High deductible health plans (HDHPs) will be allowed to pay for COVID-19 related testing and treatment without regard to whether the insured has met their deductible under relief announced by the IRS in Notice 2020-15.[1] Such payments will not impact the plan’s qualification as HDHPs, nor the ability of taxpayers covered by such plans to make contributions to health savings accounts (HSAs).

In Revenue Procedure 2020-17[1] the IRS provided an exemption from information reporting rules under IRC §6048 for transactions with or ownership of certain specified tax-favored foreign trusts.

Under IRC §6048, U.S. persons are required to file annual reports for:

• Transfers of money or other property to a foreign trust;

• Ownership of a foreign trust; or

• Distributions from a foreign trust.

The information reporting for §6408 is provided for on:

• Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, and

• Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under section 6048(b)).

IRC §6077 imposes significant penalties on taxpayers who fail to file these reports.

Practitioners from time to time will encounter traders in securities in their practice. Such traders hold investments for a very short period of time, often no more than minutes, looking to make money from short term movements in the price of the securities in question.

Unfortunately, doing this successfully is far from simple, and quite a few new traders find their new business is the perfect vehicle to turn a large fortune into a small one—or none. The sale of securities normally is considered a sale of a capital asset—so if they are unsuccessful, they quickly have losses far in excess of the $3,000 per year limit on an individual claiming capital losses in excess of capital gains.

The U.S. Supreme Court has decided not to hear the appeal from the Ninth Circuit in the case of Baldwin v. United States, Case No. 19-402.[1] The denial leaves standing the Ninth Circuit’s ruling that Reg. §301.7502-1(e)(2) rendered irrelevant a prior Ninth Circuit decision in the case of Anderson v. United States, 966 F.2d 487 (9th Cir. 1992).

We previously wrote about this case when it was first decided by the Ninth Circuit in April 2019.[2]

The issue involved whether a taxpayer could only show timely mailing of their document by producing a certified or registered mail receipt stamped by a U.S. Postal Service employee or whether they could resort to other evidence showing the document had been timely mailed. In 1992 the Ninth Circuit had ruled that other evidence could be considered in the Anderson case. Other circuits had held that provisions Congress enacted in IRC §7502 for proof of timely filing of documents were meant to be the sole method of proving such timely mailing.

The Treasury Department has released proposed regulations relating to the changes to IRC §274 made as part of the Tax Cuts and Jobs Act.[1]

The Tax Cuts and Jobs Act (TCJA) repealed the rule that allowed a deduction for entertainment expenses if the taxpayer established that:

• The entertainment was directly related to the active conduct of the taxpayer’s trade or business (directly related exception), or

• In the case of an item directly preceding or following a substantial and bona fide business discussion (including business meetings at a convention or otherwise), the item was associated with the active conduct of the taxpayer’s trade or business (business discussion exception).

Thus, following the TCJA, no deductions are allowed for entertainment expenses unless they meet one of the exceptions found at IRC §274(e).

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]