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Can a Virtual Currency Position Be Treated as a Commodity for Tax Purposes?

Some virtual currency units and positions are treated as commodities by Commodity Futures Trading Commission (CFTC) and US courts. The IRS has told taxpayers that it views convertible virtual currency as property, not foreign currency, for federal tax purposes. Lacking clear guidance from either the Internal Revenue Service (IRS) or the Department of the Treasury, this article addresses issues that may help determine whether Internal Revenue Code provisions that apply to commodities might also apply to transactions involving virtual currencies and positions. Access the full article here.

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Virtual Currency Losses Disallowed on Infrequent Activities

If a taxpayer’s virtual currency activities are too infrequent to rise to the level of investment activities or do not qualify as trader or dealer activities, losses associated with virtual currency transactions are not deductible. This article explores tax-law issues that arise in the context of "personal use virtual currency" and reminds taxpayers to be aware of both their intent when acquiring or holding virtual currency and the potential tax implications arising from such activities. Access the full article here.

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Specific Identification of Virtual Currency Positions

The Internal Revenue Service (IRS) views convertible virtual currency as property, not foreign currency. As such, taxpayers must record and track the tax basis of each unit of virtual currency held in order to properly report taxable gain or loss when disposing of a unit or units of virtual currency. This article reviews the IRS’s position with respect to the identification and tax basis of such units. Access the full article here.

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The Legal Effect of IRS Pronouncements on Virtual Currency

Given limited guidance by US tax authorities regarding taxation of virtual currency activities, taxpayers with such holdings may find themselves in uncharted territory as to whether to take positions that are contrary to IRS pronouncements. This article explores relevant notices, rulings and FAQs, and reviews the types of deference that courts tend to put on different types of IRS interpretations and guidance. Access the full article here.

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Weekly IRS Roundup June 22 – June 26, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 22 – June 26, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. June 24, 2020: The IRS issued final regulations permitting a regulated investment company (RIC) that receives qualified real estate investment trust (REIT) dividends to report dividends the RIC pays to its shareholders as section 199A dividends. June 25, 2020: The IRS Office of Chief Counsel announced a limited settlement offer to certain taxpayers with pending docketed US Tax Court cases involving syndicated conservation easement transactions. The settlement offer requires a concession of the income tax benefits claimed by the taxpayer and imposes penalties. June 26, 2020: The IRS will begin to reopen Taxpayer Assistance Centers starting on June 29, 2020. In-person appointments will be available for...

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

​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,”...

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Weekly IRS Roundup June 15 – June 20, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 15 – June 20, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. June 19, 2020: The US Tax Court announced that the Court will resume receiving mail effective July 10, 2020. Any items currently being held by the United States Postal Service or any private delivery service will be delivered to the Court on that day. June 19, 2020: The IRS issued proposed regulations that provide guidance for the deduction of qualified transportation fringe (QTF) and commuting expenses. As part of the Tax Cuts and Jobs Act (TCJA), taxpayers are not allowed deductions for QTF expenses or for certain commuting expenses. These proposed regulations address the elimination of the QTF deduction. The proposed regulations also provide guidance to determine the amount of QTF parking expense that is...

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The Next Normal — Tax Responses to COVID-19

The coronavirus (COVID-19) pandemic has thrown our personal and professional lives into a constant state of change, as we deal with social distancing, e-learning, remote working, and Zoom. In this American Bar Association article, Andrew R. Roberson, a partner in US and International Tax at McDermott Will & Emery, describes how the constant change or “next normal” rings true in the tax world as well, both for taxpayers and practitioners, as we all adapt to today’s challenges. Access the full article.

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Weekly IRS Roundup June 8 – June 12, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of June 8 – June 12, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. June 9, 2020:  The IRS published a reminder for taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15.  Any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty. June 11, 2020:  The IRS released Notice 2020-46 to address that cash payments employers make to charitable organizations that provide relief to victims of the COVID-19 pandemic in exchange for sick, vacation, or personal leave which their employees forgo will not be treated as compensation. Additionally, the employees will not be treated as receiving the value of the leave as income and cannot claim a deduction for...

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Tax Court Records Accessible Again

When the US Tax Court (Tax Court) shut down in March, the public was unable to request copies of Tax Court records. That changed effective June 1, 2020, as non-parties may now call and request copies of court records which will then be sent via email. The cost for copy requests is $0.50 per page, with a per-document cap of $3.00. The Tax Court’s press release on this subject can be found here. Practice Point: It can be extremely beneficial to taxpayers and their advisors to see arguments being made by other taxpayers and the Internal Revenue Service in cases with similar legal issues. The ability to now directly call the Tax Court to request briefs or other filings in a docketed case, and to receive such documents electronically, is significant. Moreover, the cap of $3.00 per document may provide an incentive to request documents where the price per page, without a cap, was previously financially burdensome.

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