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.

The commentary is brief, and you should not take a position on the items discussed until you thoroughly examine it with authoritative sources. All 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 lynnnicholscpa@outlook.com or 714.321.3387 and connect on LinkedIn.

  1. IRS Issues Payroll Tax Deferral Guidance

The IRS has issued guidance (Notice 2020-65) implementing an Aug. 8 presidential memorandum directing Treasury to use its authority under section 7508A to defer the withholding, deposit, and payment of some payroll tax obligations. [Notice 2020-65; 8/28/2020]

  1. Dispute Over Missed Election Goes to Trial in Bankruptcy Case

A U.S. bankruptcy court denied summary judgment in a third-party dispute between a debtor’s former business consultants regarding which one owes him for missing a section 1398 election that would have allowed him to shift a tax debt from personal liability to his bankruptcy estate, finding that there are material facts in dispute regarding an indemnification claim. [Curtis James Jackson III v. GSO Business Management LLC et al.; Bnk CT New Haven Div., No. 17-02068, 8/27/2020]

  1. Convertible Virtual Currency Is Taxable Ordinary Income

In a legal memorandum, the IRS concluded that a taxpayer who receives convertible virtual currency in exchange for performing a microtask through a crowdsourcing platform has received consideration in exchange for performing a service and the currency is taxable as ordinary income. [ILM 202035011, 6/29/2020, rel. 9/1/2020]

  1. IRS Reaches First Settlement of Syndicated Easement Case

The IRS has completed the first settlement of a docketed Tax Court case involving a syndicated conservation easement under the agency’s settlement initiative announced in June. [Tax Notes Today; 9/1/2020, Article by Kristen Parillo] [IR-2020-196; 9/1/2020]

  1. Transaction Lacked Economic Substance; Couple Denied Loss Deduction

The Tax Court imposed an accuracy-related penalty and held that a couple isn’t entitled to a claimed loss deduction of almost $2.1 million in connection with the dissolution of their S corporation, which they argued they organized for day trading purposes, finding that the transaction was part of a prepackaged tax strategy and lacked economic substance. [Sean L. Daichman et ux.; No. 14368-15; T.C. Memo. 2020-126, 8/31/2020]

  1. IRS Announces Rollout of Partnership Audit Regime Website

An IRS website dedicated to the centralized audit regime walks taxpayers through the new procedural maze as audits under the regime start to heat up. [Tax Notes Today, 9/2/2020, Article by Eric Yauch]

Source: https://www.irs.gov/businesses/partnerships/bba-centralized-partnership-audit-regime.

  1. Court Reverses on Tax Treatment of Malpractice Settlement

A Florida district court erred when it held that $800,000 a couple received as settlement from an accounting malpractice suit was a nontaxable return of capital, according to the Eleventh Circuit. [Tax Notes Today, 9/2/2020, Article by Kristen Parillo]

  1. Eleventh Circuit Holds Settlement Payment Wasn’t Excludable

The Eleventh Circuit, partially reversing a district court decision, held that a couple didn’t show that they were entitled to exclude the settlement they received from an accounting firm that advised them in a tax strategy that led to a $2.2 million tax liability; the court affirmed that they weren’t entitled to deductions for legal expenses or for the taxes they paid. [Joseph M. McKenny et ux.; CA 11, No. 18-10810, 9/1/2020]

  1. IRS Issues Q&A on Retirement Provisions in SECURE and Miners Acts

The IRS has issued guidance (Notice 2020-68) in question-and-answer format on specific retirement plan provisions in the Setting Every Community Up for Retirement Enhancement Act of 2019 and the Bipartisan American Miners Act of 2019. [Notice 2020-68; 2020-38 IRB 1, 9/2/2020]

  1. Former IRS Head Anticipates Trouble With Corporate Refund Claims

The IRS could face an avalanche of corporate tax refund claims next year resulting from business losses during the COVID-19 pandemic, a former tax agency chief said. [Tax Notes Today; 9/4/2020, Article by William Hoffman]

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. Check out his Tax Updates video playlist.

Click and subscribe to the SCACPA YouTube channel so you don’t miss another update on guidance from the experts.