The special rule for exclusion from income of cancellation of debt income related to the discharge of certain home mortgage debt (IRC §108(a)(1)(E)) was only extended by Congress through December 31, 2016 in the PATH Act.  However, Congress did provide that the relief would apply to discharges after that date if certain events took place before December 31, 2016 that had the effect of entering into an agreement to cancel the debt at some later date.

In Notice 2016-72 the IRS provides guidance about how that “special rule” would apply to the Federal Housing Finance Agency’s (FHFA’s) principal reduction modification program (PRMP) and the Home Affordable Modification Program (HAMP).

Image copyright mrgao / 123RF Stock Photo

A divided Tax Court has overruled its previous decision in the BMC Software, Inc. v. Commissioner, 141 TC No. 5, a case that was overturned on appeal by the Fifth Circuit, and found that accounts receivable established in a Revenue Procedure 99-32 closing agreement didn’t create related party indebtedness in the case of Analog Devices Inc., et al, v. Commissioner, 147 TC No. 15.  The Court therefore allowed the company’s entire dividends received deduction under IRC §965.

Image copyright hafakot / 123RF Stock Photo

The taxpayer in the case of The Malulani Group, Limited and Subsidiary v. Commissioner, TC Memo 2016-209 was facing a problem with its attempted §1031 exchange—it was unable to locate properties to identify as replacement properties as the 45-day period for doing in its deferred exchange was running down.  The taxpayer decided to identify properties held by a related entity (MBL) as properties to be acquired in order to complete the transaction.

Image copyright pockygallery / 123RF Stock Photo

If a taxpayer ends up with a worthless security, the loss from writing off that security is treated as a capital loss.  While, generally, to have a capital gain or loss there must be a sale, IRC §165(g) provides a special rule for worthless securities.

Image copyright sentavio / 123RF Stock Photo

The IRS has announced an extension of the due date for providing Forms 1095-B and 1095-C to individuals in Notice 2016-70.  The Forms 1095-B and 1095-C are used to report to individuals whether they possessed minimum essential coverage (MEC) for the year and, for employees of applicable large employers, whether they had an offer of MEC that provided minimum value as well as information to determine that offered coverage was affordable. 

Individuals use that information to determine if they are subject to a shared responsibility payment for failure to have MEC for some or all of the year, as well as whether the individual qualifies for a tax credit that offsets a portion of the cost of any insurance they obtained from the applicable exchange.

Image Copyright rawpixel / 123RF Stock Photo

The IRS has granted educational institutions an additional 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.  No penalties will be assessed against institutions that report tuition billed rather than tuition paid on Forms 1098-T for 2017 per Announcement 2016-42.

Announcement 2016-17 originally provided a one year reprieve for 2016 Forms 1098-T from the law change enacted as part of the Protecting Americans from Tax Hikes Act of 2015.

Image Copyright icetray / 123RF Stock Photo

The “anti-Cohan” rule found in IRC §274(d) cost the taxpayer a deduction for expenses related to use of an Aston Martin in the case of Roy v. Commissioner, TC Summary Opinion 2016-77.

Image copyright buschmen / 123RF Stock Photo

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.

Image Copyright mearicon / 123RF Stock Photo

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.

Image Copyright donets / 123RF Stock Photo

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.

Image copyright devke / 123RF Stock Photo

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.

Image copyright turbo1019 / 123RF Stock Photo