Welcome to the Federal Tax Update Podcast, hosted by Lynn Nichols. This is presented as a member benefit by the South Carolina Association of CPAs. It is produced to provide current information about developments in U.S. tax law, such as cases, ruling, IRS pronouncements and expert comments on hot topics.
Nichols’ Note: The most important items this week are:
- For return preparers: Topic 1 on the forgiveness of any excess advance payment of the premium tax credit
- For anyone calculating income from forgiveness of indebtedness: Topic 2 on solvency and the requirement to count the value of a taxpayer’s pension
- For anyone preparing returns for an S corporation and shareholder employee: Topic 6 on classification of value of split-dollar insurance as wages to employee rather than distribution to shareholder
Trending in this edition:
- IRS Details Suspension of Repayment of Excess Advance Payments
The IRS has announced (IR-2021-84) the issuance of a fact sheet (FS-2021-8) providing additional details regarding the suspension of the requirement to repay excess advance payments of the 2020 premium tax credit. [IR-2021-84 and FS-2021-8; 4/9/2021]
- IRS Will Not Acquiesce in SchieberHolding on Pension Plans
In an action on decision (AOD 2021-01, 2021-15 IRB 985), the IRS has announced that it will not acquiesce in a Tax Court holding that an interest in a defined benefit pension plan is not an asset for purposes of applying the insolvency exclusion in section 108. [AOD 2021-01; 2021-15 IRB 985, 4/12/2021] [Schieber v. Commissioner, T.C. Memo. 2017-32, 2/9/2017]
- Fact Sheet Outlines Foreign Account Reporting Requirements
The IRS has provided a fact sheet (FS-2021-7) describing the reporting requirements of U.S. individuals who have foreign bank and financial accounts.
- Same-Sex Couple Can’t Deduct Most Costs of Having a Child
The IRS ruled that a male couple could not deduct costs and fees for egg donation, in vitro fertilization procedures, and gestational surrogacy because they do not qualify as deductible medical expenses but that medical costs and fees directly attributable to the couple are deductible within the limitations of section 213, including sperm donation and freezing. [LTR 202114001; 1/12/2021, rel. 4/9/2021]
- IRS Rules on Beneficiaries and RMDs of IRA
The IRS ruled that each child beneficiary of a trust originally created by a decedent for his grandchild who also died is treated as having been designated as a beneficiary of the trust’s IRA for purposes of determining the distribution period under section 401(a)(9) and the required minimum distributions from the IRA are calculated using the life expectancy of the oldest of those child beneficiaries. [LTR 202114011; 1/14/2021, rel. 4/9/2021]
- Tax Court Disagrees With Sixth Circuit on Split-Dollar Character
The Tax Court, in De Los Santos v. Commissioner, rejected the Sixth Circuit’s conclusion that section 301 regulations treat split-dollar life insurance compensation income as corporate distributions to owner-employees because the statute only applies to shareholder payments. [Tax Notes Today; 4/13/2021, article by Nathan Richman] [Ruben De Los Santos et ux; No. 5458-16; 156 T.C. No. 9, 4/12/2021]
- Individual’s Time at New Job Too Short to Deduct Moving Expenses
The Tax Court, in a bench opinion, denied an individual’s moving expense deduction for expenses incurred in moving to Hawaii for a new job because he resigned after less than four months and returned to his home in California, finding that he did not meet the section 217(c) requirement of remaining employed in the new location for at least 39 weeks. [Erinn Theresa Doyle et vir Tax Court Order # No. 6532-20S, 4/14/2021]
- Disregarded Entity Debt Cancellation Ruling Incites Tax Planning
The IRS has apparently endorsed a tax-efficient solution for debt restructurings involving disregarded entities that may avert the repercussions of the debt cancellation and gain recognition rules. [Tax Notes Today; 4/16/2021, article by Emily Foster] [LTR 202050014, 9/17/2020, rel. 12/11/2020]
Missed last week’s Tax topic? Catch up with Lynn on his Tax Updates video playlist.
All commentary is brief, and you should not take a position on the items discussed until you thoroughly examine it with authoritative sources. The topics can be found discussed in further length at Tax Notes Today.
“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,’ the preeminent source of accurate information and analysis of important developments and trends in Federal taxation,” Nichols says.
You can contact Lynn Nichols at firstname.lastname@example.org or 714.321.3387 and connect on LinkedIn.
A federal tax specialist for 50 years, Lynn Nichols provides tax consulting services to CPA firms on complex federal income tax issues, professional standards in tax practice and effective tax practice management.
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