The third time was not a charm for the taxpayer in the case of SWF Real Estate, LLC, et al. v. Commissioner, TC Memo 2015-63.  As was true in the case of Virginia Historic Tax Credit Fund 2001 v. Commissioner, 693 F.3d 146, CA4 reversing TC Memo 2009-295 and Route 231, LLC v. Commissioner, TC Memo 2014-30 the issue involved whether individuals who paid money to become “partners” that received tax credits from the state of Virginia had really simply bought credits in a disguised sale under IRC §707(a)(2).  And, as was eventually found in the prior cases, the Court determined the answer was yes.

The IRS addressed the period during which a penalty may be assessed against a preparer under IRC §6694 for having prepared a claim for refund that contained a meritless position in Chief Counsel Advice 201514008.  As well the memo addressed the statute of limitations for the preparer to claim a refund of such a penalty.

A last minute change in the tax law came as we raced towards the 2015 filing deadline.  As the IRS announced in New Release IR-2015-65 Congress passed and the President signed into law the Slain Officer Family Support Act of 2015.

The IRS has lost again on the question of material participation for a taxpayer helping the family business deal with the financial crisis of 2008.  In the case of Lamas v. Commissioner, TC Memo 2015-59, the issue was whether the taxpayer had materially participated in businesses in 2008 where the taxpayer’s share of losses generated multi-million refunds from a net operating loss carryback.

A CPA’s inability to prove that he had timely mailed an appeal to the IRS regarding the issue of whether this taxpayer was truly liable for a trust fund recovery penalty proved a major problem for the taxpayer in the case of Smith v. Commissioner, TC Memo 2015-60.

In late October of 2010 the IRS sent Letter 1153, Trust Funds Recovery Penalty Letter, to Mr. Smith proposing to assess the penalty against him for unpaid employment taxes of a partnership in which he had been a partner.  Mr. Smith faxed the letter to his CPA who was with a firm with 5 partners and over 40 staff members.

The taxpayer referred to in Chief Counsel Email 201513003 argued that the payment he was making under a Deferred Prosecution Agreement (DPA) represented a deductible payment under IRC §162(a).  The taxpayer argued that the Department of Justice planned to use the funds to pay restitution to those the DOJ alleged had been defrauded by the taxpayer and thus should represent a business expense.

The IRS, in this email, disagreed with that view, arguing that IRC §162(f) prohibited the deduction. 

In the case of BMC Software Inc. v. Commissioner, 141 TC No. 5, reversed CA5, Case No. 13-60684, 115 AFTR 2d ¶2015-528, the Fifth Circuit Court of Appeals and the U.S. Tax Court had to consider whether there was an intent requirement imposed by the language of what would reasonably be seen as an anti-abuse provision.  The Tax Court ruled that since no “bad intent” requirement was found in the statute, the statute had to be applied mechanically even if both the IRS and the taxpayer agreed that there was no “bad faith” on the part of the taxpayer.  The Fifth Circuit disagreed with that conclusion.

The IRS Large Business & International Division issued a memorandum outlining activities the division contends generally do not meet the definition of “manufactured, produced or grown” under §199 for computing the deduction for domestic production activities.  LB&I Memorandum LB&I-04-0315-001 provides a specific list of “non-qualifying” activities.

In the case of Maines v. Commissioner, 144 TC No. 8, the Tax Court had to consider the federal tax treatment of various tax credits provided by the state of New York.

A taxpayer who was used as what might be termed a “partner of convenience” by a promoter in structuring tax shelters where a partnership entity was needed was found by the Tax Court to have self employment income on a payment of $2,000,000 in the case of Chai v. Commissioner, TC Memo 2015-42.