The tax law doesn’t often work the way we like it to, and in the case of Tobias v. Commissioner, TC Memo 2015-164 the taxpayer’s argument that, when viewed as a whole he hadn’t really seen income from a series of transactions was not availing.

The taxpayer in this case was an attorney who held an inactive CPA license.  In 2003 the taxpayers had purchased an annuity for $228,800.  In order to buy the annuity the taxpayer had sold securities at a loss of $158,000.  The taxpayers continued to make contributions to the annuity through 2006 of $346,154. 

The Ninth Circuit in the case of Minnick v. Commissioner, 116 AFTR 2d ¶ 2015-5137, CA9, affirming TC Memo 2012-345 agreed with the Tax Court’s conclusion that in order to claim a deduction for a conservation easement under the provisions of IRC §170, holding that Reg. §1.170A-14(g)(2)’s requirement that any mortgage must be subordinated at the time of the gift.

IRC §1.170(b)(5)(A) permits a deduction for a conservation easement only if that interest is protected in perpetuity.  The IRS regulation interpreting this rule holds that the protected in perpetuity rule may only be satisfied (and thus a deduction allowed) only if the mortgage holder subordinates its rights in the property to the rights of the donee organization to enforce the conservation easement.

Final regulations have been issued (TD 9729) to eliminate what some had claimed was a method that could allow the use of a charitable remainder trustto allow a donor to gain a charitable deduction, have the trust sell off the appreciated assets, acquire new high basis assets and then allow the grantor to sell off his retained interest (the right to future payments from the trust) while recognizing no or very little taxable gain.

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.