In PLR 201645017 the IRS denied tax-exempt status to a religious organization that established a coffee shop that it planned to use to spread a religious message to members of the community.  The exemption was denied because the IRS determined, under the facts of the case, that a substantial portion of the organization’s operations would be devoted to operating the coffee shop in a commercial manner.

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To most practitioners, at first glance the facts in the case of Fitzpatrick v. Commissioner, T.C. Memo. 2016-199 would appear to doom Christina Fitzpatrick to being liable for the 100% trust fund penalty related to unpaid payroll taxes for the wine bar that was partially owned by her husband and for which she worked.

These “bad facts” included the fact that:

• Christina had signature authority over the bar’s checking account
• Christina signed payroll checks regularly
• Christina selected and arranged to hire Paychex to handle the restaurant’s payroll

However, despite that apparent level of control, the Tax Court found that Christina was not a responsible party based on other facts in the case.

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No longer possessing a valid charter can create a situation where the entity is unable to file in Tax Court to dispute an IRS finding.  That was the situation for the corporation in the case of Urgent Care Registries, Inc. v. Commissioner, TC Memo 2016-198.

The corporation in this case had filed some income and employment tax returns for 2009 through 2013 but enclosed no payments.  As well, some returns that it should have filed were never filed and the IRS prepared substitutes for returns (SFR).  The IRS assessed the taxes and penalties, and send the taxpayer a Final Notice of Intent to Levy.

The word “including” in the Internal Revenue Code creates a potential trap that taxpayers fall into from time to time.  IRC §7701(c) tells us that when we see that word in the code we need to understand that the list presented is not every item that could apply to the situation.

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The IRS released inflation adjusted amounts for a number of tax related items for 2017 in Revenue Procedure 2016-55.  This year’s information includes a number of additional entries, including §179 adjustments and revisions of the amounts for various penalties, that Congress added in the various tax bills that were passed in 2015.

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The Social Security Administration has provided on the Employment Coverage Threshold page on their website, information on the coverage threshold levels for domestic workers in 2017.  The threshold will remain at $2,000 in 2017, the same level as it was set at for 2016.

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The Social Security Administration announced in an October 19, 2016 news release that the maximum amount of earnings subject to Social Security tax in 2017 will rise to $127,200 from the maximum $118,500 that applied for 2016.

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The federal transfers (gift and estate) are computed based on lifetime transfers—thus, in order to compute the current year’s gift tax the gifts made during the year are reported along with gifts made in prior years.  In Chief Counsel Advice 201643020 the IRS was looking a situation where a taxpayer had reported the proper amount of current year’s gifts but had omitted prior years gifts from the Form 709.

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January 20, 2017 will be the date on which the new President is to be inaugurated—and in emailed advice the IRS Chief Counsel’s office noted that this date will be considered “holiday” for tax purposes.  Thus, any deadlines that fall on January 20, 2017 (a Friday) will instead be treated as actually having a deadline of the following Monday (January 21, 2017).

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In response to Hurricane Matthew the IRS in Announcement 2016-39 granted the option to qualified plans to give access to retirement funds to individuals impacted by the disaster without requiring certain the plans to go through certain verification procedures required of such plans when making loans or hardship distributions.

Employer retirement plans of various sorts (§§401(k), 403(b) and 457) must follow certain procedures in order to make distributions or loans to account holders.  Distributions can only be made upon the occurrence of certain events that the IRC allows, and then only if the plan itself allows for such a distribution. As well, distributions will generally be subject to tax except to the extent the distribution consists of already taxed amounts.

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In the case of United States v. McGrew, et. al, CA9, 118 AFTR 2d ¶2016-5319, the Ninth Circuit looked at whether the IRS could foreclose liens on property that the taxpayer had previously owned as community property with her former husband.  The liens were being forceclosed against the taxpayer’s former husband. 

Ms. McGrew had received the residence in question as part of the division of community property at the termination of her marriage to Kenneth McGrew.  Ms. McGrew argued that because the liens were against her former husband that the IRS did not have the right to foreclose the liens against the property that was now solely.

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The IRS has issued a revised 202 page Audit Technique Guide for Capitalization of Tangible Property that is meant to outline what agents should do in an examination when looking at the applying the regulations that took effect for tax years beginning on or after January 1, 2014 under IRC §263(a).

In the case of Harvey C. Hubbell Trust et al. v. Commissioner; T.C. Summary Opinion 2016-67 the IRS was disallowing all of the charitable contributions claimed by the trust for 2009.  The IRS did not deny that the contributions were made.  The agency also did not claim the recipients were not qualified charitable organizations. Rather, the IRS claimed the contributions were not made according to the terms of the will that established the trust.

The trust in question had been making charitable contributions for many years (going back to 1985) and in quite substantial amounts.  For instance, in 1985 the trust made (and deducted) charitable contributions of $384,976, and had made contributions, often in excess of $100,000, for many years between 1985 and 2008.  Apparently the IRS had never raised any issue with regard to these contributions—likely because the IRS had never examined the trust.

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