Lynn Nichols Federal Tax Update Podcast September, 26 2019, Episode 48

Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law.

1. IRS Explains Deductibility of Contribution to Retirement Plan

In a legal memorandum, the IRS advised that for an employer's contribution to the trust of a qualified retirement plan to be deductible in the tax year it is made, the contribution must be a payment or cash, a cash equivalent, or property.

[ILM 201935011, 8/15/2019]

[Don E. Williams Co. v Commissioner, 429 U.S. 569 (1977)

 

1. Vacation Rentals Can't Be Used to Deduct Losses, Court Holds

A real estate professional and his spouse couldn't lump in three vacation rentals with other rental properties in trying to claim non-passive losses.

[Tax Notes Today, 9/4/2019. Article  by Stephanie Cumings]

Resort Properties Not Part of Rental Activity for Passive Losses

A U.S. district court held that a couple that included a real estate professional wasn't entitled to group their resort properties with other real estate properties as a single rental activity for purposes of section 469, finding that the management companies with whom they had agreements didn't have a continuous or recurring right to use the properties.

[Greg A. Eger; USDC N CA, No. 4:18-cv-00199, 8/30/2019]

 

1. Denial of Innocent Spouse Relief Upheld; Collection May Proceed

The Tax Court held the IRS properly determined in a collection case that a wife wasn't entitled to innocent spouse relief, finding that she doesn't meet the criteria for equitable relief under section 6015 because she failed to show sufficient economic or health hardship, and there was evidence she knew or should have known of the unpaid liabilities.

[Melinda Jean Welwood; No. 17254-17L; T.C. Memo. 2019-113, 9/4/2019]

1. Treasury Issues Proposed Regs on TCJA Accounting Rule Changes

Treasury has released proposed regulations governing how businesses recognize income and treat advance payments.

[Tax Notes Today, 9/6/2019, Article by Stephanie Cumings and Kristen Parillo]

Proposed Regs Address Treatment of Advance Payments

The IRS has published proposed regulations (REG-104554-18) on the timing of income inclusion under section 451 of advance payments for goods, services, and other items, reflecting changes made by the Tax Cuts and Jobs Act.

Proposed Tax Accounting Regs Address Timing of Income Inclusion

The IRS has published proposed regulations (REG-104870-18) on the timing of income inclusion under section 451 to reflect changes made by the Tax Cuts and Jobs Act.

[9/5/2019]

 

1. Motorcycle Dealership's Challenge to Penalties Will Proceed

A U.S. district court held that there is a genuine dispute of material fact regarding whether a motorcycle dealership intentionally disregarded its filing requirements in its suit challenging penalties imposed against it for failing to report transactions involving more than $10,000 in cash but held that it cannot obtain reasonable cause relief to avoid the penalties.

[ Mycles Cycles Inc.; USDC S CA, No. 3:18-cv-00314, 9/4/2019]

 

1. Couple Gets Litigation Costs After IRS Error

The Tax Court granted a couple litigation costs after they received an erroneous SSA-1099 that the IRS refused to acknowledge as false despite proffered evidence until the Taxpayer Advocate Service intervened, leading the IRS to reverse its position; the court held that it lacks authority to adopt a rule proposed by the couple for situations of this nature.

[ David K. Wagstaff et vir; No. 22658-17; T.C. Memo. 2019-114; 9/5/2019]