Taxation of International Investment Losses: Disallowance of a Theft Loss Deduction Under Section 165

The United States Tax Court, in Potts v. Commissioner, T.C. Memo. 2025-108, addressed a deficiency of $431,691 and an accuracy-related penalty of $86,338 under Section 6662(a) determined by the Commissioner of Internal Revenue (Respondent) against petitioners Craig K. and Kristen H. Potts for the 2014 taxable year. The predominant issue concerned the disallowance of a $2 million theft loss deduction claimed by the petitioners pursuant to Section 165.

Read More

IRS E-File Suspension Authority: An Examination of Property Interests and Administrative Procedure

This article addresses the recent Memorandum & Order issued by the United States District Court for the Eastern District of New York in Zirin Tax Company, Inc. v. United States of America, 24-cv-01511 (NCM) (MMH), dated October 15, 2025. This case involved a tax preparer challenging the Internal Revenue Service’s (IRS) decision to suspend the preparer’s Electronic Filing Identification Numbers (EFINs) and subsequent expulsion from the e-file program.

Read More

Operational Test Failure: Commercial Activities and Private Benefit Preclude Section 501(c)(3) Exemption

This article reviews the findings of the United States Tax Court in Coaches 101 a NJ Nonprofit, v. Commissioner, T.C. Memo. 2025-106 (Oct. 15, 2025), a case focused on the denial of tax-exempt status under Internal Revenue Code (I.R.C.) Section 501(c)(3). The Court, in granting the Commissioner’s Motion for Summary Judgment, underscored that organizations must satisfy both the organizational and operational tests, emphasizing that a single substantial nonexempt purpose or evidence of private inurement is fatal to qualification.

Read More

Lawsuit Settlement Enforcement and Tax Disclosure Obligations

As tax professionals, we frequently advise clients regarding the taxability and reporting requirements associated with litigation settlements. The recent Report and Recommendation in Barbara Rumain v. Gregoris Motors, Inc., No. 17-CV-7251 (DG) (TAM) from the United States District Court for the Eastern District of New York provides a relevant illustration of the contractual enforceability of settlement agreements, particularly when a dispute arises post-agreement concerning mandatory IRS reporting via Form 1099.

Read More

Employee Retention Credit Refunds in Bankruptcy: Property of the Estate Dispute

This article examines the decision of the United States Bankruptcy Court for the Southern District of New York in Stephen S. Gray v. The Williamsburg Hotel BK, LLC, Toby Moskovits, and Michael Lichtenstein, Adversary Proceeding No. 22-07049, which addressed whether Employee Retention Tax Credit (ERTC) refunds claimed and received by a non-debtor manager constitute property of the Debtor’s estate and must be turned over to the Liquidation Trustee.

Read More

The Concrete Injury Requirement in ERTC Consultant Litigation: An Analysis of Greenway Equipment Sales, Inc. v. ERC Specialists, LLC

This analysis examines the United States District Court for the District of Utah’s Memorandum Decision and Order in Greenway Equipment Sales, Inc. v. ERC Specialists, LLC, et al. (Case No. 2:24-CV-773-DAK-DBP), focusing on the court’s assessment of Article III standing in a lawsuit stemming from the utilization of Employee Retention Tax Credit (ERTC) consulting services. This case provides insight for tax professionals regarding the pleading requirements for damages claims against third-party promoters, particularly when the underlying tax credit results in a net positive financial outcome for the taxpayer.

Read More

2026 Inflation Adjustments for Tax Professionals: Revenue Procedure 2025-32 Analysis

The Internal Revenue Service (IRS) has issued Revenue Procedure 2025-32, which modifies prior guidance (Rev. Proc. 2024-40) to incorporate statutory changes made by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly known as the One, Big, Beautiful Bill Act (OBBBA). This Revenue Procedure sets forth the inflation-adjusted items pertinent to the 2026 taxable year for various provisions of the Internal Revenue Code (Code), adjustments which are generally determined by reference to Code Section 1(f).

This document details the key adjustments applicable for the 2026 taxable year, citing the specific Code sections and corresponding Revenue Procedure sections where the adjusted amounts are located. Tax professionals should note that unless otherwise specified, all references to "section" or "§" refer to provisions of the Internal Revenue Code.

Read More

IRS Contingency Planning: Operational Impact on Tax Practice and Filing Season Preparedness

This overview is designed for tax professionals, including CPAs and Enrolled Agents (EAs), providing a technical summary of the Internal Revenue Service’s Fiscal Year 2026 Lapse in Appropriations Contingency Plan. The plan outlines which essential activities will continue during a lapse, starting October 8, 2025, through April 30, 2026, encompassing the critical Tax Year 2026 filing season period.

Read More

Timeliness and the Deed-in-Lieu: A Review of Cancellation-of-Indebtedness Income Timing and the Variance Doctrine

When advising clients on complex debt relief transactions, it is crucial to understand not only the substantive law governing the timing of income recognition but also the procedural prerequisites for challenging IRS determinations. The recent Summary Order issued by the United States Court of Appeals for the Second Circuit in Romeo Salta, Jr., Phyllis Polega v. United States of America, 24-2700-cv (Oct. 6, 2025), affirmed the District Court’s finding regarding the proper tax year for cancellation-of-indebtedness (COI) income and provided a stark reminder of the binding nature of the doctrine of variance.

Read More

Tax Exemption Denial for a Gated Community HOA by the Tax Court

This article examines the findings of the United States Tax Court in Mira Vista Homeowners Association, Inc. v. Commissioner of Internal Revenue, T.C. Memo. 2025-102, which addressed a homeowner association’s denial of tax-exempt status under Internal Revenue Code (I.R.C.) § 501(c)(4). The petitioner, Mira Vista Homeowners Association, Inc. (the Association), sought a declaration that the Commissioner’s final adverse determination, issued on April 6, 2022, was erroneous.

Read More

Supervisory Approval, Reasoned Decision Making, and the Limits of APA Review in Tax Court

As tax professionals, we understand the critical procedural requirement of I.R.C. § 6751(b)(1) regarding supervisory approval of penalties. The recent Tax Court opinion in Computer Sciences Corporation v. Commissioner, 165 T.C. No. 8 (Oct. 6, 2025) provides essential guidance on the procedural depth required for this approval, specifically addressing arguments that the Administrative Procedure Act (APA) mandates "reasoned decision making" beyond a timely written signature.

Read More

IRS Revenue Ruling 2025-20: Updated SIFL Rates for Noncommercial Employer-Provided Flights

The Internal Revenue Service (IRS) has issued Revenue Ruling 2025-20 to provide the updated terminal charge and Standard Industry Fare Level (SIFL) mileage rates for valuing noncommercial flights on employer-provided aircraft. This guidance is crucial for tax professionals advising clients on the taxation of fringe benefits under section 61 of the Internal Revenue Code. The Department of Transportation (DOT) calculates these rates, which are reviewed on a semi-annual basis, necessitating periodic updates from the IRS.

Read More

A Tale of Two Opinions: The Tax Court on Substantiation, Reasonable Cause, and Penalties in Green

On October 2, 2025, the U.S. Tax Court released two significant opinions in the consolidated cases involving the shareholders of Hobby Lobby Stores, Inc. (The David and Barbara Green 1993 Dynasty Trust, et al. v. Commissioner). The first, a reviewed opinion by the full court (Green 1993 Dynasty Trust v. Commissioner, 165 T.C. No. 7), addresses complex substantiation issues for noncash charitable contributions and the application of various Code sections governing deductions for trusts. The second, a memorandum opinion (Green 1993 Dynasty Trust v. Commissioner, T.C. Memo. 2025-100), focuses on the procedural requirements for penalty assessments under I.R.C. § 6751(b) and the reasonable cause defense for valuation misstatement penalties.

Read More

District Court Finds IRS Standards for § 501(c)(4) Status Unconstitutionally Vague

In a significant ruling for nonprofit advocacy organizations, the U.S. District Court for the District of Columbia has held that the standards applied by the Internal Revenue Service to determine eligibility for § 501(c)(4) tax-exempt status are unconstitutionally vague. In Freedom Path, Inc. v. Internal Revenue Service, et al., (USDC DC Case No. 20-cv-1349 (JMC)), the court granted partial summary judgment to the plaintiff, finding that both the Treasury Regulation and the IRS Revenue Ruling used to deny its application transgress the heightened vagueness standard applicable to civil regulations affecting First Amendment speech. However, the court stopped short of granting Freedom Path § 501(c)(4) status, finding that neither party had proposed a constitutionally permissible alternative standard grounded in the existing statutory and regulatory framework.

Read More

Eighth Circuit Reverses Tax Court in 3M, Restricting § 482 Allocations of Blocked Foreign Income

The Eighth Circuit Court of Appeals, in 3M Company, and Subsidiaries v. Commissioner of Internal Revenue, has reversed a closely divided U.S. Tax Court, holding that the Internal Revenue Service (IRS) lacks the authority under Internal Revenue Code (IRC) § 482 to allocate royalty income to a U.S. parent company that its foreign subsidiary was legally prohibited from paying under foreign law. This significant decision, one of the first to apply the Supreme Court’s holding in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), reaffirms the "dominion and control" standard established in Commissioner v. First Security Bank of Utah, N.A., 405 U.S. 394 (1972).

Read More

Final Regulations Streamline Interest Capitalization for Property Improvements

On October 2, 2025, the Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations (TD 10034) that significantly alter the interest capitalization rules under Internal Revenue Code (IRC) § 263A(f) for improvements to designated property. The regulations primarily focus on eliminating the complex "associated property rule," updating the definition of an "improvement," and clarifying the treatment of "mid-production purchases". This article provides a technical overview of these changes for tax practitioners.

Read More

IRS Issues Notice 2025-53, Extending Tax Relief for Those Affected by Terroristic Action in Israel

The Department of the Treasury and the Internal Revenue Service (IRS) have issued Notice 2025-53, providing another round of tax relief under § 7508A of the Internal Revenue Code for individuals and businesses affected by the ongoing terroristic action in the State of Israel. This notice extends previously granted postponements and establishes a new relief period, offering crucial deadline extensions for a wide range of tax-related acts. For practitioners with clients impacted by these events, understanding the legal authority, scope of relief, and interaction with prior notices is essential.

Read More

IRS Releases Additional Interim Guidance on the Corporate Alternative Minimum Tax

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) have issued two significant pieces of interim guidance, Notice 2025-46 and Notice 2025-49, addressing the Corporate Alternative Minimum Tax (CAMT). This guidance responds to numerous comments received on the proposed regulations (REG-112129-23) issued in September 2024 and is intended to reduce compliance burdens and provide clarity on complex areas of the CAMT. The forthcoming proposed regulations are expected to incorporate rules similar to this interim guidance, on which taxpayers may rely immediately.

Read More