IRS Archives | Page 40 of 102 | TAX CONTROVERSY 360

More Changes to IRS Appeals’ Practices?

by Kevin Spencer and McDermott Will & Schulte | Mar 12, 2018 | IRS Appeals, IRS Guidance, Uncategorized

We have previously commented on changes at the Internal Revenue Service (IRS) Appeals Division, including: (1) the allowance of Appeals to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel to the Appeals conference, (2) the limitations on in-person conferences, and (3) the use of “virtual” conferences.

IRS Appeals Chief Donna Hansberry discussed these changes at a recent tax law conference held by the Federal Bar Association. According to reports, Ms. Hansberry wants feedback from practitioners on the compliance attendance and virtual conferences. (more…)

White House Intends to Nominate Michael J. Desmond to High-Level Roles in the IRS and the Department of Treasury

by Kevin Spencer, Macdonald Norman and McDermott Will & Schulte | Mar 5, 2018 | Court Procedure Matters, IRS Guidance, Trial Courts, Uncategorized

The White House announced on March 2 that the president intends to nominate Michael J. Desmond, a prominent tax lawyer, to be the Chief Counsel for the Internal Revenue Service (IRS) and Assistant General Counsel in the Department of Treasury. Subject to approval by the Senate, Mr. Desmond’s new roles will entail providing legal guidance and interpretive advice to taxpayers, the IRS, and the Department of Treasury.

Mr. Desmond clerked for Judge Ronald S.W. Lew of the United States District Court from 1994 until 1995. Mr. Desmond went on to serve as a trial attorney for the Department of Justice Tax Division and as tax legislative counsel for the Department of Treasury’s Office of Tax Policy. After leaving the public sector, Mr. Desmond became a partner with Bingham McCutchen LLP in the Washington, DC office until he opened the Law Offices of Michael J. Desmond in 2012. While operating his own practice, Mr. Desmond has represented clients at every stage of the tax controversy process. He has been a frequent author and speaker on tax topics. More information about Mr. Desmond can be found at his firm’s website.

Mr. Desmond is a very well-known and respected tax practitioner. He is a fixture in the tax community. We congratulate him on his nomination.

The IRS May Be Coming for Your Bitcoins

by Kevin Spencer and McDermott Will & Emery | Mar 1, 2018 | Court Procedure Matters, IRS Audits, IRS Guidance, Trial Courts, Uncategorized

If you have traded Bitcoin or other crypto-currencies, you probably know that their taxation may be as uncertain as your potential for reward or loss. Since 2014, the Internal Revenue Service (IRS) has publicized how it believes these investments should be treated for US federal income tax purposes. If you have failed to report your virtual currency transaction, the result in Coinbase, a recent IRS “John Doe” summons enforcement case, should convince you that it is time to ensure you are compliant with tax laws. The IRS may be coming for your Bitcoins!

IRS Guidance – Bitcoins Are Property

In IRS Notice 2014-21, 2014-16 IRB 938, the IRS explained that so-called “virtual currencies” that can be exchanged for traditional currency are “property” for federal income tax purposes. As such, a taxpayer must report gain or loss on its sale or exchange, measured against the taxpayer’s cost to purchase the virtual currency. In the notice, the IRS also made clear that “virtual currencies” are not currency for Internal Revenue Code (IRC) section 988 purposes. (more…)

New Chief Judge of US Tax Court

by Kevin Spencer and McDermott Will & Schulte | Feb 27, 2018 | Trial Courts, Uncategorized

On February 26, 2018, the US Tax Court announced that Judge Maurice B. Foley has been elected Chief Judge to serve a two-year term beginning June 1, 2018. Judge Foley will replace Chief Judge Paige Marvel.

Judge Foley was appointed to the US Tax Court by President Clinton on April 9, 1995. He was reappointed by President Obama on November 25, 2011, for a second term ending November 24, 2026. He received a bachelor of arts degree from Swarthmore College, a JD from Boalt Hall School of Law at the University of California, Berkeley, and a master of laws in taxation from Georgetown University Law Center. (more…)

Let’s Get Ready to Rumble – Coca Cola Concentrates on Trial Preparation

by Robin L. Greenhouse | Feb 20, 2018 | Appellate Courts, Court Procedure Matters, IRS Appeals, Transfer Pricing Resource, Trial Courts, Uncategorized

The main attraction in the US Tax Court (Tax Court) is just a few weeks away. On March 5, 2018, The Coca-Cola Company (TCCC) and the Internal Revenue Service (IRS) square-off for a much anticipated six-week trial before Judge Lauber. The parties recently filed their Pretrial Memoranda in the case, although the IRS’s memorandum was filed under seal. TCCC’s Pretrial Memorandum gives us deep insight into the issues and how the trial will be conducted. The primary issue in the $3 billion transfer pricing case is the proper amount of the arm’s length royalties payable by six foreign licensees to TCCC for the licenses of TCCC’s trademarks and certain other intangible property for exploitation in international markets. In its Pretrial Memorandum, TCCC contends that the IRS’s application of an approximately 45 percent royalty rate using a bottler-based Comparable Profit Margin (CPM) that allocates to TCCC more than 100 percent of the aggregate operating (after accounting for the amounts paid pursuant to the Royalty Closing Agreement) profits of the six foreign licensees is arbitrary and capricious. (more…)

Treasury and IRS Throw Out 298 Regulations and Amend 79 Others

by McDermott Will & Schulte | Feb 13, 2018 | IRS Guidance, Uncategorized

Following up on our prior posts here and here, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have proposed to remove 298 regulations and amend 79 regulations. The Treasury’s and the IRS’s action is in response to Executive Order 13789 (April 21, 2017), which called on the Treasury and the IRS to identify and reduce tax regulatory burdens that impose undue financial burdens on US taxpayers or otherwise add undue complexity to federal tax laws.

The 298 regulations are proposed to be removed because they have no current or future applicability and, therefore, no longer provide useful guidance. However, the proposed removal is not intended to alter any non-regulatory guidance that cites or relies on these regulations. The regulations proposed to be removed fall into one of three categories:

Regulations interpreting provisions of the Internal Revenue Code (Code) that have been repealed;
Regulations interpreting Code provision that, while not repealed, have been significantly revised, and the existing regulations do not account for these statutory changes (note that to fall within this category, the statutory changes must have rendered the entire regulation inapplicable); and
Regulations that, by the terms of the relevant Code provisions or the regulations themselves, are no longer applicable (g., expired temporary regulations, certain transition rules)

The 79 regulations proposed to be amended are regulations that make reference to the 298 regulations proposed to be removed.

Before the proposed regulations removing and withdrawing regulations are adopted as final regulations, the Treasury and the IRS will give consideration to any written comments provided by the public. Comments must be received by May 14, 2018. A public hearing may be scheduled if requested in writing by any person that timely submits written comments.

Practice Point: Taxpayers and practitioners may want to review the list of regulations proposed to be removed to determine whether the regulations continue to serve a useful purpose and should be retained.

IRS Releases Second Quarter Update to 2017-2018 Priority Guidance Plan

by Kevin Spencer and McDermott Will & Schulte | Feb 9, 2018 | IRS Guidance, Uncategorized

On February 7, 2018, the Department of the Treasury (Treasury) released its second quarter update to the 2017-2018 Priority Guidance Plan to identify tax issues it believes should be addressed through regulations, revenue rulings, revenue procedures, notices and other published administrative guidance. The Priority Guidance Plan contains projects the Treasury hopes to complete during the 12-month period from July 2, 2017 through June 30, 2018. We previously posted on the first quarter 2017-2018 Priority Guidance plan here.

Most of the projects do not involve the issuance of new regulations, instead focus on guidance to taxpayers on a variety of tax issues important to individuals and businesses in the form of: (1) revocations of final, temporary, or proposed regulations (for our prior coverage, see here); (2) notices, revenue rulings and revenue procedures; (3) simplifying and burden reducing amendments to existing regulations; (4) proposed regulations; or (5) final regulations adopting proposed regulations. The initial 2017-2108 Priority Guidance Plan consisted of 198 guidance projects, 30 of which have already been completed. The second quarter update reflects 29 additional projects, including priority items as a result of the Tax Cuts and Jobs Act (TCJA) legislation enacted on December 22, 2017, and guidance published or released from October 13, 2017 through December 31, 2017.

(more…)

Expect Controversy in the Wake of Tax Reform

by Kevin Spencer and Robin L. Greenhouse | Feb 7, 2018 | IRS Audits, IRS Guidance, Privilege and Non-Disclosure, Tax Reform, Uncategorized

Tax reform is here to stay (at least for the foreseeable future). The Internal Revenue Service (IRS) may receive additional funds to implement the new tax law. With lowered tax rates, accelerated expensing and forced repatriation of foreign earnings comes an increased risk of an IRS audit. This brave new tax world has left so many questions that tax advisors’ phones have been ringing off the hooks! But as the end of the 2017 year and first quarter of 2018 dust settles, be mindful of the IRS audit to come. (more…)

Treasury Moves Forward on Proposing Withdrawal of Regulations

by McDermott Will & Emery and McDermott Will & Schulte | Jan 26, 2018 | IRS Guidance, Uncategorized

As we previously discussed, the US Department of the Treasury (Treasury) announced a plan in October 2017 to repeal more than 200 regulations. The plan appears is moving forward based on remarks by Acting Chief Counsel William M. Paul earlier this week at the New York State Bar Association Section meeting that the Internal Revenue Service will soon propose 200 – 300 tax regulations (including longstanding temporary and proposed regulations) for withdrawal as part of President Donald Trump’s 2017 executive order creating a Treasury Regulatory Reform Task Force. Practitioners will have the opportunity to comment before the regulations are withdrawn.

Practice Point: Comments from taxpayers and practitioners will be instrumental in ensuring that seemingly obsolete regulations do not still have effect in other areas or negatively impact tax reporting positions. We will continue to monitor Treasury’s plan and provide more information once the proposal is released.

Court Rules That a Family Office Is a Business!

by Kevin Spencer and Leigh-Alexandra Basha | Jan 25, 2018 | IRS Guidance, Trial Courts, Uncategorized

On December 13, 2017, the US Tax Court (Tax Court) held that a family office was appropriately treated as a business, and permitted to deduct its expenses pursuant to Internal Revenue Code (Code) Section 162. In Lender Management LLC v. Commissioner, T.C. Memo. 2017-246, the Internal Revenue Service (IRS) argued that the taxpayer’s expenses should be properly claimed pursuant to Code Section 212 because the family office was not a business for federal income tax purposes, and instead its expenses were merely costs of its investment activities. Whether or not a family office is a business is important because deductions under Code Section 212 are substantially limited.

The taxpayer was the family office to the Lender’s Bagels fortune. It was owned by two Lender family trusts. In 2010 and 2011, the taxpayer reported net losses on its returns and reported net income in 2012 and 2013. The taxpayer provided direct management services to three limited liability companies (LLCs), each of which elected to be treated as a partnership. The owners of the LLCs were the children, grandchildren and great grandchildren of the founder.

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