The Tax Court sided with the IRS in the case of The Morning Star Packing Company, L.P. et al v. Commissioner, TC Memo 2020-142.[1] The Court found the taxpayers could not claim a tax deduction for certain accrued expenses, finding that not all events had taken place to establish the fact of the liabilities in question.

A taxpayer reporting on the overall accrual method of accounting must generally demonstrate two items in order to be able to claim a deduction on the current year’s return.

• Economic performance with regard to the item in question[2] and

• All events have occurred that determine the fact of a liability and the amount of that liability can be determined with reasonable accuracy.[3]

The IRS has issued a draft of the instructions[1] for Form 8995, Qualified Business Income Deduction Simplified Computation, for 2020, something that may not initially seem noteworthy. But it turns out that what is no longer found in the instructions may indicate an IRS change of view on the impact of charitable contributions on the calculation of qualified business income under IRC §199A.

Eric Yauch noted in an article published in Tax Notes Today Federal on October 14, 2020[2] that the revised instructions no longer contain a reference to, in at least some cases, reducing qualified business income (QBI) by charitable contributions.

Some concerns had been raised regarding the expiration date found on the various Forms 3508 to be used to apply for forgiveness under the PPP loan program. Ever since the first Form 3508 was released, the forms have shown an expiration date in the upper right corner of October 31, 2020.

The issue came into sharper focus when the SBA released the Form 3508S in October with that very same expiration date. Some expressed the concern that this might be the date by which borrowers would have to apply for forgiveness—and that date was rapidly approaching. But others noted nothing in the statute or other SBA guidance suggested that such a short deadline applied to the request for forgiveness.

In News Release IR-2020-233[1] the IRS announced that CP14 and CP14 IA notices of amounts due to the IRS will come with a QR code. These codes will enable taxpayers to navigate the IRS website to deal with the matter at hand.

The SBA published an additional interim final rule on PPP loan forgiveness on October 8, 2020.[1] The October 8, 2020 IFR which provides:

• Additional guidance concerning the forgiveness and loan review processes for PPP loans of $50,000 or less and

• For PPP loans of all sizes, lender responsibilities with respect to the review of borrower documentation of eligible costs for forgiveness in excess of a borrower’s PPP loan amount.[2]

The SBA has added a question and answer[1] to the Paycheck Protection Program Loans Frequently Asked Questions to clarify how the extension of the deferral period in the Paycheck Protection Program Flexibility Act affected loans that were already in place when the PPPFA was enacted.

The original loans were written for the original six-month period for deferral of payments of all principal, interest and fees on PPP loans. When the PPPFA extended that period through the date that forgiveness is granted on the PPP loan as long as an application for forgiveness is made during the 10 months following end of the covered period, the key question was whether those PPP notes already signed before passage of the PPPFA had to be modified?

Life can be unfair, and the tax law even more so. In the case of Koopman, et al v. United States[1] the taxpayers found the law left them no recourse when they never received amounts on which they had previously paid Medicare taxes due to the bankruptcy of United Airlines.

In Revenue Ruling 2020-21 the IRS has announced the rates and terminal charges for noncommercial flights for the second half of 2020. These numbers may be used under IRC §1.61-21(g)(5) to determine the value of such flights on employer-provided aircraft for compensation purposes.

The Small Business Administration has issued guidance related to PPP loans when there is a change in ownership of the borrowing business.[1] The notice provides for the required procedures when there is a change in ownership.

The notice defines a change in ownership as when any of the following take place:

• At least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity,

• The PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions, or

• A PPP borrower is merged with or into another entity.[2]

This came out a few weeks ago, but since I’ve been asked to talk about it in another setting, I’ve posted the write-up of the issue here.

In Notice 2020-69[1] the IRS outlined items that will be contained in to be issued proposed regulations related to S corporations with accumulated earnings and profits impacted by IRC §§951 and 951A. The revisions are meant to address the proposed and then modified final regulations on GILTI and FDII issued by the IRS previously. The IRS’s change of direction from handling the S corporation as an entity for GILTI to treating it under an aggregate approach can lead to problems in getting shareholders the cash to pay the tax if the S corporation has accumulated earnings and profits. The Notice and eventual regulations seeks to address that issue.

Another set of final regulations[1] have been issued by the IRS on bonus depreciation under the Tax Cuts and Jobs Act (TCJA). These regulations make final, with revisions, proposed regulations issued in 2019 (REG-106808-19).

Selected items highlighted by the IRS in the preamble related to areas that received comments from the proposed regulations or were revised from what was in those regulations are discussed below.

The IRS has issued the final regulations dealing with the post-TCJA treatment of excess deductions on termination in TD 9918.[1]

Previously Reg. §1.642(h)-2 had treated excess deductions on the termination of an estate or trust as miscellaneous itemized deductions for the beneficiary. The Tax Cuts and Jobs Act (TCJA) added IRC §67(g), effective for tax years beginning in 2018, that provided individuals would no longer receive a deduction for miscellaneous itemized deductions.

In Notice 2018-61 the IRS indicated that the agency was considering whether the treatment of such items as miscellaneous itemized deductions was appropriate following the effective date of IRC §67(g). In May of 2020 the IRS released proposed regulations (REG-113295-18) that would provide that the nature of such deductions would be determined by their treatment at the trust level. The final regulations adopt the proposed regulations with some modifications.

The IRS has granted relief related to the CCH electronic filing software outage that took place on September 15, 2020.[1]

CCH suffered an outage in their online systems that began in the afternoon of October 15, 2020 and continued throughout the evening. CPAs that used their systems found themselves unable to submit tax returns electronically on the last day to timely file extended partnership income tax returns.

The Tax Court determined that Clinton Deckard did not own shares in Waterfront Fashion Week, Inc., and, as such, the corporation could not make a late S election. Mr Decker was barred from claiming losses from that corporation on his personal return.[1]

In News Release IR-2020-212[1] the IRS reminded taxpayers of the option to request an expedited letter ruling request, and that COVID-19 issues can justify asking for such expedited processing.

The news release notes that normally letter ruling requests are processed in the order received, but there is a procedure in place for requesting expedited processing:

As set forth in Rev. Proc. 2020-1, the IRS ordinarily processes requests for letter rulings in the order that they were received. A taxpayer with a compelling need to have a request processed more quickly may request expedited handling.[2]

The IRS has published a web page that contains tax information for the marijuana industry.[1] The page describes its purpose as follows:

A key component in promoting the highest degree of voluntary compliance on the part of taxpayers is helping them understand and meet their tax responsibilities while also enforcing the law with integrity and fairness to all. This article provides general guidance including frequently asked questions for taxpayers in the marijuana industry.

The IRS has released a draft of the form that will be used by self-employed individuals to claim a credit for family and sick leave that was enacted as part of the Families First Coronavirus Relief Act (FFCRA). Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals[1] is to be used by taxpayers qualifying for this credit.

You are now cleared to start filing revisions to the second quarter Form 941 if you have some to fix. The IRS has released the revised Form 941-X[1] that will allow revising Forms 941 that are impacted by provisions found in the Families First Coronavirus Relief Act and/or the CARES Act that impacted second quarter payroll. The related revised instructions to the form were also issued at the same time.[2]

On August 17 the IRS had asked employers not to use the prior version of Form 941-X to attempt to amend a second quarter 2020 Form 941 and to wait for this form, which existed in draft form on that date, to be finalized sometime in “late September.”[3]