup.




Uncle Sam Is Buying Your Next Business Meal – at Least Half of It!

Tax reform made many structural changes to our tax system. Changes to Code Section 274, however, sent shudders through corporate America. As amended, Code Section 274 eliminated the 50 percent deduction for “entertainment” expenses that are related to business activities. Sadly, gone are the days of companies deducting the cost of box tickets to games for the local sport’s team. Gulp! But, in its haste, Congress left what constitutes entertainment expenses substantially undefined. Accordingly, a strict reading of the statute meant—along with the box seats—went the hot dogs and beer! Ugh! So, under this strict interpretation, taking your client to the fancy restaurant to encourage her to buy your product or services would no longer be deductible.

Thankfully, the IRS has recently clarified that meals are not entertainment under amended Code section 274. IRS Notice 2018-76 explains that business meals are still eligible for the 50 percent deduction if they are not lavish and extravagant. And an IRS press release, IR-2018-195, explains that the IRS will release proposed regulations explaining what “entertainment” means.

Practice Point: We can all sigh with relief that Uncle Sam will continue to underwrite the “wining and dining” of our clients. Although eating is officially not entertainment (at least for tax purposes), the recent IRS guidance acknowledges that America does a lot of its business while breaking bread.




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