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October IRS Updates

On Behalf of | Oct 14, 2021 | IRS Updates |

Historic Gross Receipts Permitted. IRC 165, PLR 202140002IRS allows for the inclusion/consideration of historic gross receipts of stated foreign sub into account for purposes of computing Code Sec. 165(g)(3)(B)’s “more than 90% gross receipts test” by holding co.

Timely Response Required for PLR.  IRC 501 & PLR 202140017: Adverse determination for exempt status under 501(c)(3) where taxpayer failed to timely protest the IRS’ proposed adverse determination finding.

Fraud Assessment for Lying During Audit: 75% Penalty: IRC 6663, 6751(b) & 61+, Robert S. Clark v. Commissioner, (2021) TC Memo 2021-114, 2021 RIA TC Memo ¶2021-114:  Auto body shop owner/sole proprietor continued to significantly underreport annual income.  Fraud evidenced through underreporting, amounts required to sustain multiple property and vehicle loan repayments, misleading auditor as the number of properties and vehicles owned and failing to provide records. Taxpayer’s sophistication/business acumen argument rejected because he ran his own business, managed multiple rental properties and their corresponding loans. Written supervisory approval requirement for penalties was met. IRS’ bank deposit method of reconstructing taxpayer’s income was also held valid.

Passport Not Linked to Liens+. IRC 7421 & Tinnerman v. U.S., DC FL, 128 AFTR 2d ¶2021-5261: Taxpayer basically filed claim for tax injunction which is barred by AIA; alternate claim for refund also denied because taxpayer was unable to prove the required full payment prerequisite; further, SDTD certification (for passports) not contingent on lien remaining in place.

Good Faith & PLRs: IRC 7701 & Entity Classification: Where foreign entity acted reasonably, in good faith and granting relief wouldn’t prejudice govt.’s interests, IRS allowed for 120-day extension of time to file Form 8832 to elect to be treated as disregarded entity (PLR 202140006)

Something We Should Remember: Partner taxed on distributive share that was constructively received.  Dodd, TC Memo 2021-118: US Tax Court held that a partner was liable for tax on her distributive share of income from the partnership.