Safe Habor Allocation of Refresh-Remodel Costs for Retail and Restaurants Provided by IRS

In Revenue Procedure 2015-56 the IRS provided a safe-harbor method that may be used by certain taxpayers operating a retail establishment or restaurant for remodel-refresh costs.

One key restriction is that this safe harbor may only be used by taxpayers that have applicable financial statements (AFP) as referred to in the tangible property regulations that took effect in 2014. Such statements are defined at Reg. §1.263(a)-1(f)(4)—and many small businesses will not have a statement.

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Trust Granted Deduction for Full Fair Value of Donated Property, Not Limited to Basis in Property

In the case of Green v. United States, 116 AFTR 2d ¶ 2015-5394, US District Court, Western District of Oklahoma, Case No. CIV-13-1237-D the court was asked to decide the application of the charitable contribution provisions applicable to trusts and estates under IRC §642 and a donation of appreciated property.

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IRS Extends Safe Habor Method for Recipients of Hardest Hit Fund Relief Thorugh 2017

The IRS in Notice 2015-77 extended until the 2017 tax year the safe harbor method originally provided for in Notice 2013-7 of reporting payments made on a home mortgage that had received relief from a state housing agency from the Hardest Hit Fund (HFA Hardest Hit Fund).  The notice also extended relief from penalties related to information returns for mortgage services and state housing agencies due to payments made under the program.

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Chief Counsel's Position is Use of UPS to Deliver Notice of Non-Judicial Sale Did Not Satisfy IRC Requirements, IRS Lien Remains Intact

In Chief Counsel Email 201545025 the issue involved whether the use of an approved private delivery service was acceptable for delivery to the IRS of notices of non-judicial sales.

IRC §7425 deals with the IRS’s rights when the service obtains a lien on property.  Generally such a lien is not impacted by any judicial proceeding to which the IRS is not a party.  A limited exception occurs in certain cases described in IRC §7425(b) if the IRS is properly notified of the proceeding.

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Failure to Contact e-Help Desk to Gain Authorization to File Paper Amended Return Not Fatal to Claim When System Would No Longer Accept Year in Question

In Chief Counsel Advice 201545017 the IRS looked at whether an amended return was timely filed where an attempt was made to file it electronically prior to the expiration of the statute, the return was rejected and then a paper return was filed without contacting the e-Help desk to make a waiver request to file on paper. 

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Representative Must Personally Sign Form 2848

In Chief Counsel Advice 201544024 the Chief Counsel’s office ruled that it was not permissible for one representative on a Form 2848 to sign the Form 2848 on behalf of another representative.

In the case discussed, there were three representatives appointed on the Form 2848 to represent the taxpayer.  However, one of the representatives had not personally signed the form, but rather another representative signed the form “on behalf” of the third representative when the document was completed.

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Acquired Domain Name Costs Are Amortized Over 15 Year Life Per Chief Counsel Advice

The IRS National Office determined that the proper life for amortization of an acquired domain name is 15 years in Chief Counsel Advice 201543014.  That was true whether the domain name was a generic domain name (one that doesn’t refer to a specific company or product name, say “dogfood.com”) or a non-generic domain name (one that is associated with a specific company, product or service name, such as “microsoft.com”).

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Taxpayer Who Developed Residential Land But Did Not Construct Homes Was Not a Homebuilder and Could Not Use Completed Contract Method

In the case of The Howard Hughes Company, LLC v. Commissioner, 142 TC No. 20, the Tax Court clarified the limit of its decision in Shea Homes, Inc. v. Commissioner, 142 TC No.3, denying the completed contract method to a developer that did not actually construct homes in this case.  On appeal, the Fifth Circuit accepted the Tax Court’s analysis (The Howard Hughes Company, LLC v. Commissioner, CA5, Nos. 14-60915, 14-60921, AFTR 2d ¶ 2015-5368).

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Fact Taxpayer Received Full and Adequate Consideration, Not Whether Recipient Provided It, Was Determinative That No Gift Had Taken Place

The summer of 1972 had the break-in at the Watergate office complex in Washington DC on June 17.  While that event is now the subject of history books, an event that took place just over a month later just recently was the featured issue in tax litigation.  In the case of Estate of Redstone v. Commissioner, 145 TC No. 11 the issue became whether or not a gift had taken place back in 1972, a gift the IRS now sought to collect gift tax on.  Since no gift tax return had been filed, the statute remained open for the IRS to assess and attempt to collect the tax it claimed was due.

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Estate Never Had Been Given Advice on Due Date, No Reasonable Cause Found for Late Filing

An estate argued that it should be excused from late filing penalties because it had relied on the advice of an attorney—but the court in the case of West, et al v. Koskinen, 2015 TNT 203-11 (USDC Eastern District Virginia) determined that, in fact, there had been no advice received from the attorney on this matter.

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Taxpayer Fails to Show Procedures in Revenue Procedure 99-17 Followed in Prior Year, No Current Year Use of Mark To Market Allowed for Trading Business

If a taxpayer is a trader and properly elects under IRC §475(f) to use the mark to market treatment, the gains and losses from the trading activity are treated as ordinary, rather than capital, gains and losses.  Of particular significance is that losses in excess of gains will not be subject to a $3,000 annual limitation.

In the case of Poppe v. Commissioner, TC Memo 2015-205 the question at hand was whether, in fact, Mr. Poppe had ever properly made the election in question.

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IRS Announces 2015/2016 PCORI Fee

An annual fee to fund the “Patient Centered Outcome Research Institute” (the PCORI fee) is imposed on either:

  • The issuer of a specified health insurance policy for each policy year ending after September 20, 2012 and before October 1, 2019 [IRC §4375]
  • A sponsor of an applicable self-insured health plan each plan year ending after September 20, 2012 and before October 1, 2019 [IRC §4376]
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