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Weekly IRS Roundup May 4 – May 8, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 4 – May 8, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. May 7, 2020: The IRS issued proposed regulations that provide guidance for estates and trusts clarifying that certain deductions of estates and non-grantor trusts are not miscellaneous itemized deductions. The proposed regulations also provide guidance on determining the character, amount and allocation of deductions in excess of gross income succeeded to by a beneficiary on the termination of an estate or non-grantor trust. May 8, 2020: The Large Business & International (LB&I) Division of the IRS released an update to the Practice Unit titled Official Versus Free Market Exchange Rate. The update covers determining the appropriate exchange rate used to translate foreign currency amounts. The unit...

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IRS Appeals Large Case Pilot Program Ends

More than three years ago, the Internal Revenue Service (IRS) revised the Internal Revenue Manual to provide IRS Appeals Division (Appeals) with discretion to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel (Counsel) to the Appeals conference. The IRS also started a three-year initiative for taxpayers under the Large Business & International (LB&I) Division with cases assigned to Appeals Team Case Leaders (ATCLs). Under the initiative, LB&I personnel from Exam and Counsel were invited to the non-settlement portion of the taxpayer’s Appeals conference to test whether the participation of both parties would assist Appeals in narrowing and resolving complex factual and legal differences. The IRS announced that the initiative ended on May 1, 2020. The IRS has invited comments from the public about the initiative and its effectiveness. Such comments should be submitted by August 31, 2020. The practice of...

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Death of the CAP Program?

According to participants in a recent webcast, the Internal Revenue Service’s (IRS) Large Business & International Division (LB&I) is no longer accepting applicants for its Compliance Assurance Process (CAP) program.  CAP is a real-time audit program that seeks to resolve the tax treatment of all or most return issues before the tax return is filed.  The CAP program began in 2005 on an invitation-only basis with 17 taxpayers, and was subsequently expanded to include pre-CAP, CAP and CAP Maintenance components.  Taxpayers and IRS leadership generally praised the CAP program as one of the most successful corporate tax enforcement programs, with surveys showing that over 90 percent of CAP taxpayers reported overall satisfaction with the program. When the IRS announced its recent shift in the examination process to identifying and focusing on specific areas of risk, as opposed to general return review, the future of CAP became uncertain.  High-ranking IRS...

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IRS Updates LB&I Examination Process Guide

Effective May 1, 2016, the Internal Revenue Service (IRS) will begin applying previously announced changes to the Large Business & International (LB&I) Division’s examination process.  Publication 5125 begins by setting forth expectations for the LB&I exam team and the taxpayer or its representatives.  It then addresses IRS expectations regarding refund claims.  Finally, the publication discusses the three stages of the LB&I examination process—planning, execution and resolution—and how the IRS and taxpayers should conduct themselves during each stage. The IRS had previously released draft publication 5125 in November 2014, which concerned some taxpayers, particularly with respect to the statement that informal refund claims would only be accepted within 30 days of the opening conference.  Final Publication 5125 retains the 30-day period for making informal refund claims, but provides that LB&I will not require a formal claim after the...

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