Lynn Nichols Federal Tax Update Podcast

March 19, 2018, edition

 

Listen as Lynn Nichols provides commentary on 8 Items pertaining to current developments in U.S. tax law. This week's topics include:

1. IRS Publishes List of Practitioners Subject to Disciplinary Action

The IRS has published a list of attorneys, CPAs, enrolled agents, enrolled actuaries, enrolled retirement plan agents, and appraisers who have received disciplinary sanctions for violating the regulations governing practice before the IRS.

[Announcement 2018-4; 2018-10 IRB 401; 3/5/2018]

 

1. Business Network Loses Exemption

The IRS revoked the tax-exempt status of an organization described in section 501(c)(3) because its primary activity is operating a networking event for business owners and investors, which is not an exempt purpose.

[LTR 201809011; 9/21/2017]

 

1. Tax Court Invalidates Scheme to Bypass Roth IRA Limits

A group of taxpayers is on the hook for excise taxes after the Tax Court invalidated their scheme to contribute funds to a foreign sales corporation and then Roth IRAs.

[Tax Notes Today; 3/5/2018; Article by Velarde and Madara]

     Family Directly Contributed to Roth IRAs, Liable for Excise Taxes

The Tax Court, declining to sustain additions to tax, held that funds a couple and their daughter routed from their business through a Bermuda-based foreign sales corporation to their Roth IRAs were contributions from the individuals and held them liable for excise taxes under section 4973 for excess contributions to the retirement accounts.                                                                                                            [Mazzei, Celia et al. v. Commissioner; No. 16702-09; No. 16779-09; 150 T.C. No. 7; 3/5/2018]

1. Architect Was Real Estate Professional, Allowed Rental Loss Deduction

The Tax Court, in a summary opinion, held that an architect qualified as a real estate professional during the 2013 tax year and the IRS improperly disallowed a loss deduction for his rental real estate activities under the passive activity loss limitations in section 469.

[Franco, Jose et ux. v. Commissioner; No. 22469-16S; T.C. Summ. Op. 2018-9; 3/6/2018]

 

1. Company Co-Owner Liable for Trust Fund Recovery Penalties

A U.S. district court held that one of the owners of a construction contracting company was a responsible person who willfully failed to pay the company's employment tax liabilities; the court granted the government a nearly $1 million judgment against him for trust fund recovery penalties.

[Davis, Kelly D. v. United States; USSDC CO; No. 1:13-cv-00450; 3/6/2018]

 

1. Wife Wasn't a Real Estate Professional, Losses Limited

The Tax Court, sustaining accuracy-related penalties, held that a couple's rental real estate activities were passive and their losses for those activities were limited under section 469(i), finding that the wife didn't spend the required time participating in real estate activities to qualify as a real estate professional.

[Farrokh E. Pourmirzaie et ux. v. Commissioner; No. 25558-14; T.C. Memo. 2018-26; 3/8/2018]

 

1. Lawyer's Losses From Real Estate Activities Were Capital

The Tax Court, in a summary opinion, held that a practicing attorney wasn't engaged in the trade or business of buying and selling real estate, so his losses from his real estate activities were not subject to ordinary loss treatment, but deductible as capital losses.

[Bruce Joseph Levitz v. Commissioner; No. 15393-14S; T.C. Summ. Op. 2018-10; 3/8/2018]

 

1. IRS Releases Practice Unit on Shareholder Debt Owed by S Corp

The IRS released a practice unit on debt basis for an S corporation shareholder, addressing what qualifies as bona fide debt and whether that debt is owed directly to the shareholder creating debt basis.

[SCO/C/53_04_02_01-04 (2016); updated 1/19/2018; 3/8/2018]