The estate of actor James Caan contended that he had accurately rolled over the entire balance of an IRA from UBS to Merrill Lynch. The IRS largely concurred with this stance, save for the transfer of an interest in a non-publicly traded hedge fund. This asset encountered numerous challenges during its transfer from UBS to Merrill Lynch. Ultimately, the hedge fund interest was liquidated, and the proceeds were transferred to Merrill Lynch—nearly a year after UBS reported the fund’s distribution to Mr. Caan.

In Estate of Caan v. Commissioner,[1] the estate posited two potential explanations: either UBS never actually disbursed the hedge fund from the IRA, or the IRS unjustly declined to grant late rollover relief through a private letter ruling request. The Tax Court did not concur with either proposition. It determined that UBS had indeed disbursed the amount in 2015. Moreover, the IRS’s denial of relief was deemed appropriate since the exact asset distributed from the UBS IRA was not the one transferred to the new Merrill Lynch IRA, thus contravening the stipulations of IRC §408(d)(3)(A)(i).

The Internal Revenue Service (IRS) has provided details about its program allowing employers to voluntarily withdraw their refund claims for the Employee Retention Tax Credit (ERC). This provision applies to those who have not yet received the refund or, if received, have not cashed the check.[1]

The Financial Crimes Enforcement Network (FinCEN) has issued a proposed rule[1] extending the deadline for covered entities formed in 2024 to file their initial beneficial ownership information reports under the Corporate Transparency Act. The new deadline is 90 days after formation, an increase from the previous 30-day requirement.

Concurrently, the agency issued a news release[2] detailing the new proposed rule.

The Financial Crimes Enforcement Network (FinCEN) has published a 56-page Small Entity Compliance Guide[1] to aid small businesses in adhering to the beneficial ownership information reporting requirements introduced by the Corporate Transparency Act (31 U.S.C. 5336).

Once again, a taxpayer has learned the critical importance of securing evidence that adheres to the regulations set forth in IRC §7502. In the case of Wrhel v. United States, No. 3:21-cv-00424, U.S. District Court for the Western District of Wisconsin,[1] the IRS contended that the taxpayer's 2016 return was not filed within the requisite time frame, thereby disqualifying him from receiving a refund for an overpayment of taxes for that year.

In Program Manager Technical Advice 2023-003,[1] the IRS discussed scenarios in which a payor receives a CP2100/2100A notice concerning identification numbers. The memorandum explores whether the payor is liable for backup withholding amounts that were not withheld prior to receiving the notice, under two different circumstances, assuming the payor promptly obtains the proper ID number from the vendor.

The IRS announced a moratorium on processing new Employee Retention Credit (ERC) claims through the end of 2022, as specified in News Release IR-2023-169.[1] According to the IRS, the delay aims to protect honest small business owners from scams. Additionally, the agency has developed an ERC checklist[2] to assist employers in determining the legitimacy of the claims they are considering filing. An updated document highlighting red flags for ERC claims has also been made available in News Release IR-2023-170.[3]

In Johnson v. Commissioner,[1] the taxpayer conceded multiple errors on the returns in question but opted for litigation solely to contest the 20% accuracy-related penalty under IRC §6662(a). The taxpayer argued that the penalty was unwarranted due to their reasonable reliance on the advice of the CPA who prepared the returns, which led to the erroneous positions taken.

Unfortunately for the taxpayer, his extensive experience in the real estate industry, spanning over half a century, counted against him in court. The Court concluded that, had he reviewed the returns before filing, he should have identified most of these errors. Furthermore, he failed to demonstrate that the CPA had actually advised him on any of the disputed positions.

Ending a prolonged wait for guidance on the revisions made to IRC §174 by the Tax Cuts and Jobs Act in 2017, which took effect in 2022, the IRS has released Notice 2023-63.[1] This Notice provides guidance related to the newly required amortization of research and experimentation costs.

The IRS issued a news release (IR-2023-157)[1] reminding most businesses that, starting January 1, 2024, they will be required to file Form 8300, “Reporting Cash Payments Over $10,000,” electronically with the Financial Crimes Enforcement Network (FinCEN). This requirement comes as final regulations[2] mandating the electronic filing of most information returns take effect.

In Chief Counsel Advice 202335014,[1] the IRS examined whether an Electing Small Business Trust (ESBT) can carry a net operating loss—attributable to net losses passed through from the S corporation—to a later year, or whether the loss simply goes unused indefinitely.

The IRS has issued Notice 2023-56,[1] providing guidance on state payments made in the 2023 tax year. This guidance addresses payments from various states to residents, paralleling similar payments made by certain states in 2022, which were previously covered in IRS News Release IR-2023-23.[2]

The IRS has released proposed regulations[1] to implement information reporting requirements for digital assets by brokers and certain other parties involved in arranging sales and/or exchanges of these assets. Originally introduced by the Infrastructure Investment and Jobs Act of 2021 and scheduled to take effect in 2023, the proposed regulations postpone the reporting obligations to cover transactions occurring in 2025. The IRS and customers will receive a newly announced Form 1099-DA in early 2026.

The IRS concurrently issued a news release[2] when the proposed regulations were published, providing a summary of the key points found in the regulations.

The IRS has published the cost-of-living adjustments for the 2024 premium tax credit in Revenue Procedure 2023-29.[1] While the applicable percentage table remains unchanged for 2024, owing to provisions in the American Rescue Plan Act that temporarily fix these values, the required contribution percentage continues to be adjusted for inflation annually.

One of the modifications introduced by the SECURE 2.0 Act was the stipulation that, starting in 2024, catch-up contributions to employer retirement plans for certain high-earning individuals must be made to designated Roth accounts within the retirement plan. Additionally, there was apprehension that this amendment might have unintentionally eliminated the option for individuals at all income levels to make such catch-up contributions. Notice 2023-62[1] from the IRS offers interim guidance and relief concerning these provisions.

Credit unions that meet the necessary criteria can claim the employee retention credit (ERC) for wages paid in 2021. However, they are ineligible for such claims for wages paid in 2020, as outlined in an IRS Chief Counsel Advice (CCA 202333001).[1]

Promoters of questionable tax schemes often distribute a “legal analysis” to potential victims. While these analyses might sound authoritative, they can sometimes resemble the output of ChatGPT in full hallucination mode. These analyses are typically designed to sound sufficiently authoritative to intimidate any tax professional who isn’t well-versed in the specific area of taxation being addressed.

In AM 2023-006,[1] the IRS targets a marketed trust tax structure. This structure aims to shelter nearly all income from assets transferred to the trust from federal income tax. The “legal analysis” supporting this program leans heavily on conflating the various forms of “income” associated with such trusts. It incorrectly treats distributable net income (DNI), taxable income, and accounting income as if they were synonymous concepts.

In Sinopoli v. Commissioner,[1] the taxpayers sought to leverage IRC 280A(g), a provision allowing individuals to rent out their personal residences for up to 14 days annually without declaring the income. The taxpayer's S corporation reported over $290,000 in rental expenses over a three-year span, purportedly for renting the shareholders' homes for monthly meetings. However, the Tax Court significantly curtailed the allowable deduction.

A taxpayer with property secured by a nonrecourse loan, who returns said property to the lender via foreclosure, deems the entire loan balance as the sales price for income tax purposes. This holds true even if the property’s fair market value is below the loan balance. But what happens when the lender consents to a payment less than the loan’s face value, facilitating a short sale by aligning with the buyer’s offer? Does this debt reduction equate to canceled debt income, or does it remain part of the sales price? Why does the distinction matter?

In the case of Parker v. Commissioner,[1] the Tax Court examined such a scenario. Their conclusion: the debt reduction should be recognized by the taxpayer as part of the sales price, not as canceled debt income.

Although the IRS has recently focused its cautionary statements on the employee retention tax credit, News Release IR-2023-144[1] saw the agency shift its focus to compliance concerns related to employee stock ownership plans (ESOPs).