The United States Tax Court, in Pascucci v. Commissioner, T.C. Memo. 2024-43 (Apr. 15, 2024), and subsequently the United States Court of Appeals for the Second Circuit in Pascucci v. Commissioner of Internal Revenue, No. 24-2429 (2d Cir. Nov. 12, 2025) (Summary Order), addressed the critical question of property ownership in the context of a claimed theft loss deduction stemming from the Bernard L. Madoff Ponzi scheme. The courts determined that indirect investors in variable life insurance policies, though victims of the underlying fraud, lacked the requisite property interest in the stolen funds necessary to sustain a deduction under I.R.C. § 165(c)(3).

Updated November 13 to add discussion of threshold relevancy determination.

The United States Tax Court, in Sunil S. Patel and Laurie McAnally Patel, et al. v. Commissioner of Internal Revenue, 165 T.C. No. 10 (2025), addressed the imposition of accuracy-related penalties following its determination in Patel v. Commissioner, T.C. Memo. 2024-34 (Patel II), that amounts paid to purported captive insurance companies Magellan and Plymouth, and to the reinsurer Capstone Reinsurance Co., Ltd. (Capstone), were not insurance premiums for federal income tax purposes. This Opinion specifically resolves the remaining issue: whether Petitioners (Ps) are liable for various accuracy-related penalties under I.R.C. § 6662(a), including penalties predicated on the codified economic substance doctrine under I.R.C. § 7701(o). The relevant tax years at issue are 2013, 2014, 2015, and 2016.

The Internal Revenue Service (IRS) and the Department of the Treasury have issued Rev. Proc. 2025-31 to provide a safe harbor for trusts seeking to engage in the staking of digital assets while maintaining their favorable classification as investment trusts under § 301.7701-4(c) and as grantor trusts for Federal income tax purposes. This procedure addresses the critical question of whether staking activities constitute a "business" enterprise or grant the trust a prohibited "power to vary the investment," either of which could lead to reclassification as an association taxable as a corporation.

The implementation of digital asset reporting requirements, stemming from the changes to Internal Revenue Code (IRC) §6045 enacted by the Infrastructure Investment and Jobs Act (IIJA), marks a significant operational shift for brokers. Treasury and the IRS have published final regulations requiring reporting on dispositions of digital assets in certain sale or exchange transactions, effective for transactions occurring on or after January 1, 2025, utilizing Form 1099-DA. The Internal Revenue Service (IRS) recently issued Frequently Asked Questions (FAQs) that clarify several technical nuances relevant to compliance and implementation, particularly concerning the scope of reporting, utilization of customer acquisition data, and exceptions related to transaction fees and stablecoins.

As tax professionals advising clients on charitable contributions and partnership taxation, the recent decision by the Sixth Circuit in Corning Place Ohio, LLC v. CIR, No. 25-1093, decided and filed November 5, 2025, serves as a critical reminder regarding the strict observance of timing rules, valuation standards, and documentation requirements. The court affirmed the Tax Court’s decision to disallow a significant conservation easement deduction and uphold severe penalties.

The oral arguments in Learning Resources, Inc., et al. v. Donald J. Trump, President of the United States, et al. (No. 24-1287) focused on three primary areas of legal dispute: the interpretation of the statutory text of the International Emergency Economic Powers Act (IEEPA), the applicability of constitutional doctrines like the Major Questions Doctrine (MQD) and the Nondelegation Doctrine (NDD), and the scope of the President's authority in foreign affairs and national emergencies [6:15-18, 55:7-12].

Notice 2025-62 provides crucial penalty relief specifically for taxable year 2025 regarding new information reporting mandates enacted by Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly referred to as the One, Big, Beautiful Bill Act (OBBBA). This relief addresses potential failures related to implementing the new reporting requirements for deductions related to qualified tips (new Code section 224) and qualified overtime compensation (new Code section 225). The relief targets penalties imposed under section 6721 for failure to file correct information returns and under section 6722 for failure to furnish correct payee statements.

This article examines the decision reached by the Office of Tax Appeals (OTA) in In the Matter of the Appeal of: J. Lunt, OTA Case No. 230112468, concerning a proposed assessment of additional tax, a late filing penalty, and applicable interest for the 2018 tax year. The case provides guidance regarding the respective burdens of proof borne by the Franchise Tax Board (FTB) and the taxpayer when residency and income sourcing are disputed, and an initial return was never filed. The FTB proposed an assessment totaling $12,315 in tax and a late filing penalty of $3,078.75, plus interest.

This article analyzes the standards and application of 26 U.S.C. § 6672 concerning the Trust Fund Recovery Penalty (TFRP) as determined by the United States District Court for the Eastern District of Pennsylvania in United States of America v. Kathryn S. Flaim. The court granted the Government’s Motion for Summary Judgment, finding the defendant liable for unpaid federal employment taxes totaling $204,466.54 (as of September 29, 2025). This analysis focuses on the court’s determination that the taxpayer qualified both as a "responsible person" and acted "willfully" in failing to remit trust fund taxes.

The memorandum opinion in Paul-Adams Quarry Trust, LLC, Francis L. Adams, Tax Matters Partner, v. Commissioner Of Internal Revenue, T.C. Memo. 2025-112, addresses the proper valuation of a qualified conservation contribution under Internal Revenue Code (I.R.C.) § 170(h), specifically focusing on whether the highest and best use of the property supported the substantial charitable deduction claimed, and whether accuracy-related penalties applied.

The distinction between ordinary income and capital gains remains paramount in federal taxation. Taxpayers often seek to characterize income as capital gains, which are frequently taxed at lower rates than ordinary income, such as interest. Congress enacted 26 U.S.C. § 483 in 1964 specifically to combat the practice of taxpayers converting what should be ordinary interest income into capital gain by structuring installment contracts without explicitly providing for interest payments. Section 483 ensures that if a deferred payment on a sale or exchange of property fails to provide adequate stated interest, a portion of that payment is imputed as "unstated interest" and taxed as ordinary income.

A recent decision from the United States Court of Appeals for the Third Circuit addresses the application of this statute in the context of a short-form merger settlement. In Trust Under the Trust of Charles G. Berwind Trust, F/B/O David M. Berwind, Jr., et al. v. Commissioner of Internal Revenue, the Third Circuit affirmed the Tax Court’s decision, concluding that the $191 million settlement payment received by the minority shareholder trusts (collectively, the "DB Trust") must include an imputed interest component under Section 483.

As CPAs and EAs advising taxpayers on compliance and controversy matters, understanding shifts in IRS procedural requirements is critical, especially concerning immediate assessments based on mathematical or clerical errors. The One Hundred Nineteenth Congress enacted H.R. 998, officially cited as the "Internal Revenue Service Math and Taxpayer Help Act". This legislation mandates substantial changes to the content and delivery of notices issued under Section 6213(b)(1) of the Internal Revenue Code of 1986 (the Code), requiring significantly enhanced specificity and transparency from the IRS.

As identical bills have been passed by both houses, it will become law once sent to the President so long as he signs the bill.

As tax professionals, CPAs and EAs operate under stringent ethical and legal requirements. Violations of judicial decrees, particularly permanent injunctions related to tax preparation, carry severe consequences, often resulting in findings of civil contempt and substantial monetary sanctions. The recent ruling in United States of America v. Kevin Hardy, 05-CV-3847 (KMW) (S.D.N.Y. October 28, 2025), provides a critical examination of the standards required to prove civil contempt when an individual violates a permanent injunction prohibiting future tax preparation activities.

This analysis addresses a recent ruling by the United States Bankruptcy Court for the Northern District of Mississippi in the case of In re Benjamin Douglas Morris (Case No.: 12-12886-JDW) concerning the duration of the automatic stay under 11 U.S.C. § 362(a) following the administrative closure of an individual Chapter 11 bankruptcy proceeding. The court’s decision underscores the specific termination triggers set forth in the Bankruptcy Code, even when a case is closed solely for the purpose of avoiding U.S. Trustee (UST) fees.

The United States District Court for the District of Maryland recently issued a Memorandum of Decision in United States of America v. Isaac M. Neuberger, Civil Action No. EA-22-2977 (D. Md. Oct. 23, 2025), addressing the personal liability of a corporate officer and director for a corporation’s outstanding tax debt under the Federal Priority Statute (FPS), specifically 31 U.S.C. § 3713(b). This analysis details the facts leading to the imposition of liability and the court’s technical application of the three core elements required for the United States’ claim.

This article examines the decision in Community Worship Fellowship v. United States, No. 19-352 (Fed. Cl. Oct. 23, 2025), concerning the revocation of tax-exempt status under 26 U.S.C. § 501(c)(3). This case provides essential guidance for tax professionals regarding the absolute nature of the private inurement doctrine, particularly within organizations controlled primarily by family members.

As CPAs and Enrolled Agents (EAs), understanding the standards for awarding administrative and litigation costs under 26 U.S.C. § 7430 is crucial, especially concerning the intricacies of the Qualified Offer Rule. The recent case of Crystal N. Greenwald v. United States of America, Civil Action 2:23-cv-4100 (S.D. Ohio, Oct. 23, 2025), provides a detailed examination of whether a government concession following a qualified offer constitutes a "settlement" that bars the recovery of attorney’s fees.

This article draws on the latest revisions to the Internal Revenue Service’s Frequently Asked Questions (FAQs) concerning Form 1099-K, Payment Card and Third Party Network Transactions, as detailed in Fact Sheet FS-2025-08, published in October 2025. These updated FAQs supersede the prior guidance posted in FS-2024-03. For tax professionals, understanding the finalized reporting thresholds, compliance obligations, and the nuanced guidance on reporting erroneous forms and personal item sales is critical.

It is important to note that these FAQs provide general information and have not been published in the Internal Revenue Bulletin; therefore, they will not be relied upon by the IRS to resolve a case. However, a taxpayer who reasonably and in good faith relies on this guidance will not be subject to penalties, such as a negligence penalty or other accuracy-related penalties, which impose a reasonable cause standard for relief, to the extent that such reliance results in an underpayment of tax. These FAQs were announced in IR-2025-107.

This advisory draws upon the guidance provided by the Internal Revenue Service (IRS) in its Frequently Asked Questions (FAQs) released as FS-2025-07 on October 22, 2025, announced via IR-2025-106. These FAQs specifically address the stringent compliance and limitation provisions affecting the Employee Retention Credit (ERC) as enacted by the One, Big, Beautiful Bill Act (OBBBA). While this guidance is intended to provide general information to tax professionals as expeditiously as possible, it is important to remember that these FAQs have not been published in the Internal Revenue Bulletin and will not be relied upon by the IRS to resolve a specific case; the underlying tax law controls the taxpayer’s liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs may be shielded from penalties, such as negligence or other accuracy-related penalties, to the extent such reliance results in an underpayment of tax, provided the reasonable cause standard for relief is met.

Due to a lapse in appropriations, Internal Revenue Service (IRS) operations are currently limited. Despite these limitations, the underlying tax law remains fully in effect, requiring all taxpayers—individuals, corporations, partnerships, and employers—to meet their tax obligations as normal. The IRS has published an update on the impact of the government shutdown on taxpayers and IRS services.