Lynn Nichols Federal Tax Update Podcast

Feb. 19, 2018, edition

 

Listen as Lynn Nichols provides commentary on 10 Items pertaining to current developments in U.S. tax law. This week’s topics include:

 

• Partnership Audit Push-Out Election Comes With Strict Timeline

Partnerships pushing out adjustments to partners under the new centralized partnership audit regime must do so within 45 days of receiving a final partnership adjustment, even if they are seeking judicial review.

[Tax Notes 2/5/2018, Article by Matthew Madara]

 

 

• IRS Releases Practice Unit on S Corp Debt Basis Adjustments

The IRS released a practice unit on adjustments to an S corporation shareholder’s debt basis in various circumstances, explaining why shareholders must track stock basis and debt basis separately.

[SCO/C/53_4_2_2-05 (2016)]

 

 

• S Corp Shareholder Cannot Skip Bona Fide Indebtedness Test

The Tax Court rejected an S corporation shareholder’s argument that the section 1366 back-to-back loan rules eliminated the requirement to demonstrate an actual economic outlay, concluding that proving bona fide indebtedness is essential.

 

• Back-to-Back Loan Regs Do Not Alter Bona Fide Indebtedness Test

The Tax Court determined that the IRS properly reduced an S corporation owner’s allowable net operating loss carryback, finding that the controlling test still requires the basis in an S corporation’s debt to have “bona fide indebtedness . . . that runs directly to the shareholder”; the court held that the S corporation’s debt was not bona fide.

[Meruelo, Homero F. v. Commissioner; No. 1795-13; T.C. Memo. 2018-16; 2/5/2018]

 

 

• Corporation Can't Deduct Expenses for Purported Home Office Rental

The Tax Court held that a corporation whose sole shareholder and employee was a physician can’t deduct expenses for the purported rental of part of the physician’s home, finding that the corporation failed to prove that it had a bona fide rental arrangement rather than an arrangement to make mortgage payments on the physician’s behalf for his home.

[Christopher C.L. Ng MD Inc. APC v. Commissioner; No. 13696-16; T.C. Memo. 2018-14]

 

 

 

• Rental Property Expenses Were Not Deductible as Business Expenses

The Tax Court, in a summary opinion, sustained the IRS’s determination that a couple’s business expense deductions for expenses incurred to repair their commercial rental property were depreciable capital expenditures, finding that they failed to prove the disputed expenses were for deductible repairs.

[Brown, Brandon et ux. v. Commissioner; No. 2809-16S; T.C. Summ Op. 2018-6, 2/5/2018]

 

 

• Treasury Lists 18 New Priorities to Put Tax Law in Motion

Treasury is prioritizing 18 guidance projects, including new rules on passthroughs and electing small business trusts, as part of its plans to implement the Tax Cuts and Jobs Act. 

[Tax Notes 2/8/2018; Article by Matthew Madara and Fred Stokeld]

 

 

• Government Says Reliance on CPA Doesn’t Negate Late-Filing Penalties

In a brief for the Fifth Circuit, the government argued that a district court correctly followed the Supreme Court’s decision in United States v. Boyle, 469 U.S. 241 (1985), and held that a couple’s reliance on their CPA to timely e-file their return did not excuse them from late-filing penalties.

 

• Couple Argues They Reasonably Relied on CPA to E-File Return

A couple argued in a brief for the Fifth Circuit that they reasonably relied on their CPA to e-file their return so late-filing penalties shouldn’t apply and that the holding in United States v. Boyle, 469 U.S. 241 (1985), that a taxpayer can’t rely on an accountant to timely file a paper return should not be extended to e-filed returns.

[Christopher A. Haynes et ux. v. United States; No. 17-50816; 2/18/2018]

 

 

• W&M Committee Publishes Summary of Budget Bill’s Tax Provisions

On February 8 the House Ways and Means Committee released a summary of the tax provisions in the Bipartisan Budget Act of 2018, which include tax relief for victims of hurricanes Harvey, Irma, and Maria and the California wildfires, and extensions of expiring tax provisions.

[Summary of Tax Provisions in Bipartisan Budget Act of 2018; 2/9/2018]