The IRS has revised its guidance on what constitutes virtual currency on its webpage, but there was a bit of confusion that was generated with comments from IRS Chief Counsel Michael Desmond on the day following the change. Now the IRS has issued a clarification that may help to resolve this matter, at least in most cases.

The IRS has released final regulations modifying the dollar limits for vehicles subject to a fleet average valuation rule or having personal use valued using the cents-per-mile valuation method found in Reg. §1.61-21.[1]

Update: On January 29, 2020 the District Court issued an order granting the motion for reconsideration and, at the same time, issued a revised judgment in favor of the taxpayer in the case.

The IRS is asking the District Court in the case of Harrison v. Internal Revenue Service, USDC WD Wisconsin, Case: 3:19-cv-00194-wmc[1] to reverse its holding in favor of the Government, supporting the taxpayer’s motion for reconsideration[2] in the IRS’s own notice of non-opposition to that motion.[3]  So why is the IRS asking the Court to reverse the holding in favor of the agency?

Well, it turns out that there existed controlling authority in favor of the taxpayers’ position but, in the words of the plaintiff’s motion for reconsideration, “all parties failed to cite the relevant authority and the Judge didn’t cite the case either.”

The good news for the taxpayer in the case of Provitola v. Commissioner, US Tax Court Bench Opinion, Nos. 12357-16 and 16168-17 (2019)[1] was that the Court rejected the IRS arguments that their business related to a product to enhance television viewing was a sham.  But that was more than offset by the bad news when the Court also found that the business had not yet commenced in the years in question, meaning all expenses were capitalized pursuant to IRC §195 until the year the business actually begins operations.

Mr. Provitola is an attorney who also holds a B.S. in physics.  His law practice specializes in patent law and he is sole owner of the S corporation in which he practices.  Around 2003 he had an idea to enhance television viewing and began developing a product. Between 2005 and 2016 he was awarded seven patents that related to this product he was developing. [2]

A taxpayer was unsuccessful in attempting to recover taxes via a claim of right deduction under IRC §1341 in the case of Heiting v. United States, US DC WD Wisconsin, Case No. 3:19-cv-00224.[1]

The claim of right provision under the IRC is a relatively obscure provision, though one that most advisers will eventually run across in their practice.  The provision is meant to provide some relief from the strict annual accounting for income taxes in certain situations where a taxpayer recognizes income that later must be repaid by the taxpayer.

In Notice 2020-06[1] the IRS has provided some relief to financial institutions due to the late change in the determination of IRA account owners who have required minimum distributions that was part of the SECURE Act.  The SECURE Act was included as part of the Further Consolidated Appropriations Act, 2020 signed into law in late December.

The late Dr. Jerry Pournelle wrote a column in Byte magazine beginning in the early years of the “microcomputer” era (the term before IBM came out with their Personal Computer when the common reference became PCs) on using the devices.

Dr. Pournelle often used the term “real soon now” in his column to deal with some new feature a vendor promised was almost ready to be released, but which quite often would either take years to arrive or never actually see the light of day.  The term came to mind when I saw a story posted on Tax Notes Today Federal regarding the issue of IRS guidance on excess deductions on termination and comments made by Catherine Hughes, attorney-adviser, Treasury Office of Tax Legislative Counsel in response to questions at a District of Columbia Bar Conference on January 23.[1]

Issues related to privilege for documents prepared related to a tax strategy were the issue decided in the case of United States v. Microsoft Corp. et al., US DC WD Washington, Case No. 2:15-cv-00102.[1]  The case involved Microsoft’s tax liabilities for 2004-2006 and a program that was being considered and then implemented to offset an expected increase in taxes.

In Chief Counsel Advice 202003004[1] the IRS Chief Counsel’s office looked at the impact of the burden of proof imposed on the agency when it asserts that payments are to disallowed under IRC §165(c) as illegal kickbacks, bribes, and the like.

Tax advisers who work with small partnerships have long been aware of the late filing relief provided by Revenue Procedure 84-35.  But some have wondered that since the procedure refers to a provision removed from the Internal Revenue Code by the Bipartisan Budget Act of 2015 for tax years beginning on or after January 1, 2018, does it continue to apply?

In Program Manager Technical Advice 2020-01[1] the Chief Counsel’s office addressed that question, determining Revenue Procedure 84-35 still is available for taxpayers to use to obtain relief from partnership late filing penalties under IRC §6698.

The IRS announced an expansion of relief to additional individuals who borrowed funds to attend school and later had that debt cancelled in Revenue Procedure 2020-11.[1]

The IRS had previously granted relief to those who attended schools owned by Corinthian College, Inc. (CCI) or American Career Institutes, Inc. (ACI) and had their loans discharged by the Department of Education under the “Closed School” or “Defense to Repayment” programs.  This relief was limited to those who had attended schools owned by CCI or ACI.[2]

Online tax discussion groups, many of which are sponsored by state CPA societies for their members, offer useful places to discuss tax issues and become aware of what is going on in taxes.  It was when participating in such a group discussion that I became aware of a theory being proposed to allow working around the state and local tax deduction cap based on the proposed regulations[1] issued by the IRS in December regarding payments to charitable organizations not treated as charitable contributions under Proposed Reg. §1.162-15.

A topic that regularly comes up year after year in Tax Court cases is the issue of whether a document meets the requirements for protection under the timely mailed, timely filed rule found in IRC §7502(a).  In the case of Seely v. Commissioner, TC Memo 2020-6,[1] we have one of the infrequent taxpayer victories when faced with such a challenge.

A series of problems led to the Tax Court agreeing with the IRS that an employee stock ownership plan (ESOP) and trust (ESOT) were not qualified in the case of Ed Thielking Inc. v. Commissioner, TC Memo 2020-5.[1]