With Revenue Procedure 2019-48[1] the IRS has updated the rules regarding the use of per diem rates to substantiate, under IRC §274(d) and Reg. §1.274-5, the amount of ordinary and necessary business expenses paid or incurred while traveling away from home.  The update incorporates the revisions made as part of the Tax Cuts and Jobs Act (TCJA), including the temporary suspension of the deduction for miscellaneous itemized deductions under IRC §67(g).

IRS Commissioner Charles Rettig, in a letter to members of Connecticut’s Congressional delegation, indicated that the Connecticut Foundation Solutions Indemnity Company, Inc. (CFSIC) is not required to issue Forms 1099 to homeowners who receive reimbursement from the state-chartered insurer, for pyrrhotite related foundation damage.[1]

The Journal Inquirer’s website reported that the CFSIC had previously issued such Forms 1099 to recipients of such payments, which led to inquiries asking why such payments would be deemed to be taxable income.  Officials of the CFSIC then wrote to the Congressional delegation seeking clarification, who then forwarded the question on to the IRS.[2]

A taxpayer, representing himself in Tax Court, was able to convince the Tax Court that, despite years of losses, he operated his cutting horse business with a proper profit motive, escaping the hobby loss rules of IRC §183.[1]

The first item of the guidance promised by Assistant Treasury Secretary David Kautter to be released by the end of January 2020 has been published.  In TD 9884[1] the IRS finalized regulations on the anti-clawback rules that IRC §2001(g)(2) required the IRS to develop to prevent issues when the exclusions are scheduled to be reduced in 2026.

The problem is simple—generally a taxpayer’s estate tax is computed by combining his/her taxable estate at death with his/her lifetime taxable gifts.  A gross tax is computed using that figure.  It is then reduced by a credit based on the appropriate exclusion amount plus any gift tax actually paid on taxable gifts.  If the exclusion amount at death is lower than it was when gifts were made, it’s possible that tax would be due at death with no assets available to pay the tax.

In the case of Wilson, et. al. v. United States, Case No. 2:19-cv-05037, US District Court, Eastern District of New York,[1] the Court found that the sole owner/beneficiary of a trust could only be assessed the 5% penalty under §6677 as the owner.  The Court denied the IRS’s attempt to impose the 35% penalty under that section on distributions received.

The issue involves the requirement under IRC §6048 for information reporting by certain foreign trusts.  If a party fails to file the required reports, penalties are imposed under IRC §6677.

In a ruling that may provide an option for a deduction of what had become otherwise nondeductible investment advisory fees, the IRS in PLR 201945001[1] (and a series of nearly identical rulings issued at the same time) allowed an insurance company to treat investment advisory fees paid out of an annuity contract as an amount not received by the owner of the annuity under IRC §72(e).

Although investment advisory fees are considered expenses related to the production of income under IRC §212, they are treated as a miscellaneous itemized deduction for individuals.  For tax years beginning after 2017 and before January 1, 2026, such items are not deductible for individuals pursuant to IRC §67(g).

The IRS published various cost of living adjusted numbers for the 2020 tax year in Revenue Procedure 2019-44.[1]

This procedure, published annually, deals with most items that are to be inflation adjusted by law aside from items related to retirement plans and health savings accounts, for which other revenue procedures are published each year.  In fact, the retirement plan numbers were published on the same day as this main procedure this year.

The IRS has released the 2020 inflation adjusted limits for qualified retirement plans and IRAs in Notice 2019-59.

The IRS issued a private letter ruling to a taxpayer dealing with both the exclusion of gain on the sale of a residence under IRC §121 and the like-kind exchange provisions of IRC §1031 in PLR 201944006.[1]

The ruling involves a piece of property.

• One of the taxpayers had purchased the property to use as a principal residence, and when the taxpayers were married they continued to use it as their principal residence.  Eventually the taxpayers moved into a new residence.

• The property was then offered to rent.  While there was a period of time when the property was rented to full-time tenants, they also rented it for short-term rentals during other portions of this period of time.  The rental use ended when the property was destroyed in a fire.

• Following the fire the taxpayers received funds for the destroyed residence, sold the land without rebuilding the residence and acquired new property in a transaction they hoped would qualify for deferral of gain under IRC §1031.[2]