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Weekly IRS Roundup July 27 – July 31, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 27, 2020 – July 31, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. July 28, 2020: The IRS issued final regulations providing guidance about the limitation on the deduction for business interest expense after amendment of the Internal Revenue Code (Code) by the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The regulations provide guidance to taxpayers on how to calculate the limitation, what constitutes interest for purposes of the limitation, which taxpayers and trades or businesses are subject to the limitation and how the limitation applies in consolidated group, partnership, international and other contexts. July 28, 2020: The IRS published a notice of proposed rulemaking concerning rules that provide additional...

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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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Weekly IRS Roundup May 11 – May 15, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of May 11 – May 15, 2020. Additionally, for continuing updates on the tax impact of COVID-19, please visit our resource page here. May 12, 2020: The IRS issued proposed regulations concerning the application of IRC § 162(f), as amended by the Tax Cuts and Jobs Act. The proposed regulations provide that taxpayers may not deduct amounts that, pursuant to court orders or settlement agreements, are paid to, or at the direction of, governments in relation to the violation of any law or the investigation or inquiry into the potential violation of any law. May 13, 2020: The IRS and the Department of Treasury provided a notice of public hearing for the source of income from certain sales of property under IRC § 863 on June 3, 2020. May 15, 2020: The IRS expanded partner for Economic Impact Payments to provide information in multiple languages to...

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Weekly IRS Roundup February 10 – 14, 2020

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of February 10 – 14, 2020. February 10, 2020:  The IRS issued a revenue ruling providing guidance regarding how to determine the adjusted basis life of insurance contracts under IRC section 1011 and 1012 given the recent amendments to IRC section 1016(a), which the Tax Cuts and Jobs Act amended to provide that in determining the basis of a life insurance contract or an annuity contract, no adjustment is made for mortality, expense, or other reasonable charges incurred under the contract. The IRS updated Revenue Ruling 2009-13 and 2009-14 to reflect these changes. February 10, 2020:  The Joint Committee on Taxation released a report addressing domestic corporations’ federal tax receipts and tax liabilities. The report summarized the present law and accounting rules regarding corporate taxation, specifically addressing behavioral responses...

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Code Sec. 367(a) and (d) After the TCJA

Code Sec. 367(a) and (d) subject to taxation a transfer of tangible and intangible property by a U.S. person to a foreign corporation in an otherwise tax-free transaction. While for many years exceptions were provided for transfers of certain types of property, the Tax Cuts and Jobs Act (“TCJA”) amended Code Sec. 367, removing the exceptions and broadening the definition of intangible property. Specifically, Code Sec. 367(a)(1) provides generally that gain realized on the transfer of property by a U.S. person to a foreign corporation is subject to taxation. Former Code Sec. 367(a)(3) had provided an exception for property transferred to a foreign corporation for use in an active trade or business outside the United States. For example, this exception was available for the transfer of a foreign plant and equipment. The exception did not apply to a transfer of inventory, accounts receivable, intangible property within the meaning of former Code Sec. 936(h)(3)...

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Weekly IRS Roundup December 16 – 20, 2019

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of December 16 – 20, 2019. December 16, 2019: The IRS released a notice extending the phase-in period for the enforcement and administration of section 871(m) of the IRC. The notice extends the transition relief provided in Notice 2018-72, 2019-40 I.R.B. 522, for two years. As a result, the regulations under section 871(m) will not apply to any payment made with respect to a non-delta-one transaction issued before January 1, 2023. The IRS noted that the anti-abuse rule provided in §1.871-15(o) will continue to apply during the phase-in years. December 16, 2019: The IRS issued final regulations providing guidance regarding a corporation’s distribution of stock or securities of a controlled corporation without the recognition of income, gain or loss. More specifically, the regulations address how to determine whether a corporation is a...

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Watch Your Mailbox: IRS Letters Warning of Cryptocurrency Non-Compliance on Their Way

On July 26, 2019, the Internal Revenue Service (IRS) issued a press release informing the public that it is sending more than 10,000 letters to taxpayers with potentially unreported (or misreported) virtual currency transactions. The letters will inform them of the possible reporting requirements that may apply to these transactions and advise them of the need to correct past errors. As IRS Commissioner Chuck Rettig notes in the release, “Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties. . . .The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.” As we have previously reported, the IRS has stepped up its enforcement efforts regarding the reporting of cryptocurrency holdings and transactions in...

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Taxpayers Should Prepare for the Next Penalty Battleground

The IRS is using a new tool from its arsenal to enforce compliance for tax refund and credit claims: the Internal Revenue Code Section 6676 penalty. Taxpayers and their advisers need to be aware of the mechanics of this penalty and how best to avoid it being sustained. Andrew R. Roberson, Kevin Spencer and Evan Walters authored a comprehensive article on IRC Section 6676. They discuss: The origins of IRC Section 6676 How to contest the penalty and privilege concerns What taxpayers who are considering filing—or have already filed—refund claims should keep in mind now that the penalty is the IRS’s favorite new compliance tool Read the article here.

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Tax Court Rules State Corporate Incentives Are NOT Taxable Income Under Federal Law

Many states and localities give incentives for business to move or transact in their locations. There has always been a question of whether these incentives are taxable income under federal income tax law. Internal Revenue Code (IRC) section 118, as amended by the Tax Cuts and Jobs Act, P.L. 115-97, provides that “[i]n the case of a corporation, gross income does not include any contribution to the capital of the taxpayer….(b) For purposes of subsection (a), the term “contribution to the capital of the taxpayer” does not include—…(2) any contribution by any governmental entity or civic group (other than a contribution made by a shareholder as such).” In a recent case, the US Tax Court ruled that certain cash grants given by the State of New Jersey fit squarely within IRC section 118, and were not taxable to the corporate taxpayer. Brokertec Holdings, Inc. v. Commissioner, T.C. Memo. 2019-32. Brokertec Holdings is a financial services company based in Jersey...

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IRS LB&I Division Announces Its New Year’s Resolutions

Each New Year, many of us look back on the previous year’s activities, and determine what we want to accomplish in the coming year – lose weight, start exercising, read more tax articles, etc. The Internal Revenue Service (IRS) Large Business & International (LB&I) Division memorialized its New Year’s resolutions for 2019 in Publication 5319. So, for taxpayers with more than $10 million in assets, you may want listen up and see what the IRS has in store for 2019! LB&I’s goals come during a time of significant reduction in workforce and increase in responsibilities. LB&I experienced a significant reduction in workforce between October 2017 and October 2018, reducing its workforce by a net of 344 employees (down from 4,868 to 4,524) spread across several positions. This included 18 individuals in leadership, 218 revenue agents and 25 tax examiners. With the exception of tax law specialists, which remained at 24, every other position saw a...

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