July 15th, 2026
June Federal Tax Update
Posted in: Tax Law Tagged: David S. De Jong
Author: David S. De Jong
INDIVIDUALS
In Paschall v. Commissioner, TC Memo 2026-46, the Tax Court agreed with the IRS position that an individual who receives cryptocurrency for “staking” services (the process through which tokens are earned in exchange for validating transactions on blockchain networks) is taxed immediately, the Court noting the ability to convert the tokens to cash at any time.
Igboke v. Commissioner, the Tax Court in a Bench Opinion denied a deduction for residential interest to a 30-year CPA who admitted that he paid no mortgage interest but deducted it based on Forms 1098 that he allegedly received; the Court noted that the forms appeared to have been altered and were not authentic and were created to support the deduction.
In Wells v. Commissioner, TC Memo 2026-49, the Tax Court disallowed a carryover of charitable contributions although a deduction for this donation of a military boarding school had been allowed in the year of the donation and two succeeding years, IRS now claiming that the requisites including the acknowledgement by the charity were insufficient.
In Rising Rock Partners v. Commissioner, TC Memo 2026-45, an LLC including former major league manager Ned Yost lost 95 percent of a claimed tax deduction for donating a conservation easement, the Court also imposing a 40 percent penalty.
In Chief Counsel Advice 202625022, IRS stated that income omissions disclosed on a tax return are excludable from both the numerator and denominator when calculating the percentage of gross income omitted on a tax return for purpose of the six-year statute of limitations.
RETIREMENT AND ESTATE PLANNING
In Estate of Fields v. Commissioner, 2026 WL – 1642415, the Fifth Circuit Court of Appeals agreed with the Tax Court that there was no purpose other than tax avoidance in a transfer of $17 million in assets ten days before death to a limited partnership, the grand-nephew as power of attorney holding a 0.01 percent interest and the decedent as limited partner owning 99.99%.
In Revenue Procedure 2026-25, IRS created a “safe harbor”, not requiring contributions to Trump accounts to be reported as “future interests” where no gift tax return is otherwise not required to be filed and is not actually filed for the applicable year.
In Technical Release 2026-02, the Department of Labor announced that Trump accounts will normally not be subject to the Employee Retirement Income Security Act (ERISA) even though employees under age 18 could receive employer contributions, DOL considering them “not significant”; exceptions apply where the employer imposes conditions beyond those permitted under the law, makes or influences investment decisions, represents that this is a pension or welfare benefit plan or receives any consideration in connection with such an account.
BUSINESS
In Branch v. Commissioner, TC Memo 2026-51, the Tax Court let stand most of an $8 million deficiency against an organization serving disabled individuals for lack of substantiation of expenses after using estimates of expenses except where the law requires strict substantiation.
In Rodrigues v. Commissioner, TC Summary Opinion 2026-4, the Tax Court rejected a business deduction for an executive’s travel to West Palm Beach and San Jose de Cabo to meet with ten of his Harvard Business School fellow alums regarding joint investments; expenses of his wife, an attorney with PWC, were also disallowed.
In Ha v. Commissioner, TC Memo Summary Opinion 2026-5, the Tax Court disallowed international travel expenses of a California real estate agent who, allegedly sought both investment properties and investors.
In Ryan LLC v. Internal Revenue Service, 2026 WL 1847197, a Texas Federal District Court upheld regulations requiring disclosure of certain “captive insurance” arrangements.
In Smith v. Commissioner, TC Memo 2026-50, the Tax Court found that four of six building projects including one related to the Jeddah tower in Saudi Arabia, designed to be the tallest building in the world, were eligible for the research credit as the firm retained substantial ownership of its research as required to be credit eligible.
In Schumacher v. Commissioner, TC Memo 2026-47, the Tax Court concluded that a veterinarian engaged in the show of quarter horses a hobby and not as an activity intended for profit; he had claimed losses of $51,000-210,000 in each year from 2010 through 2019.
In Information Release 2026-70, IRS announced the release of a calculator to assist businesses with construction or manufacturing contracts in using percentage of completion, noting that it does not guarantee the accuracy of the computations.
In Letter Ruling 202622007, IRS ruled that a conversion of a disregarded limited liability company subsidiary to corporate status followed by a distribution of stock to shareholders qualifies as a tax-free reorganization with no gain or loss recognized by the parties, carryover basis and an allocation of earnings and profits between the entities.
PROCEDURE
In Aryanpure v. Commissioner, TC Memo 2026-48, the Tax Court found that a physician who blamed underreporting of gross receipts on his CPA committed civil fraud by diverting receipts including cash into his personal account and excluding it from information provided to the accountant; in Hee v. Commissioner, TC Memo 2026-53, a Hawaii businessman, subsequent to a criminal conviction, was found to have committed substantial civil fraud, rejecting explanations for deducting family trips to Tahiti and Disney World, massages as “consulting fees” (although his wife and children were on payroll and performed some services, the Court concluded that their compensation was unreasonably high).
In United States v. Niksich, 2026 WL 1601368, the Eleventh Circuit Court of Appeals agreed with a Georgia Federal District Court that an MBA who had accumulated $2.1 million and $4.6 million in foreign bank accounts over a seven-year period, one of them in the name of his dog, and who left a blank on Schedule B concerning foreign bank accounts willfully violated that FBAR law; however, the Court remanded the case on the issue of whether there was an Eighth Amendment violation for excessive penalties as a result of an earlier decision in the Circuit ruling that FBAR penalties are subject to the Amendment.
In Hirsch v. U.S. Tax Court, 608 U.S _____, the U.S. Supreme Court declined to hear an appeal from the Eleventh Circuit Court of Appeals which agreed with the Tax Court that it did not need to offer a jury trial to impose a civil fraud penalty and that there was no violation of the Eighth Amendment.
In White v. Commissioner, TC Memo 2026-56, the Tax Court found that IRS abused its discretion in sustaining a levy when the individual, previously convicted of tax evasion, was in compliance with restitution installments related to the same liability.
In Besicorp Group v. Commissioner, 2026 WL 1857266, the Second Circuit Court of Appeals reversed the Tax Court and held that an Appeals Officer in a Collection Due Process hearing must verify that penalties imposed received the required written supervisory approval even if there was prior verification; failure would threw out the lien or levy but not the prior penalty assessment.
In Sleiman v. Commissioner, the Tax Court in a Bench Opinion awarded Innocent Spouse status to an abused former wife from liability on her own income (S corporation flowthrough where she did not know she was considered a 31 percent owner), finding that her ex-husband physically abused her and their children; even at trial cross-examining her, as was his right as intervenor, and telling her to “cut the s— out.”
In Novak v. Commissioner, TC Memo 2026-52, the Tax Court declined in a CDP hearing to give an installment agreement to an individual who owed IRS $1.7 million but had liquid assets of about $75 million.
