In PLR 201934006[1] the IRS granted the taxpayer’s request to allow her to roll the amounts from her deceased husband’s IRA to an IRA in her own name.

The IRA had listed the couple’s children as the beneficiaries of the decedent’s IRA.  Later a state court named the spouse as the sole beneficiary of her husband’s IRA.

We are getting close to our first look at the IRS’s proposed regulations to implement the revenue recognition conformity and advance payment provisions added to IRC §451 by the Tax Cuts and Jobs Act. Tax NotesToday Federal reported on August 22, 2019, that the IRS’s proposed regulations related to both issues have now completed their review at the Office of Information and Regulatory Affairs of the Office of Management and Budget.[1]

The revenue conformity rules of IRC §451(b) apply to any taxpayer who reports on the accrual method of accounting for tax purposes[2] that has an applicable financial statement (AFR) as defined in IRC §451(b)(3).  Under these rules, the taxpayer must generally recognize revenue for tax purposes no later than the date on which the revenue is recognized in the AFR.

In what has happened quite often over the past few years, the Tax Court found in the case of Hairston v. Commissioner, TC Memo 2019-104[1] that the taxpayers had failed to show that either was a real estate professional.  Thus, losses of just under $55,000 over three years were treated as passive activity losses.

IRC §469(c)(2) provides a blanket rule that a rental activity is automatically treated as a passive activity.  However, IRC §469(c)(7) was added to the law to grant relief from this automatic treatment to individuals who are real estate professionals.

In a story posted on August 1, 2019 we noted that DNA testing firm 23andMe had reported receiving a private letter ruling from the IRS that allows for a portion of a DNA test kit fee paid for ancestry and health testing qualified as a deductible medical expense under IRC §213. The ruling (PLR 201933005) has been posted by IRS.

While most taxpayers do not itemize, and even those that do often have not incurred the necessary amount of medical expenses to begin to deduct them on Schedule A, the ruling clears the way to use HSA funds to reimburse the taxpayer for the medical portion of the fee. As well, flexible spending accounts also should be able to reimburse such amounts as well.

A taxpayer could not show that payments he made represented interest on purported loans and, while he was able to deduct some commission expenses, the amount was limited due to issues with his records in Moore v. Commissioner, TC Memo 2019-100.[1] 

The IRS in a news release announced the release of a new online tax withholding estimator, replacing the previous withholding calculator.[1]  The new calculator, found at https://apps.irs.gov/app/tax-withholding-estimator, is designed to be both simpler to use and mobile friendly (that is, easier to use on smart phones).

The Fifth Circuit in March 2019 raised, but did not answer, the question of whether it was still appropriate to hold that taxpayers could not reasonably rely on a return preparer for timely filing of a return in the age of electronic filing.[1]  A U.S. District in Court in Tennessee decided that, since taxpayers could prepare their own paper return or obtain paper returns from the preparer, the prior rule should continue to apply.[2]  The Court also held that the taxpayer could not seek first-time abatement (FTA) relief in Court—rather, that is fully under the IRS’s control.

The US Supreme Court held in the Boyle case[3] that a taxpayer could not establish reasonable cause for failing to file a tax return by claiming he/she relied upon a tax preparer to timely file the return.  The Court found that the duty required no special knowledge or skill to file a return (a trip to the Post Office or local IRS office) and, as such, could not be delegated to a third party—the taxpayer had a duty to insure the third party actually took the desired action.

The Self-Employed/Small Business (SBSE) Division of the IRS has a memorandum outlining revised procedures for third party contact in SBSE-04-0719-0034.[1]  The revised procedures reflect changes made to IRC §7602(c)(1) by the Taxpayer First Act of 2019.

IRC §7602(c)(1), both before and after amendment, required the IRS to provide notice to the taxpayer prior to contacting third parties.  The IRS had taken the position, noted in the Internal Revenue Manual at IRM 25.27, Third Party Contacts, that providing the taxpayer with Publication 1, Your Rights as a Taxpayer, was sufficient notice under the prior law.

The issue of the reach of the ban on claiming the earned income tax credit when a taxpayer knowingly claims a dependent he/she is not allowed to claim is discussed in an emailed chief counsel advice (CCA 201931008).

To retain status as a §501(c)(3) charitable organization, an entity must not only have been organized for charitable purposes (a requirement for initial qualification), it must also be operated exclusively for charitable purposes in order to retain that status.  A failure on the second test caused the organization in the case of Giving Hearts, Inc. v. Commissioner, TC Memo 2019-94[1] to retroactively have its status revoked by the IRS.

The case involves an attempt by a business that was negatively impacted by the National Do Not Call Registry, a program conducted jointly by the Federal Trade Commission and the Federal Communications Commission, to blunt the impact of that program.  The business, Windows Plus, relied primarily upon telemarketing calls to sell replacement windows and other home improvement services to homeowners.