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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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IRS Is “All Hands on Deck” to Provide Guidance Related to Tax Reform

In the wake of tax reform, taxpayers and practitioners alike are anxious for guidance and clarification on how the new laws impact transactions and reporting positions. The Internal Revenue Service (IRS) has previously stated that implementing tax reform is its highest priority, but that issuing guidance on the entire bill would likely take a substantial amount of time. Since December 2017, the IRS has published a host of notices, revenue procedures and administrative guidance. In some instances, the guidance was mechanical (e.g., Notice 2018-38), and in others it was more substantive (e.g., Notice 2018-28, Notice 2018-18, Rev. Proc. 2018-26). On May 31, 2018, the IRS announced an “all hands on deck” effort to implement tax reform through 11 groups working closely with the Treasury Department. The IRS originally stated that it did not plan to release any more proposed regulations before the end of the year. Instead, it would issue tax Forms (with...

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GAO Reports on IRS Guidance Procedures

The United States Government Accountability Office (GAO) recently released a report regarding how the Internal Revenue Service (IRS) communicates tax guidance to the public.This report was prepared following bipartisan requests from members of both houses of Congress. The GAO report: (1) analyzed documents that defined IRS guidance types; (2) reviewed the IRS’s policies and procedures for issuing guidance; (3) reviewed literature on the IRS’s issuance of guidance; (4) interviewed individuals at relevant government and tax practitioner organizations; and (5) reviewed IRS guidance issued during 2013 through 2015. Below is a chart included in the GAO report that illustrates various forms of guidance, and the weight that the IRS says attaches to each. The GAO found that the IRS uses many different forms of guidance to communicate its interpretation of tax laws to the public, but considers only the Internal Revenue Bulletin (IRB) guidance to be authoritative. The...

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3M Company, IRS File Reply Briefs in “Blocked Income” Case; Tax Court Orders Oral Argument

As discussed in an earlier post, 3M Co. v. Commissioner, T.C. Dkt. No. 5816-13, involves 3M Company’s (3M) challenge to the Internal Revenue Service’s (IRS) determination that Brazilian legal restrictions on the payment of royalties from a subsidiary in that country to its US parent should not be taken into account in determining the arm’s-length royalty between 3M and its subsidiary under Treas. Reg. § 1.482-1(h)(2). The case has been submitted fully stipulated under Tax Court Rule 122. We discussed the parties’ opening briefs, filed on March 21, 2016, here. Reply briefs were filed on June 29, with the IRS filing an amended reply brief on August 18. 3M returns to its argument that Treas. Reg. § 1.482-1(h)(2) is “procedurally invalid” because Treasury and the IRS failed to satisfy the requirements of section 553 of the Administrative Procedure Act (the APA) when they promulgated the regulations. 3M notes that the IRS completely ignored this argument in its...

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Law School Professors File Amicus Briefs in Support of Commissioner’s Position in Altera

Two groups of law school professors have filed amicus briefs with the US Court of Appeals for the Ninth Circuit in support of the government’s position in Altera Corp. v. Commissioner, Dkt Nos. 16-70496, 16-70497. Read more on the appeal of Altera here and the US Supreme Court’s opinion addressing interplay between the Administrative Procedure Act (APA) procedural compliance and Chevron deference here. Each group argues that Treas. Reg. § 1.482-7 represents a valid exercise of the Commissioner’s authority to issue regulations under Internal Revenue Code (Code) Section 482 and that the US Tax Court (Tax Court) erred in finding the regulation to be invalid under section 706 of the APA. One group of six professors (Harvey Group) first notes its agreement with the arguments advanced by the government in its opening brief. In particular, the Harvey Group concurs with the argument that “coordinating amendments promulgated with Treas. Reg. § 1.482-7(d)(2) vitiate...

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