Advisers at times treat the statute of limitations related to tax returns as being broader than it actually is, believing that once a year is closed there is no ability for either the IRS or a taxpayer to make a change to an item on that return.  As PLR 201548006 points out, that’s not the case.  And, in this case, that works out to the taxpayer’s advantage.

In the case of Dorrance v. United States, CA9, 116 AFTR 2d ¶2015-5505, reversing DC Arizona, 111 AFTR 2d 2013-1280 a divided panel concluded that stock received from demutualization of an insurance company has a basis of zero.  Note that this viewpoint is at odds with the holding of Federal Circuit Court of Appeals in the case of Fisher v. United States, 102 AFTR 2d 2008-5608 (2008), affd 105 AFTR 2d 2010-35 (2009) creating a split in the circuits on this issue.

The IRS took the interesting step of formally “blessing” a private letter ruling as “still valid” with regard to other taxpayers in Chief Counsel Advice 201549024.  That is interesting because a private letter ruling is only binding with regard to the taxpayer who requested it, but it illustrates the fact that this “somewhat but not quite formal” guidance is still important to understand.

The issue in this case relates to how enterprises deal with expenses related to Enterprise Resource Planning (ERP) software.  The IRS had issued PLR 200236028 that provided information on what the IRS position was the requirements to capitalize such costs and the periods over which the costs could be recovered. 

In Revenue Procedure 2015-57 the IRS provided relief to certain taxpayers with student loans. 

In the case of Neighborhood Improvement Projects, LLC v. United States, case No. 2:15-cv-00523, 2015 TNT 230-21, the US District Court for the District of Arizona found that the IRS’s lien was superior to that held by a homeowner’s association on the property.

Life is unfair, and the tax law often becomes part of that unfairness.  But the mere fact that a result may be unfair is not enough to change its result as the taxpayer discovered in the case of Vargas v. Commissioner, TC Summary Opinion 2015-69.

Mr. Vargas filed a married filing separate return for 2013, reporting total adjusted gross income of $67,045, exemptions for himself and his son of $7,800 and itemized deductions that included $40,978 of employee business expenses.  Mr. Vargas was a pilot flying internationally was expected to incur significant unreimbursed expenses.

The IRS appears to be continuing to show its displeasure with attempts to use IRA funds to purchase businesses, most recently in PLR 201547010.  The IRS denied the taxpayer relief for failing to complete a rollover of IRA funds within 60 days.

In the case of Mathews v. Commissioner, TC Memo 2015-225 the taxpayer protested that the IRS had abused its discretion by counting the taxpayer’s veterans’ disability payment as income in determining his ability to pay when deciding on the amount the taxpayer could pay under an installment agreement for unpaid taxes.

The taxpayer owed taxes from eight separate years running from 2000 to 2011. The IRS issued a notice of tax lien and the taxpayer for a collection due process hearing.

A recent Arkansas U.S. District Court case involved the court resolving a number of not often raised in court questions regarding the interaction of the passive activity rules, the real estate professional classification, S corporations and stock provided to an employee that was subject to restrictions triggering treatment under IRC §83(b).  The case in question is the case of Stanley v. United States, 116 AFTR2d ¶2015-5419, Case No. 5:14-CV-05236, U.S.D.C. Western District of Arkansas.

The issues arose regarding Mr. and Mrs. Stanley's claimed deductions for losses on Schedule E that arose from real estate related activities.  Mr. Stanley took the position that he qualified as a real estate professional and that all of the various items reported on Schedule E were properly classified as a single activity under the passive activity rules.

The issue of whether a taxpayer was justified in writing off the balance of a purchased intangible was the matter at issue in the case of Steinberg, et al v. Commissioner, TC Memo 2015-222.

The taxpayers in this case had acquired a towing contract as part of the acquisition of the assets of a business in 2005.  The contract, which provided the taxpayers the sole and exclusive right to operate “Official Police Garages” in a portion of Los Angeles.  The contract had an expiration date on June 27, 2009 and the city of Los Angeles had the exclusive option to extend the term for an additional five years.

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.