1. Amount Paid for Psychotherapy Excludable From Settlement Income
    • The Tax Court, in a summary opinion, held that an individual could not exclude from income half of the $55,000 in settlement proceeds she received from her former employer, but she could exclude from the proceeds the amount she paid for psychotherapy for emotional distress, finding that psychotherapy is medical care for purposes of section 104(a)(2). [Rebecca A. Tressler; T.C. Summ. Op. 2021-33, 9/13/2021]
  1. Ninth Circuit Affirms Tax Advice Documents Not Privileged
    • The Ninth Circuit affirmed district court orders that held a law firm and company in contempt for failing to comply with grand jury subpoenas for dual-purpose communications because the primary purpose of the documents was to obtain tax advice, holding that the primary-purpose test applies regarding the attorney-client privilege for dual-purpose communications. [In re Grand Jury; No. 21-55085; No. 21-55145, 9/13/2021]
  1. Partnership Audits Are About to Get Real
    • The IRS will start implementing its large partnership compliance program audits within a few weeks as the first batch of centralized partnership audits is wrapping up. [Tax Notes Today; 9/16/2021, article by Nathan Richman]
  1. Ways & Means Advances ‘Historic’ Package of Tax Increases, Cuts
    • House Ways and Means Democrats advanced in a largely party-line vote a package of $2.2 trillion in tax increases, along with tax cuts approaching $1.5 trillion, bringing to an end a grueling four-day markup that featured the rejection of 64 consecutive Republican amendments. [Tax Notes Today; 9/16/2021, article by Doug Sword]
  1. Fifth Circuit Affirms Tax Court on Deficiency but Not Penalty
    • The Fifth Circuit affirmed part of a Tax Court decision that held an individual liable for a deficiency stemming from disallowed legal expense deductions that were not deductible under section 162 but some of which were deductible under section 212 and reversed part of the decision that upheld an accuracy-related penalty for which the individual had a reasonable cause defense for underpayment. [Ames D. Ray; CA 5, No. 20-60004, 9/14/2021]
  1. IRS Revises Audit Technique Guide on Not-for-Profit Activities
    • The IRS has revised a prior audit technique guide on activities not engaged in for profit under section 183’s hobby loss rules. [Publication 5558, 66 pages, (9-2021)]
  1. IRS Issues Practice Unit on Foreign Currency Transactions
    • The IRS has issued a practice unit covering some basic foreign currency principles regarding currency transactions that multinational enterprises may enter and how changes in exchange rates will affect an MNE. [INT-C-242, 18 pages, 9/2/2021]
    • Practice Unit Covers Costs Capitalized Under 2018 Final Regs
      • The IRS has issued a practice unit that provides guidance for the capitalization of self-constructed assets, covering costs capitalized under final section 263A regulations that are effective for tax years beginning after November 19, 2018. [COR-C-023,   7/15/2021]

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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.)