Nichols Tax Update Issue 21-36

  1. Memo Provides Guidance on Partnership Election Revocation Requests
    • The IRS Large Business and International Division and the IRS Small Business/Self-Employed Division have issued a memorandum (LB&I-04-0621-0004) outlining new procedures for employees to use when determining whether to approve or deny a request filed by a partnership to revoke its election to adjust the basis of partnership property under section 754. [ LB&I-04-0621-0004; 8/26/2021]
  1. IRS Publishes 2021 Interest Rates for Special Use Value of Farms
    • The IRS has published (Rev. Rul. 2021-15, 2021-35 IRB 331) a list of the 2021 average annual effective interest rates on new loans under the Farm Credit System for purposes of computing the special use value of real property used as a farm for which an election is made under section 2032A. [Rev. Rul. 2021-15; 2021-35 IRB 331, 8/30/2021]
  1. Organization Renting Water Sports Equipment Loses Exemption
    • The IRS revoked the tax-exempt status of a nonprofit corporation that rents water sports equipment because the organization’s activities furthered a substantial nonexempt purpose and its charitable purposes regarding environmental protection activities are insubstantial to its overall operations. [LTR 202134018; 6/3/2021, rel, 8/27/2021]
  1. Willful Blindness’ Won’t Fly With Ninth Circuit in Penalty Case
    • The Ninth Circuit, for the second time, remanded a CPA and attorney’s challenge to penalties assessed against him under section 6694 and directed the district court to determine whether he acted with specific intent to understate his reported tax liabilities as required for a finding of willfulness under section 6694(b)(2)(A). [John Q. Rodgers v. United States;CA 9, No. 20-55378, 8/26/2021]
  1. Practice Unit Covers Foreign Tax Credit Principles for Corporations
    • The IRS has issued a practice unit on some foreign tax credit general principles regarding corporations, addressing changes made to the FTC by the Tax Cuts and Jobs Act.  (21 slides) [INT-C-241, 9/1/2021]
  1. Court Greenlights Deductions for Actor’s Business Expenses
    • The Tax Court held that an individual’s acting activities constituted a trade or business and determined which of her reported expenses are deductible; the court upheld the IRS’s disallowance of passthrough loss deductions she claimed from jewelry sales activities and agreed that she can’t claim retirement contribution deductions. [ Gayle Gaston; T.C. Memo. 2021-107,  9/2/2021]

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