Nichols’ Tax Update, Issue 21-43

  1. IRS Announces New FAQ Process With Penalty Protection
    • The IRS plans on releasing significant FAQs on new tax statutes in fact sheets and promises that taxpayers can rely on the releases for penalty protection.  [Tax Notes Today, 10/18/2021, article by Nathan Richman]
    • IRS to Issue ‘Fact Sheet FAQs’ With an Eye Toward Transparency
      • The IRS has announced (IR-2021-202) a new process for issuing some frequently asked questions on newly enacted tax legislation to promote transparency and to address the potential impact on taxpayers when the FAQs are updated or revised. The agency has also clarified the extent to which taxpayers may rely on FAQs for penalty protection.
    • IRS updates process for frequently asked questions on new tax legislation and addresses reliance concerns
      • IR-2021-202, October 15, 2021 — Today, the Internal Revenue Service is updating its process for certain frequently asked questions (FAQs) on newly enacted tax legislation.  [From IRS website “News Releases for Current Month”]
    • Questions Emerge About New Process for IRS FAQs
      • The initial praise for the IRS’s new process for releasing some FAQs as fact sheets continues, but some tax professionals are starting to ask questions about just how the system will work.  [Tax Notes Today, 10/20/2021, article by Nathan Richman]
  1. Utah Ski Lodge Fighting IRS Over Accumulation of Earnings
    • A ski lodge in Alta, Utah, is protesting the imposition of a $495,826 tax penalty on its retained earnings in Alta Peruvian Lodge Ltd. v. Commissioner. [Tax Notes Today, 10/18/2021, article by Benjamin Guggenheim]
    • Ski Lodge Challenges Accumulated Earnings Tax
      • A ski lodge petitioned the Tax Court for a redetermination of its accumulated earnings tax, arguing that it needs its retained earnings to weather fluctuations in revenue due to the pandemic and competition from other hotels.  [Tax Court Petition, filed 9/15/2021]
  1. IRS Spells Out How to Make a Valid Research Credit Refund Claim
    • In field attorney advice, the IRS outlined the information that must be included in a valid administrative claim for a refund or credit of the section 41 research credit. [FAA 20214101F; 9/17/2021]
    • IRS Makes Seismic Shift on How to Claim Research Credit Refunds
      • An IRS memorandum detailing the level of information needed to file a valid research credit refund claim is being slammed as creating an unduly burdensome filing regime that could negate the credit’s value. [Tax Notes Today, 10/19/2021, article by Kristen Parillo]
  1. Tax Court Won’t Let Oil Company Partner Slip Away From Liability
    • The Tax Court in Goldberg v. Commissioner has sided with the IRS and sustained an administrative adjustment tax liability against an oil and gas investor. [Tax Notes Today; 10/20/2021, article by Caitlin Mullaney]
    • Partner Can’t Challenge Underlying Liabilities in Levy Case
      • The Tax Court found no abuse of discretion in an IRS determination to sustain a levy to collect an individual’s tax liabilities stemming from two oil and gas partnerships, finding that he could not challenge his underlying tax liability because he did not challenge the limitations period at the partnership level, and he failed to challenge a prior notice of federal tax lien filing.  [Ronald M. Goldberg; T.C. Memo. 2021-119, 10/20/2021]
  1. Couple’s Theft Loss Deductions Denied in Refund Suit
    • A U.S. district court granted the government summary judgment in a couple’s refund suit, finding that they weren’t entitled to theft loss deductions for investments made in an allegedly fraudulent mortgage company because they don’t qualify for safe harbor treatment under Rev. Proc. 2009-20 and as indirect investors, they aren’t the proper parties to claim the deductions. [Edward B. Smith Jr. et al.;  DC S FL, No. 2:19-cv-14222, 10/14/2021]
  1. (***) Six new challenges of Conservation Easement Deductions this week . . .
    • By the way, last week I forgot to mention the “Springing Cash Value of a Life Insurance Policy After Distribution to an Employee/Shareholder” shelter that came and went during the late 1990’s/early 2000’s. Many of those were caught-up in extensions of the 3 year statute to 6 years and came to an unpleasant end. What are the latest “too good to be true” shelters your clients are asking about ?
  1. (***) IRS Interprets Conservation Easement Rule on Pre-Existing Use
    • In emailed advice, the IRS suggested how reg. section 1.170A-14(e)(3) – which states that a conservation easement donor may continue a pre-existing use of the property that doesn’t conflict with the conservation purposes of the gift – interacts with reg. section 1.170A-14(g)(5)(ii), which states that a donor must agree to notify the donee in writing before exercising any reserved right that may have an adverse impact on the conservation interests associated with the qualified real property interest.  [ECC 202141022, 9/2/2021, rel. 10/15/2921]

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 I have relied on Tax Analysts® to provide reliable and timely analysis of Federal tax developments for over 30 years. The “headnotes” you see here are from “Tax Notes Today” In my opinion, the preeminent source of accurate information and thoughtful analysis of important developments and trends in Federal taxation.

(*** identifies item with useful analysis of current issue but not covered in Lynn’s recorded commentary due to complexity and time required for fair comment.)