October 1st, 2023
September Federal Tax Updates
In Johnson v. United States, 132 AFTR2d 2023-________, a South Carolina Federal District Court determined that a couple’s loss of $180,000, when the real estate market crashed and they could not be repaid the full $840,000 of their loan, did not give rise to a theft loss as there was no indication that there was an intent to defraud the couple despite the indictment of the borrower on federal bank fraud charges for preparing a false financial statement.
In Letter Ruling 202335002, IRS declared that transferrable property rights, if considered real property under state law, may be the subject of a like kind exchange if all other criteria are met.
RETIREMENT AND ESTATE PLANNING
In Balint v. Commissioner, TC Memo 2023-118, the Tax Court concluded that an incarcerated taxpayer was not taxable on withdrawals from an IRA as well as a life insurance policy when the divorcing wife used a power of attorney for her own benefit and not that of her husband; the decision was based upon Florida law which did not provide the wife with “open-ended authority.”
In In Re: Myatt, 132 AFTR2d 2023-_______, a North Carolina bankruptcy court concluded that rights to a distribution from an ex-spouse’s qualified retirement plan were protected in bankruptcy despite that a QDRO had not yet been issued, the court finding that the intended transferee had a vested ownership interest in the distribution notwithstanding.
In In Re: Green, 132 AFTR2d 2023-5728, an Illinois Federal District Court affirmed the bankruptcy court and concluded that foreign plans cannot be tax qualified retirement plans under the Bankruptcy Code and are within reach of the Trustee in bankruptcy.
In Short Stop Electric v. Commissioner, TC Memo 2023-114, the Tax Court denied a deduction for interest that a company accrued on a “revolving line of credit” although it was cash basis, notwithstanding that the owner reported income on interest that he did not receive.
In Taylor v. United States, 132 AFTR2d 2023-5881, an Idaho Federal District Court determined that the president and chair of the board of a media company was personally liable for unpaid taxes of the business as he had authority though not exclusive over the financial operations and was aware of the tax debt but made intentional decisions to pay other creditors.
In News Release 2023-169, IRS announced a suspension on processing Employee Retention Credit claims through at least December 31, 2023 to focus on detailed compliance reviews of the large numbers of unprocessed claims as a result of aggressive and often inaccurate marketing.
In Chief Counsel Advice 202335014, IRS declared that the S portion of an electing small business trust (ESBT) may carry to another taxable year a net operating loss attributable to an S corporation which passed the loss through to the ESBT.
Proposed Regulations by FinCen, would extend the time period for newly formed companies in 2024 to report beneficial ownership information to 90 days after formation instead of 30 days; existing companies as of the start of 2024 will have one year to file their initial disclosure reports.
In Rocky Branch Timberlands LLC v. United States, 132 AFTR2d 1923-5788, the 11th Circuit Court of Appeals agreed with a Georgia Federal District Court that the Anti-Injunction Act prohibited an injunction related to disallowance of a $26.5 million deduction for a conservation easement.
In Johnson v. Commissioner, TC Memo 2023-116, the Tax Court declined to drop the accuracy related penalty where there were significant errors, noting that the responsibility of an accurate return lies with the taxpayer who could not show that he asked questions of the preparer and received incorrect answers.
In Evenhouse v. Commissioner, TC Memo 2023-113, the Tax Court held that an extended 150-day statutory period for filing a Tax Court petition was not applicable where the couple returned to the United States from abroad at 4:35 p.m. on the date set forth in the Notice of Deficiency.
In Polk v United States, 132 AFTR2d 2023-5745, the US Court of Federal Claims allowed only the portion of a refund claim attributable to foreign tax credits under the 10-year limitations rule but denied other portions of the claim as the usual statute of limitations applied.
In Wrhel v. United States, 132 AFTR2d 2023-_____, a Wisconsin Federal District Court denied a refund claim as untimely when the taxpayer could not prove an earlier filing within the limitations period and IRS had no record of receipt.
In Organic Cannabis Foundation LLC v. Commissioner, 161 TC No. 4, a divided Tax Court concluded that IRS Appeals has the authority to grant a Collection Due Process hearing request after the 30-day deadline where good cause existed for not filing in time.
In Stevenson v. Commissioner, TC Memo 2023-115, the Tax Court found that Appeals acted within its discretion when it rejected collection alternatives because the taxpayer failed to comply with current year estimated tax obligations.
In O’Nan v. Commissioner, TC Memo 2023-117, a widow granted innocent spouse relief was found entitled to a refund from joint property that was sold to the extent the funds were derived from her 50 percent interest.
In Zaimes v. Commissioner, TC Memo 2023-121, the Tax Court believed that the taxpayer actually mailed his tax return but declined to drop the penalties for late filing and late payment as he could not prove Post Office error in that he may have used an incorrect address or applied insufficient postage.
In Information Release 2023-178, IRS announced that it will be using chat bot technology to respond to basic taxpayer questions about CP2000 and similar notices relating to matching information returns to Form 1040.