Following the announcement of planned relief related to April 15 tax filings by the Treasury Secretary over a week ago, the IRS has now formally released the details of such relief in Notice 2020-17.[1]

In the daily session discussing COVID-19 developments given each day by the Vice-President’s task force on March 17, 2020, Treasury Secretary Mnuchin announced that the government was going to allow taxpayers to defer the payment of taxes due on April 15 by 90-days, with a $1 million cap for individuals and a $10 million cap on such deferred payments by corporations. The Secretary did not address whether there would be any automatic extensions also granted for filing income tax returns due on that day, even though the tax potentially would not be required to be paid on that date.

In the case of Thomas v. Commissioner, TC Memo 2020-33[1] the taxpayers discovered the risk of dropping a tax related document in a mailbox that you think will be picked up and postmarked that day. In this case the document in question was their Tax Court petition.

The last day for Sara and David Thomas to file their petition with the Tax Court to challenge the IRS’s notice of deficiency was March 5, 2018.[2]

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.