It’s now been five years since this website was created, publishing its first article on December 29, 2014 (Memo Analyzes Proper Deduction of Mortgage Interest Where There are Multiple Obligors on the Note).  At the time I was writing the site for Nichols Patrick CPE, Inc., using material I was writing for the database I was in charge of managing to create our annual tax update course.

The course, originated by Lynn Nichols many years back, has always been called Current Federal Tax Developments, so that became the website’s name once I confirmed the URL was available. 

This particular case was one mentioned by Tony Nitti in the over two hour BKD Simply Tax podcast with Damien Martin that was released on December 26, 2019[1] where Tony discussed his top 10 tax cases for 2019.  If you haven’t listened to this two hour discussion of cases, their importance in learning tax law, and how Tony deals with reading the number of cases he does, be sure to listen to the program.  You won’t be disappointed.

I had written on the topic, a case that involved a local attorney here in Phoenix, for Nichols Patrick in April of 2012 prior to the establishment of this website.  Because, as Tony notes, this is an especially useful case to understand hobby loss rules and we don’t have a lot going on at the end of the year, I’ve decided to publish this on the website here at year end.

The IRS decided that an attorney who was claiming deductions relating to a documentary she was filming was not engaged in the activity for a profit, and sought to disallow her losses.  Fortunately for the taxpayer, the Tax Court, in the case of Storey v. Commissioner, TC Memo 2012-115,[2] decided that in fact, her large losses did not indicate that she did not intend to eventually make a profit from the activity

The final regulations dealing with Qualified Opportunity Zone Funds have been released by the IRS.[1]  Note that the copy released by the IRS has the following caveat:

This document will be submitted to the Office of the Federal Register (OFR) for publication. The version of the final rule released today may vary slightly from the published document if minor editorial changes are made during the OFR review process. The document published in the Federal Register will be the official document.[2]

In the last few weeks of 2019 Congress produced its most significant tax package of the year as part of the Further Consolidated Appropriations Act, 2020 (HR 1865).[1]  The President signed the Act into law on December 20, 2019.  The Act includes primarily appropriations provisions for various federal agencies, but it has significant tax provisions in the following Divisions:

• Division N – Health and Human Services Extenders, Title I-Health and Human Services Extenders, Subtitle E – Revenue Provisions: This portion of the Act repeals three taxes originally enacted as part of the Patient Protection and Affordable Care Act but which had not yet gone into force.

• Division O – Setting Every Community Up for Retirement Enhancement (SECURE): The bill that passed the House earlier this year dealing with various retirement provisions, including major changes to required distributions for inherited IRAs, delayed required beginning date for required minimum distributions, other provisions affecting qualified retirement plans, expansion of items §529 plan distributions can be used for as education expenses and returning to the pre-TCJA version of the Kiddie Tax.

• Division Q – Revenue Provisions (Taxpayer Certainty and Disaster Tax Relief Act of 2019):  The largest portion of this section of the Act contains extenders, some retroactive, of various provisions that had expired or were scheduled to expire, including the ability to treat certain private mortgage insurance as interest on acquisition debt, the nonbusiness energy credit and many others.  As well the bill adds disaster relief provisions for disasters taking place in 2018, 2019 and the very early portion of 2020 and retroactively repeals the rule treating transportation benefits provided to employees of a tax exempt entity as unrelated business income (a portion of the “parking lot tax” provision added by the Tax Cuts and Jobs Act).

A question regarding virtual currencies will be part of the Form 1040 package for 2019, as the IRS has now released the final version of Schedule 1 (Form 1040 and Form 1040-SR)[1] and the question added in the second draft version about virtual currencies remains on the final form.

The Schedule can be downloaded at https://www.irs.gov/pub/irs-pdf/f1040s1.pdf.

The IRS has issued the final version of the revised Form W-4 for 2020.[1]  The new Form W-4 is meant to more accurately estimate the proper amount of withholdings from an employee’s paycheck following the changes made by 2017’s Tax Cuts and Jobs Act.  

Note that the form is significantly different from its predecessor, which will likely lead to some confusion on the part of employees regarding how they should fill out the form. The new form eliminates the concept of withholding allowances.

The IRS has released the final versions of Form 1040 and Form 1040-SR just before Thanksgiving 2019, along with final versions of two of the three schedules that go along with the two forms.

Form 1040 is the first update of the Form 1040 since the postcard version debuted in 2018.  This version no longer meets what Treasury had apparently used to define a postcard, as the 2019 version takes up more than half of each page.  Good news for most CPAs is that the form now is mathematically complete—the adjustments now actually flow from Schedule 1 to a line on the front of the return.

Final version Form 1040 (2019)