The IRS issued a Technical Advice Memorandum[1] that looks at whether, to put it simply, if meeting the material participation test for an activity for five straight years by using the significant participation activity (SPA) test found at Reg. §1.469-5T(a)(4) means the activity cannot be included as an SPA in year six. And the IRS concludes that answer is yes, which could cause the taxpayer to lose material participation status for other SPAs for the year in question.

In the case of Keefer v. United States, USDC ND TX,[1] a taxpayer was denied a deduction for a contribution on two separate grounds. First, the Court found that the taxpayers had failed to give away the entire asset in question, resulting in an anticipatory assignment of income and, second, the taxpayers did not obtain a proper contemporary written acknowledgment of the contribution.

In the case of United States v. Ward, USDC AK,[1] the taxpayers’ attempt to argue that some of the time period the statue for collections was suspended due to the taxpayers filing multiple times for collection relief should be ignored due to defects in those filings made by the taxpayer. The court decided the taxpayers would not be allowed to use their own mistakes to their advantage.

In the case of LaRochelle v. Commissioner, TC Summary Opinion 2022-12[1] the taxpayers argued they should not be liable for an accuracy related penalty under IRC §6662 related to their failure to report an IRA distribution when the Form 1099-R had been sent to their former, rather than current, address. The Tax Court found, in these circumstances, that there was not reasonable cause for their failure to report the distribution despite the Form 1099-R being sent to the wrong address.

The Tax Court denied relief from late filing,[1] late payment[2] and underpayment of estimated tax[3] penalties to a physician in the case of Bennett v. Commissioner.[4]

In Email Chief Counsel Advice 202226010[1] IRS counsel gave its conclusion on whether a federal tax lien (FTL) could be attached to payments made by the purchaser of a business to the seller’s former spouse to cover an alimony obligation of the seller who now faced a collection action related to a federal tax liability. This payment structure was entered as part of the taxpayer’s divorce action and was in effect prior to when the federal tax lien arose.

The IRS has issued a revised Revenue Procedure providing for a late portability election available to qualifying estates in Revenue Procedure 2022-32.[1] The procedure supersedes Revenue Procedure 2017-34 and becomes the only method by which a late election may be made for any estate that qualifies to use this procedure.

We don’t often write about criminal tax cases here on this site, but the case of United States v. VanDemark[1] discusses a taxpayer who, per the beginning of the Sixth Circuit opinion “tried to hoodwink the IRS.”[2] Of interest outside the criminal tax controversy context, he attempted to argue in his defense that he did not have to report cash deposits he received as income due to lack of “some guarantee” the business would keep the funds, an argument the appellate panel did not find persuasive given the facts of his case.

The National Taxpayer Advocate Service (TAS) has updated its criteria for accepting cases,[1] removing limitations on accepting paper-filed return cases for 2021 referred from Congressional offices.

The Fifth Circuit Court of Appeals sustained the Tax Court’s decision[1] denying a taxpayer a charitable contribution deduction in the case of Izen v. Commissioner,[2] finding that a taxpayer must strictly follow the documentation requirements set out by Congress in the statute to obtain a charitable contribution deduction.

This case was covered back when the Tax Court released its decision in 2017 on our tax update webpage[3] and involved a taxpayer’s attempt to claim a deduction for a donation for an aircraft on an amended income tax return.

While the IRS posted a news release[1] announcing the agency had hit a key milestone in dealing with paper return filings that have been backlogged since the pandemic began, the National Taxpayer Advocate issued a report[2] a day later showing the agency had lost ground over the past year in attempting to catch up on dealing with such returns.

The US Supreme Court has agreed to hear the taxpayer’s appeal of the Fifth Circuit Court of Appeals decision in the case of Bittner v. United States.[1] The key issue is whether, in assessing penalties for failing to report interests in foreign accounts on an annual FBAR, the penalties apply on a per-account or per-reporting form basis, a matter which was decided differently in 2021 cases heard by the Fifth and Ninth Circuits.

The IRS in News Release IR-2022-127[1] announced they have made available automated voice bot options to assist taxpayers in verifying their identities and setting up payment plans.

The release begins:

The Internal Revenue Service today announced expanded voice bot options to help eligible taxpayers easily verify their identity to set up or modify a payment plan while avoiding long wait times.

“This is part of a wider effort at the IRS to help improve the experience of taxpayers,” said IRS Commissioner Chuck Rettig. “We continue to look for ways to better assist taxpayers, and that includes helping people avoid waiting on hold or having to make a second phone call to get what they need. The expanded voice bots are another example of how technology can help the IRS provide better service to taxpayers.”[2]

The Tax Court found that clothes purchased by a nurse to meet an employer’s requirements that she be dressed in comfortable clothes and in a manner that reflected her profession as a nurse qualified as a deductible business expense in the case of Romana v. Commissioner, TC Summary Opinion 2022-9.[1]

In the case of Chavis v. Commissioner,[1] 158 T.C. No. 8, Angela Chavis argued, in part, that she should not be liable to pay a portion of a trust fund penalty under IRC §6672 because she should qualify for innocent spouse relief. The Tax Court denied her requested relief, finding that the innocent spouse provisions only apply to amounts due on joint income tax returns.

The Tax Court had to look at a taxpayer’s attempt to claim a deduction for interest paid on a home equity credit line by the application of funds when the property was foreclosed in the case of Howland v. Commissioner, TC Memo 2022-60.[1] And the Tax Court found that the answer isn’t quite as clear as you might expect at first glance.

Not understanding and following proper procedures can come back to haunt taxpayers, even if they do something that they would have been allowed to do if they had followed the proper procedures. In PLR 202223011[1] the IRS denied the taxpayer’s request to file a Form 3115 for an overall accounting method change from the cash to accrual basis it had made without asking for permission years earlier.

On May 13, eighteen members of Congress wrote the IRS asking for the agency to increase mileage rates in recognition of the rapid rise in the price of gasoline since the beginning of 2022.[1] The letter pointed out that the IRS had previously raised the rate mid-year in 2011, noting the increases this year are more substantial than those that prompted the increase in rates in 2011.

The IRS has now decided to take action to increase some mileage rates by 4 cents per mile effective July 1, announcing the change to be in effect for the last six months of 2022 in Announcement 2022-13.[2]

The AICPA sent a letter[1] to IRS Associate Chief Counsel Holly Porter (Passthroughs and Special Industries) with comments regarding the need for guidance on research and experimental expenditures under IRC §174.

The Tax Cuts and Jobs Act revised IRC §174 so that, effective for tax years beginning after December 31, 2021, specified research or experimental expenditures are no longer currently deductible by a business, but rather must be amortized over 5 years for domestic research and 15 years for foreign research.

In PLR 202221006[1] a corporation whose shareholders were negotiating a sale of their stock to an unrelated third party asked the IRS to rule that the business is a qualified trade or business under IRC §1202(e)(3).