The IRS and Department of Labor have proposed significant changes to be made to the Forms 5500 filings, including requiring all employers who provide health coverage to file a Form 5500 of some sort beginning with the 2019 filings. The Proposed Regulations [FR Doc 2016-14893] have been published for comments.

The Forms 5500 reports deal with various employee benefit programs (including qualified retirement plans, welfare benefit plans, etc.) that are subject to regulation by both the IRS and Department of Labor. Generally filing requirements vary based on the type of benefit provided and size of the plan, with small plans in certain cases exempted from the filings.

In Section 405 of the Protecting Americans from Tax Hikes, organizations that intend to operate as organizations exempt from tax uner §501(c)(4) must notify the IRS of that intent. [IRC §506] The IRS has issued temporary regulations [T.D. 9775] that were also issued as proposed regulations [REG-101689-16] to implement these rules, along with a Revenue Procedure [Revenue Procedure 2016-41] outling the notification procedure.

The taxpayers in PLR 201628002 were asking for the ability to use the reduced exclusion of a gain from the sale of principal residence under IRC §121(c)(2)(B)’s “unforeseen circumstance” provision due to the birth of a second child.

IRC §121 provides that taxpayers may exclude up to $250,000 ($500,000 for married taxpayers filing a joint return) of gain on the sale of a home if the property was owned by them for at least 2 of the past 5 years and also was used by them for 2 of the past 5 years (though the periods do not necessarily have to be the same days). The “2 of the last 5 years” test are applied as of the date of the sale. The provision also limits a taxpayer generally to claiming the exclusion only once every two years. [IRC §121(b)]

In a series of private letter rulings (PLRs 201628004, 201628005 and 201628006) the IRS denied an estate’s attempt to fix a problem that appeared to have been created by accident by the decedent when his financial adviser changed firms

In the case of Luque v. Commissioner, TC Memo 2016-128 the taxpayers had overpaid their 2011 tax. However, between the time the taxpayers filed a 2011 return in April of 2012 and when the IRS determined that the tax for 2011 was higher than that reported, the original overpayment amount had been applied by the IRS to an outstanding liability the taxpayers had for 2009.

At trial the IRS conceded that there was, in fact, no underreporting of tax for 2011 and so that the Tax Court should rule at this point that there is no tax due nor any overpayment on the 2011 return. The taxpayers, while agreeing they did not owe anything to the IRS wanted the Court to order the IRS to pay them the amount of the 2011 overpayment.

In order to claim a deduction for interest paid that is otherwise deductible, generally a cash basis taxpayer must both actually pay the interest in question (since that controls the timing of deductions in that case) and be liable on the debt (since only a taxpayer’s own expenses are going to generally be deductible). However even if one is not directly liable on a mortgage on a principal residence, if the taxpayer is the legal or equitable owner of the property in question the taxpayer can still claim a deduction on that debt. [Treasury Reg. §1.163-1(b)]

In the case of Jackson v. Commissioner, TC Summary Opinion 2016-33, the taxpayer claimed to be the equitable owner of a residence he shared with his girlfriend in which they both lived and that he had paid amounts towards the mortgage that should enable him to claim interest deductions despite the fact that the Form 1098 was issued in his girlfriend’s name and he was not listed either on the deed for the property nor as liable on the debt.

A taxpayer’s liability for self-employment tax related to income from working interests in oil and gas wells was the issue in the case of Methvin v. Commissioner, T.C. Memo 2015-81, affd CA10, Case No. 15-9005, AFTR 2d ¶2016-809.

This is a case we first visited back in April of 2015 when the taxpayer lost in Tax Court. But now we have the results of the taxpayer’s appeal to the Tenth Circuit.

The concept of “crowdfunding” has becoming a increasingly important way of getting access to funds for certain projects. In fact, a June 2015 post on Forbes (http://www.forbes.com/sites/chancebarnett/2015/06/09/trends-show-crowdfunding-to-surpass-vc-in-2016/#bce560444b52) indicated that crowdfunding is expected to grow to over $34 billion in 2016, surpassing amounts invested by the venture capital industry.

But what is not terribly clear to many is what the tax treatment of a crowdsourcing program should be, especially given the wide variety in structures and conditions involved in such programs. In Information Letter 2016-0036 the IRS, while not giving a hard and fast answer to the question, did indicate what issues should be considered in determining the tax effects.

The Federal Circuit wasn’t willing to go quite as far as the Court of Federal Claims in the case of Wells Fargo & Co. vs. United States, CA FC, No. 2015-5059, 2016 TNT 126-15 in allowing a corporation to allowing interest netting for overpayments and underpayments arising from prior years involving entities that later were acquired and merged into the entity.

In the original case (Wells Fargo & Company v. United States, Court of Federal Claims, No. 11-808T, 2014 TNT 125-13, 6/27/14) the Court of Federal Claims had adopted Wells Fargo’s position allowing that following mergers the corporation was in all cases the “same” corporation as any of the pre-merger predecessors.

In the case of Newman v. Commissioner, TC Memo 2016-125 the Tax Court looked at two questions—did Mr. Newman have cancellation of debt income in 2011 from an overdraft on a bank account he never paid back and, if so, was he insolvent at the time the debt was discharged.

If a statute allows a court to consider an issue, does that mean the court only has the right to accept the position being posited, but must remain mute if the court decides in the alternative? That was the position being advanced by the taxpayer in the case MK Hillside Partners, et al v. Commissioner, No. 14-71504, CA9, 2016 TNT 122-8.

Some tax related mistakes are not able to be corrected by asking for forgiveness, as the taxpayer discovered in Private Letter Ruling 201625001. In this case the issue was a taxpayer who inherited a private annuity and wished to roll the annuity over in a tax free §1035 exchange.

Inherited annuities are eligible to be rolled by the beneficiary under IRC §1035 (see PLR 201330016). And advisers are aware that the IRS has the authority under IRC §408(d)(3)(I) to waive late rollovers for IRAs. So it may not be surprising that when an error occurred in attempting to rollover an annuity under IRC §1035 that the taxpayer asked the IRS for a waiver.

Another couple discovered that the documentation rules for charitable contributions are very strict in the case of Haag v. Commissioner, TC Summary Opinion 2016-29. This case dealt with both cash and noncash contributions, along with other deduction items the IRS disputed. But our key matter of interest will be for the charitable contributions, since the strict documentation rules are very difficult for taxpayers to comply with, but the Courts feel compelled to enforce those rules since Congress passed them.

The issue involved both cash and noncash contributions. The cash contributions related to the standard situation clients often assert in making a certain amount of weekly contributions to a church. Though we are not told so in this case, quite often the taxpayer will claim they put cash into an offering plate.