Nichols’ Tax Update Podcast- Issue 21-31

  1. Retiree Must Pay Taxes on Garnished Income

The Tax Court sided with the IRS in finding that the state debt repayment deductions from a retiree’s pension are taxable income.

[Tax Notes Today, 7/26/2021, article by Caitlin Mullaney]

Amounts Withheld From Retirement Distributions Were Income

The Tax Court held in a bench opinion that amounts withheld from a former correctional officer’s retirement distributions to pay an outstanding debt to the Commonwealth of Pennsylvania and to pay for health insurance were unreported income, finding that he constructively received the distributions, and the amounts were not excludable from income.

[Michael F. Kissell et ux;( Bench Opinion No. 20103-18); 7/23/2021]

  1. IRS Rules on Treatment of Joint Development Payment

The IRS ruled that a payment by a corporation to an entity with which it entered into a joint development agreement regarding an energy facility is deductible as an ordinary and necessary business expense under section 162(a) in the year of payment, or alternatively, if the payment must be capitalized under section 263(a), it is amortizable under section 167.

[LTR 202129001; 4/21/2021, rel. 7/23/2021]

  1. IRS Provides Additional Q&A on COBRA Subsidies and Credits

The IRS has responded to remaining uncertainty regarding temporary relief for health coverage premiums and related tax credits under a coronavirus pandemic response law.

[Tax Notes Today, 7/27/2021, article by Caitlin Mullaney] [ Notice 2021-46; 2021-23 IRB 1, 7/26/2021]

  1. Entrepreneur Can Deduct Full Amount of MBA Education Expenses

A technology entrepreneur is entitled to fully deduct education expenses for a master’s in business administration he pursued to refine skills involving his established trade, the Tax Court held in a bench opinion in Zuo v. Commissioner.

[Tax Notes Today, 7/27/2021, article by Kelley Taylor] [Yishi Zuo; Bench Opinion, No. 5716-1, 6/16/2021]

  1. A Tax Practitioner’s Guide to Tax Insurance

Matthew Movafaghi and Jordan Tamchin explain why tax insurance is the preferred solution to mitigate contingent risk for some tax positions.

[Tax Notes Today, 7/27/2021, article by Matthew Movafaghi and Jordan Tamchin]

  1. Tax Home Determination Wrecks Traveling Nurse’s Expense Claims

The Tax Court, in a summary opinion, disallowed all of a traveling nurse’s claimed miscellaneous itemized deductions for costs incurred traveling between Kentucky and Georgia and for meals in Kentucky, finding that her tax home was in Kentucky and that she had no business ties to Georgia.

[Angela West; T.C. Summ. Op. 2021-21, 7/26/2021]

  1. MBA Student Gets Expense Deduction but Not Fee Award

The Tax Court held that even though the IRS conceded that an individual was entitled to deduct his education expenses in pursuit of a master’s in business administration, the agency’s initial position in disallowing the deduction was substantially justified and, thus, the individual was not entitled to an award of litigation costs.

[  Julien J. Lardet-Maurin et ux.; USTC No. 569-20 , 7/28/2021]

  1. IRS Updates FAQ on Paid Leave Credits for COVID-19 Immunization

The IRS has updated (IR-2021-160) its list of frequently asked questions on paid sick and family leave tax credits under the American Rescue Plan Act, clarifying that eligible employers can claim the credits for providing leave to employees caring for specified individuals obtaining or recovering from a COVID-19 immunization.

[IR-2021-160, 7/29/2021]

(123 Q & A . . . updated . . . Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021 for Leave After March 31, 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.)