While the IRS has issued numerous private letter rulings over the years granting taxpayers relief for late IRA rollovers, far fewer rulings have been issued denying relief. But in PLR 2020033008[1] the IRS did just that for a taxpayer’s request for permission to make a late rollover, as the taxpayer had effectively attempted to borrow the funds from the IRA to make a cash offer on a residence.

As many advisers have discovered due to clients (especially trusts) receiving notices regarding payments supposedly due on tax returns where payments had been mailed in when the return was filed at July 15, the IRS is behind in processing items mailed to the agency and that includes certain tax payments. Due to this delay, the IRS has updated guidance on its website to provide relief for taxpayers who end up with a check being dishonored by their bank when the IRS finally gets around to processing that July 15 check.[1]

In what may initially seem like an odd argument for both parties to make, the IRS successfully argued that vacation homes were not rentals in the case of Eger v. United States, USDC Northern District California, Case No. 18-cv-00199-DMR.[1] The taxpayer’s attempt to get the decision overturned on appeal failed when the Ninth Circuit affirmed the District Court decision.[2]

The previously promised guidance on the appeals process for PPP borrowers who are wholly or partially denied forgiveness has been released as an interim final rule (IFR) by the Small Business Administration.[1]

The appeal will be heard by the SBA Office of Hearings and Appeals (OHA) and will involve appealing certain SBA loan review decisions.[2]

The SBA added a new “Economic Injury Disaster Loan (EIDL) FAQs” section to the PPP Loan Forgiveness FAQ on August 11, 2020.[1] The FAQs are the first significant guidance issued on the interaction of EIDL advances and PPP loans.

Under the CARES Act a business that receives an EIDL advance and a PPP loan will have its PPP loan forgiveness reduced by the amount of the EIDL advance.

The SBA added two new questions to their first FAQ on Payroll Protection Loans,[1] dealing with the impact on paying or not paying agent fees on the SBA’s guarantee of a PPP loan or the payment of fees to the lenders and on insurance that qualifies as a health care benefit for forgiveness.

The President has signed an Executive Order directing the Treasury Department to issue guidance under IRC §7508A deferring the withholding, deposit, and payment of the tax imposed under IRC §3101(a) (the old age, survivor and disability portion of social security taxes imposed on individuals) and IRC §3201(Railroad Retirement Act taxes tied to the rate of tax under IRC §3101(a)).[1] The deferral will apply to the period from September 1, 2020 (note the delayed effective date) through December 31, 2020.[2]

Under provisions of the CARES Act, as later amended, all employers are able to defer payment of the employer portion of these taxes at this time, explaining why this order is limited to the employee portion of such taxes.

At the same time the IRS issued final regulations on the business interest deduction limitations under IRC §163(j), the agency issued a proposed Revenue Procedure in Notice 2020-59 to provide a safe harbor for a trade or business that manages or operates a qualified residential living facility to be treated as a real property trade or business solely for the purposes of qualifying as an electing real property trade or business under IRC §163(j)(7)(B).[1]

An electing real property or business is exempted from the business interest limitations under IRC §163(j) but is required to use the alternative depreciation system (ADS) methods to depreciate any real property.

In the case of Matzkin and Schroeder v. Commissioner, TC Memo 2020-117,[1] the Tax Court ruled that a taxpayer could not increase his basis in an LLC (Dental Care Alliance, LLC, or DCA) interest by the amounts he had paid his former spouse Georgeann as part of the divorce to obtain full ownership. The Tax Court found that this was part of the property settlement for federal tax purposes and such payments do not add to the basis of the asset in question.

Eventually Stephen’s 70% interest in the dental practice LLC was transferred by Steven into an S corporation of which he was the only shareholder, SRM Consulting, LLC (SRM).

In Steven Matzkin’s divorce his interest in the LLC, which contained his dental practice, was assumed to be $21 million. The interest was ruled to be a marital asset under Florida law, and it was proposed to divide such assets 50/50 between the two soon to be former spouses.

The IRS has published an FAQ that provides an employer may set up a leave sharing plan related to the COVID-19 national emergency that will be treated as meeting the requirements of Notice 2006-59.[1]

The FAQ starts out by answering the following question:

Q1. May employers set up a leave-sharing plan under IRS Notice 2006-59 (PDF) that permits employees to deposit leave in an employer-sponsored leave bank for use by other employees who have been adversely affected by the COVID-19 pandemic?

A1. Yes. Notice 2006-59 provides guidance on the federal tax consequences of certain leave-sharing plans that permit employees to deposit leave in an employer-sponsored leave bank for use by other employees who have been adversely affected by a major disaster such as the COVID-19 pandemic. See Notice 2006-59 for the requirements of a qualifying leave-sharing plan.[2]

The Small Business Administration announced that it has tentative plans to begin accepting lender forgiveness decision information on August 10 using a new “PPP Forgiveness Platform.”[1] Note that this platform is intended solely for lenders—borrowers will submit their forgiveness application to their lender. Once the lender has made a determination on forgiveness, the lender then transmits data to the SBA.

The date is tentative because, as of the July 23 release date of the notice, Congress was considering legislation that could make various changes to the PPP loan program yet again.