The IRS has issued temporary regulations dealing with allocation of W-2 wages for purposes of the domestic production activities deduction (DPAD) of IRC §199, along with proposed regulations dealing with that topic along with other issues related to DPAD.   The temporary regulations are found in TD 9731 while the proposed regulations were released in REG-136459-09.

How taxpayers should deal with changes in the determination of foreign taxes due for purposes of the foreign tax credit was discussed in Chief Counsel Email 201534013.  Specifically, the question arose regarding a taxpayer on the cash basis of accounting who has not elected to report the foreign tax credit on the accrual basis that faced an additional assessment of foreign tax related to a prior year.

The question of whether an arrangement was a partnership or was a commission arrangement was the issue before the United States Court for the Southern District of Texas in the case of United States v. Stewart, et al, 116 AFTR 2d ¶ 2015-5159.

An important fact in dealing with the foreign earned income exclusion is that, per Reg. §1.911-7(a)(2)(i)(D), a taxpayer who fails to file his/her return more than one year after the original due date is risking the loss of the ability to exclude that income if the IRS discovers the fact that no election was made.  In the case of McDonald v. Commissioner, TC Memo 2015-169 the taxpayer discovered she had made this costly mistake.

One significant tax law change contained in the Surface Transportation and Veterans Health Care Improvement Act of 2015 (STVHCIA) was the uniform reporting of basis for inherited assets.  The act added IRC §6035 to require that an estate required to file an estate tax return must provide information to the IRS and beneficiaries regarding the basis reported. 

Generally, the information must be provided to the IRS no later than by the earlier of 30 days after the date the Form 706 was required to be filed (including extensions, if any are granted) or 30 days after the Form 706 is actually filed by the estate.  The law does authorize the IRS to move that date forward.  The requirement applied to any estate that filed a return after July 31, 2015—which was the day this bill was signed into law.

In Notice 2015-57 the IRS has pushed the due date forward to February 29, 2016 for statements that would be due prior to that date under the 30 day rule found in the new law.

Does a county clerk need to issue a Form 1099MISC to attorneys when the clerk sends funds to an attorney in various circumstances?  For the situations considered in Chief Counsel Advice 201533012 the IRS’s answer was no.

Information returns must be issued by payors in certain situations when payments are made to various parties. 

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.