Recent Tax Law Updates: September 2019

Repeated Bankruptcies Extend Length Of Non-Dischargability. A bankruptcy court in Oklahoma found that the three-year look-back period during which tax debts are not dischargeable extended for the times a taxpayer filed previous bankruptcies. (Nachimson, (Bktcy Ct OK 8/23/2019) 124 AFTR 2d ¶2019-5171)

IRC 6320: Prior Opportunity To Dispute Liabilities Prevents Ability To Raise Later In CDPH. Tax Court was found to have properly upheld IRS's administrative determination to proceed with a lien filing where the IRS Settlement Officer met all Code Sec. 6330(c) requirements and the taxpayer had been given a deficiency notice - and actually litigated those liabilities in an earlier case. (Hom v. Comm., CA 9, 124 AFTR 2d ¶2019-5181)

IRC 7422: Abuse Of Authority Not Found. Pro se taxpayer was unable to show valid jurisdictional basis or allege that he filed an underlying administrative refund claim for the years in issue or had otherwise met the full payment prerequisite for a refund suit or to extend the suit as alleging 5th Amendment takings, as tax imposition wasn't "taking" for these purposes. (Patterson v. U.S., Ct Fed Cl, 124 AFTR 2d ¶2019-5178)

IRC 451: IRS Issues Proposed Reliance Regulations regarding the timing of income inclusion under Code Sec. 451 to reflect changes made by the Tax Cuts and Jobs Act (PL 115-97, 2017). For advance payments received by accrual basis taxpayers, see FTC 2d/FIN ¶ G-2540 et seq.; United States Tax Reporter ¶ 4514.166.

UPDATED Tax Forms Issued. The IRS released new versions of Form 8809, Application For Extension Of Time To File Information Returns; Form 706, US Estate (and Generation-Skipping Transfer) Tax Return; Form 706-A, US Additional Estate Tax Return; Instructions for Form 706-A; and Form 706-CE, Certificate of Payment of Foreign Death Tax.

US Tax Court Uses Income Approach To Value Gifts Of Limited Partnership Interests in a partnership that produced timber. (Estate of Jones, TC Memo 2019-101)

IRS Releases More Qualified Opportunity Fund FAQs regarding the tax deferral and capital gain exclusion possibilities of investing in a qualified opportunity fund.

IRC 404 & Qualified Trust. Chief Counsel Advice 201935011 gives examples of when an employer has actually made a payment to a qualified trust in order for the employer to be able to deduct that amount under Code Sec. 404(a).

IRS Private Letter Ruling determines that an employee's confirmation of a retirement plan buyout election was not an accelerated annuity payment prohibited by regulations. Moreover, the preliminary payments made to the employee during an administrative period when the annuity amount was being calculated were not prohibited annuity payments. (PLR 201933006)

Education Credits. As a reminder, there are two credits available to help taxpayers offset the costs of higher education: the American opportunity tax credit and the lifetime learning credit, which allow for a maximum benefit of up to $2,500 and up to $2,000, respectively. Use Form 8863, Education Credits, to claim the credits. The taxpayer or a dependent must have received a Form 1098-T from an eligible educational institution.

U.S. Citizenship & Immigration Services advises employers to continue using the current version of Form I-9 (Employment Eligibility Verification) after its expiration date on August 31, 2019.

Be Wary Of Short-Term Rentals. District court held that a taxpayer's short-term rental activity was passive, even though the taxpayer was a real estate professional. (Eger, (DC CA 8/30/2019) 124 AFTR 2d ¶2019-5195) At issue is when the average period of customer use is seven days or less (seven-day exception). Reg. § 1.469-1T(e)(3)(ii)(A). A "period of customer use" is defined as each period during which a customer has a continuous or recurring right to use the property. (Reg. § 1.469-1(e)(3)(iii)(D))

Sole Beneficiary Spouse Of Decendent's Retitled IRA May Roll Over Distribution. Because the IRA's custodian retitled the decedent's account pursuant to a court order, the spouse was the individual for whose benefit the account was maintained under IRC 408(d)(3)(A). (PLR 201935005)

No Compassionate Release. An incarcerated defendant and senior citizen, sentenced to more than three years for identity theft and other fraud offenses in a scheme to file false returns using stolen identifying information from other inmates, was denied motion for "compassionate release" prior to completion of his sentence, as the defendant failed to show he had exhausted his administrative remedies before seeking relief or extraordinary/compelling reasons supporting same. (U.S. v. Lake, DC KY, 124 AFTR 2d ¶2019-5197)

Tobacco Tax Changes In DC. Effective October 1, 2019, the tax will increase by four cents for cigarettes and decrease by 5% on other wholesale products. 

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