Details make a difference when attempting to qualify for a tax benefit, and a taxpayer who thought his conservation easement language complied with that found in the regulations discovered that the Tax Court noted a difference.  In the case of Carroll v. Commissioner, 146 TC No. 13 the issue involved what happens if the easement is extinguished due to circumstances outside the taxpayer’s control.

The IRS has granted educational institutions a one-year reprieve from penalties if they fail to provide information on the amounts actually paid to the institution for the year in question on Form 1098-T and rather provide information solely on the amounts billed to the student.  Announcement 2016-17 provides this short term relief from the law change enacted as part of the Protecting Americans from Tax Hikes Act of 2015.

As part of a package of provisions meant to reign in unauthorized claims for the American Opportunity Tax Credit and Lifetime Learning Credit, the Congress removed the option for educational institutions to report the amounts billed for tuition to a student on Form 1098-T in lieu of reporting the amounts actually paid by the student during the year.  The credits in question are only available for amounts actually paid during the year in question, though not surprisingly many taxpayers simply used the amount on that form to claim the credit, even if the actual payment was made in a different year.

California’s law requiring providing the California Attorney General with an unredacted list of donors was held constitutional by the Ninth Circuit, but less than a year later a District Court in the same Circuit found that the ruling only found the law not “facially unconstitutional” but that using an “as-applied” test the law was unconstitutional, granting again an injunction against its enforcement.

But, as we’ll describe below, the rulings are not as contradictory as they might appear when reading just the headlines.

Wendell Wilson lived in Mexico and was an engineer on ocean going container ships during the years in question.  In the case of Wilson v. Commissioner, TC Summary Opinion 2016-19 the issue was whether and to what extent Mr. Wilson was eligible for the foreign earned income exclusion under IRC §911(a)(1)

Should a surviving spouse be able to make use of an unused credit carryforward of her former spouse?  That question was posed in the case of Vichich v. Commissioner, 146 TC No. 12—and, as the Court noted, this wasn’t a question the Court had considered before.

The credit in this was the minimum tax credit under §53.  The minimum tax credit generally relates to a minimum tax paid in a prior year that is related to differences between the regular tax and the alternative minimum tax (AMT) that will reverse in later.  In this case William Vichich has exercised incentive stock options (ISOs) granted to him by his employer in 1998.

Clarifying examples meant to provide guidance to private foundations with regard to program-related investments have been issued by the IRS in TD 9762, adding the examples at the end of Reg. §53.4933-3(b).  The examples generally are the same as those found in the proposed regulations with one example clarified based on comments received.

At first glance Sletta Arobo appeared to be a perfect “innocent spouse” candidate.  But, as we’ll discover in her case (Arobo v. Commissioner, TC Memo 2016-66) even the “perfect” candidate has certain minimum duties with regard to the tax return and when she ignored these duties she lost the possibility of gaining innocent spouse relief.

The tax in this case arose from her husband’s business, as well as a failure to file returns for a number of years.  

The Seventh Circuit Court of Appeals, reversing the Tax Court, held in the case of Roberts v. Commissioner, CA7, Case No. 15-3396, found that Merrill Roberts had operated his race horse operation with a profit motive for all years and not just beginning in a specific later year.  But in doing so Judge Posner could not resist in pointing out his view on the unworkable nature of the regulations that are provided to guide making the decision.

Mr. Roberts, a successful businessman, had acquired race horses in 1999 but not until 2005 did he decide to build a larger training facility and “ramp up” the business, a business that generated losses.  In the original case the Tax Court found that there was not a business until 2007, so that his losses in 2005 and 2006 were subject to the hobby loss rule.

Politics is in the air in the election year of 2016, and the IRS was asked to rule on an attempt by an employer to “incentivize” employees to contribute to a political action committee established by the employer and funded by employees of the organization and its subsidiaries.  In LTR 201616002 the IRS ruled that this structure did not give rise to a deductible payment by the employer.

The IRS, deciding that discretion is the better part of valor, has backed off a position staked out related to “Bad Boy” provisions in non-recourse loan documents in a Chief Counsel Advice, effectively reversing its position in Generic Legal Advice AM 2016-001.  Now the IRS believes that, generally, such provisions will not convert the debt from nonrecourse to recourse debt, a result that would torpedo the expected tax effects of many real estate partnerships.

While philosophers may still debate the question of whether a noise is made if a tree falls in the forest and no one hears it, the Tax Court has no doubt that if a person does not receive a K-1 from a partnership that had income, nor receive a cash distribution that indicates there was income allocable to him, the taxpayer nevertheless must recognize the income.  The reality of this was discovered by a blogger in the case of Lamas-Richie v. Commissioner, TC Memo 2016-63.

Nik Lamas-Richie had founded a gossip blog about Scottsdale, Arizona.  As the Court described, “[t]his Web site initially posted gossip about local topics, including ‘the cool kids in Scottsdale who thought they were celebrities.’”  Discovering success, he decided good gossip wasn’t limited to the west’s most western town, expanding the site to cover regional and then national gossip.

After letting the list stand unchanged for 11 years, for the second year in a row the IRS has updated the list of authorized private delivery services in Notice 2016-30.  Although various all services from DHL Express were dropped in Notice 15-38 (the first update in 11 years to the list), the new notice adds various services offered by DHL Express.

Under IRC §7502(f) the IRS is authorized to designate certain private delivery services (referred to as “PDSs”) to count for the timely filing/timely paying rule of IRC §7502.  Generally this puts such services on a par with sending the document and/or payment via certified mail so long as the taxpayer retains the required proof of timely presentation of the package to the service. 

Contributions can no longer be made by individuals who are otherwise eligible to contribute to Health Savings Accounts beginning with the first month the individual is eligible for benefits under title XVIII of the social security act (otherwise known as Medicare).  [IRC §223(b)(7)]  In Information Letters 2016-0014 and 2016-0003 the IRS addressed the maximum contributions for individuals who enroll in Medicare during the year.

As the provision requires a taxpayer to be eligible for benefits and one of basic requirements to be eligible is that the taxpayer must register of Medicare—so merely attaining age 65 is not, by itself, enough to trigger the limitation.  If an individual has otherwise equivalent coverage (perhaps provided by an employer for employee that is working upon attaining age 65) the person can still be eligible to make a contribution.

The IRS has published the Standard Industry Fare Level (SIFL) rates and terminal charges for the first six months of 2016 in Revenue Ruling 2016-10.

The issue of the taxable status of awards received by a taxpayer from his tax adviser was addressed in the case of Cosentino v. Commissioner, TC Memo 2014-186.  While the Tax Court granted the taxpayer a victory, the IRS has announced nonacquiesence with regard to this case (AOD 2016-01).

A key issue when a taxpayer receives a damage award related to negligent tax advice is whether the amounts received will be taxable income to the taxpayer or not.  Generally when a taxpayer receives questionable tax advice, the taxpayer will file a claim against the adviser and argue for damages for taxes, interest and penalties.  The argument for the tax payment generally is based on the claim that if the taxpayer had known the action the adviser was suggesting would not have led to the claimed tax savings, the taxpayer would have taken other actions to reduce his taxes.