The IRS has announced that it is pushing back for one year the date on which it will begin accepting applications for entities to be classified as a certified professional employer organization under IRC §§3511(a)(1) and.7705.

These organizations, created as part of the Achieving a Better Life Experience (ABLE) Act of 2014, would provide protection for employers who use such organizations regarding the payment of payroll taxes.  Employers generally are responsible for the deposit of taxes withheld from their employee’s payroll and, prior to this provision, that responsibility could not be shifted to another party.

The IRS has issued Notice 2015-54 where the agency announced it was going to be issuing regulations under IRC §721(c) that would override the general non-recognition rules of IRC §721 in a situation where a U.S. partner transfers property to certain partnerships with foreign partners.  As well, the IRS will issue related regulations under IRC §482 to grant the IRS additional authority in such situations to revise the income recognition.

Generally a taxpayer who contributes property to a partnership under IRC §721 does not recognize income on that contribution.  However, under §704(c)(1)(A) the partnership must allocate items to take into account the difference between the fair value and basis at the time of contribution. 

Does the fact that the IRS dropped an issue for an earlier year preclude them from raising the same issue in a later year?  And does it make a difference if the Tax Court entered a decision after the parties had come to an agreement that no tax was due outside the Tax Court? 

These issues were important in the case of Dinger v. Commissioner, TC Memo 2015‑145.  Ms. Dinger was a German citizen who was married to a United States citizen for 50 years.  She and her husband had made a §6013(g)(1) election to treat Ms. Dinger as a United States resident.

In the case of Kline v. Commissioner, TC Memo 2015-144 the question before the Tax Court was whether the taxpayers in this case met the requirements to be treated as materially participating in the activity.

Specifically the question was whether they had met the requirements of Reg. §1.469‑5T(a)(3) for the “more than others” test for material participation. 

A taxpayer who finds that he/she has performed services for which he/she was supposed to be paid but for which payment is not to be received most often believes he/she “obviously” should be able to claim a loss on their return.

In the case of Haff v. Commissioner, TC Memo 2015‑138, the taxpayer felt doubly so, as the entity that he claimed owed him money turned out be a fraudulent investment scheme in which the taxpayer had invested over $1.3 million and which owed the taxpayer, in the taxpayer’s view, over $700,000.

The IRS has issued final regulations (TD 9728) under IRC §706 dealing with the issue of when partners hold varying interests in a partnership during the year.  As well, the IRS issued new proposed regulations, concurrent with these final regulations, that deal with the interplay between the tiered partnership rules and cash basis rules when there is a change in the partners’ interests.  (REG-109370-10).

In the case of Altera Corporation and Subsidiaries v. Commissioner, 145 TC No. 3 the issue before the Tax Court involved the question of whether the corporation in question had to include stock based compensation in its qualified cost sharing arrangement under IRC §482.  An other item of interest is the Tax Court’s analysis of its view of the IRS’s ability to use its regulatory authority to override a position taken in a prior Court decision, with the Court finding the IRS failed to justify its revised regulation.

This post has been revised to incorporate comments the author received regarding the potential application of Reg. §1.162-12 to resolve the issue independently of how the Court actually decided the case.

In Agro-Jal Farming Enterprises, Inc. et al v. Commissioner, 145 TC No. 5 the Tax Court was asked to determine if a farmer reporting on the cash basis of accounting could claim a deduction for packaging materials as payment was made for the materials or if the taxpayer rather could only deduct the amounts as the materials were used.

Sometimes it takes a while for the Tax Court to issue a decision on an issue that you might have thought would have been addressed previously.  Such is true with regard to the issue of valuing net income makeup charitable remainder unitrusts (NIMCRUTs) created under IRC §664.  In the case of Estate of Schaefer v. Commissioner, 145 TC No. 4, the Tax Court addressed this issue.

In Revenue Procedure 2015-39 the IRS had provided a safe harbor method of accounting that taxpayers filing on the accrual basis may use to determine economic performance on certain service contracts.

In the case of Illinois Lumber and Material Dealers Association Health Insurance Trust v. United States, 116 AFTR 2d ¶2015-5079, reversing DC MN, 113 AFTR 2d ¶2014-1937 the appellate panel had to deal with the complex area of the law found in the statute mitigation provisions of IRC §§1311-1315.  The appellate determined that the taxpayer, having failed to assert its rights before statute initially expired, could not “awaken the sleeping dog” of the statute of limitations bar on any refund.

The implications of the provision found in IRC §6501(c) regarding the statute of limitation on assessing tax when the IRS is faced with a fraudulent tax return is generating much action and disagreement among the courts about exactly whose fraudulent intent can trigger the extended statute and what the nature of such a fraud must be to do so.  Since triggering §6501(c) gives the IRS an unlimited period of time in which to assess the tax, the matter is one of true concern if, truly, a taxpayer may find him/herself stuck with the statute due to a fraud committed that they weren’t aware of.

Filing a Tax Court petition regarding a tax assessment carries risks, some of which an adviser may not normally consider.  In the case of Estate of Billhartz v. Commissioner, No. 14-1216, 2015 TNT 143-12 the issue that arose came after the estate had entered into a settlement with the IRS.

Under IRC §6512 a taxpayer who files a petition with the Tax Court regarding a proposed tax deficiency may not later file a claim for refund—rather, all issues need to resolved in the Tax Court case.  That’s true even for issues that may come to the taxpayer’s attention following the conclusion of the case. 

The taxpayer in the case of Stout v. Commissioner, TC Memo 2015-133 was looking to obtain capital gain tax treatment for the payment he received for the stock incentive units (SIUs) he held in his employer at the time the employer was acquired by another entity.  But it turns out that the fact that SIUs are similar to rights in the stock won’t qualify the taxpayer for capital gain treatment—unlike a game of horseshoes, here close is simply not good enough.