Tax Law News

District Court held that an estate can make a special use valuation election under section 2032A at any time if made on the first filed tax return pursuant to temporary treasury regulation section 22.0(b)United States v. Parks, No. 21-cv-12676, 2022 U.S. Dist. LEXIS 210055 (E.D. Mich. Nov. 18, 2022)11/18/2022District Court held that an estate can make a special use valuation election under section 2032A at any time if made on the first filed tax return pursuant to temporary treasury regulation section 22.0(b). The court found that the IRS had not formally revoked regulation section 22.0 (b), and then a subsequent permanent regulation didn't fully address the question.
No interest is payable on a deposit of tax which the IRS failed to apply as a payment of tax as requested by the taxpayer, resulting in loss of $11 million in interest.Dillon Tr. Co. LLC v. United States, No. 17-1898T, 2022 U.S. Claims LEXIS 2575 (Fed. Cl. Nov. 10, 2022)11/10/2022The Court of Federal claims held interest is not earned on a deposit of federal tax which the IRS did not apply as a payment of tax even though the taxpayer asked the IRS to apply the deposit is a payment of tax.
Tax Court grants Equitable innocent spouse relief even though he did have knowledge of the income that gave rise to the deficiency in this caseParker v. Commissioner, No. 6054-19, 2022 Tax Ct. Memo LEXIS 112, T.C. Memo 2022-110 (T.C. Nov. 15, 2022)11/15/2022Petitioner's poor physical health has left him disabled to the point that he is unable to work. His only source of income is Social Security disability payments, which allow him to meet his monthly expenses, but little else. Payment of the deficiency would create financial hardship. Although he did have knowledge of the income that gave rise to the deficiency in this case, petitioner credibly testified that he made a good-faith effort, despite confusing advice and reporting documents, to comply with the tax law but erroneously believed that the settlement funds were not taxable. He has remained in compliance with the federal income tax laws in subsequent years. On consideration of all of the relevant facts and circumstances, the Court concludes that petitioner is entitled to complete relief.
Lying, tax cheating, convicted felon tax return preparer believed by jury in client's criminal tax trialUnited States v. Burdett, No. 20-139, 2022 U.S. Dist. LEXIS 206122 (E.D. La. Nov. 14, 2022)11/14/2022District court deny motion to set aside jury verdict holding that jury was entitled to believe testimony of a tax return preparer who was convicted of tax fraud and lying to the IRS, and who falsely held himself out to be a CPA.
District courts applies four factors in favor of IRS sale of property due to tax liabilities of just one-joint ownerUnited States v. Yennie, No. 18-cv-3268 (WMW/ECW), 2022 U.S. Dist. LEXIS 204689 (D. Minn. Nov. 10, 2022)11/10/2022A district court held that the four factors used to determine if the IRS should be allowed to sell jointly owned property for the tax liability of one joint owner favored the IRS
Document dump insufficient to prove entitlement to NOLsAmos v CIR, T.C. Memo. 2022-10911/10/2022The Tax Court held that uncategorized, unexplained documents provided to the court are not sufficient to carry the taxpayer's burden of proof with regard to the claimed carry-forward of NOL's, and that prior years' tax returns are not sufficient by themselves to carry the burden of proving entitlement to NOL's and carry-forwards in those years.
Tax Court holds IRS violated APA when it issued notice 2017-10 regarding listed transactions for conservation easementsGreen Valley Investors v. Comm'r, 2022 U.S. Tax Ct. LEXIS 64311/09/2022The Tax Court ruled that the IRS is prohibited from imposing listed transaction penalties under 6662A because Notice 2017-10 was issued without notice and comment as required under the APA. The government failed to convince the court that Congress expressly authorized the IRS to identify a syndicated conservation easement transaction as a listed transaction without the APA's notice-and-comment procedures, as it did in Notice 2017-10.
Government need not prove that taxpayers did not authorize preparer to file false returns United States v. Charles, CRIMINAL ACTION NO. 19-63, 2022 U.S. Dist. LEXIS 20472211/10/2022Government did not have to prove names were stolen or that taxpayers approved filing of false returns in prosecution for identity theft and conspiracy to defraud the United States
The IRS cannot use a Judicial Ethics exhibit in a tax evasion caseUnited States v. Trahan, CRIMINAL ACTION CASE NO. 22-2 SECTION: "G", 2022 U.S. Dist. LEXIS 204715The District Court held that the IRS could not use an exhibit about judicial ethics in a tax evasion case because it would lead the jury to believe that judges are held to a higher standard of conduct and the general public and lawyers for purposes of filing tax returns. Defendant's tax obligations arise from her duty as a citizen, not as a judge. The government concedes that "the legal significance of honestly reporting income is established in part through the jurats on the tax returns themselves."14Link to the text of the note The fact that Defendant was also reminded of this obligation in her judicial training is of little, if any, relevance to this case.
Defendant can introduce evidence that the government did not institute civil audit or collection activities with regard to a tax liabilityUnited States v. Trahan, CRIMINAL ACTION CASE NO. 22-2 SECTION: "G", 2022 U.S. Dist. LEXIS 20296411/08/2022The District Court denied a motion in limine by the government to preclude the defendant from offering evidence of the government's failure to pursue her civilly with regard another the tax liability, reasoning that if the government wants to introduce evidence of other bad acts then the defendant is entitled to complete the story by showing the IRS never instituted civil audit or collection activities with regard to those tax liabilities.
District Court allows IRS to levy on jointly owned personal residence while innocent spouse application pendingUnited States v. Hupp, No. 20-cv-3110, 2022 U.S. Dist. LEXIS 203244 (DC C.D., Il)11/08/2022The IRS and assess penalties against a husband and wife for a joint return and was seeking court permission to levy on the personal residence of the taxpayers. The wife had filed an innocent spouse claim which was still pending at the time of this action. The court held that the IRS could levy and sell the jointly held residence but would have to hold the wife share of the proceeds in trust pending the outcome of the innocent spouse application.
Expansion of Program for Approving Certain Retirement Plans (Rev. Proc. 2022-40; IR-2022-196)Rev. Proc. 2022-40; IR-2022-19611/08/2022The IRS will now allow 403 (b) retirement plans, which are used by certain public schools, churches and charities, to use the same individually designed retirement plan determination letter program currently used by qualified retirement plans.
Extensive disclosure ordered in criminal fine collection caseUSA v. Liechti, 8:11CR39311/07/2022District court orders examination of defendant under oath concerning defendant's property and defendant's ability and means to make payments toward and/or to satisfy defendant's criminal restitution judgment, including a long list of financial documents to be provided.
Hobby loss rules apply to solar creditsOlsen v. Comm'r, 2022 U.S. App. LEXIS 30665, No. 21-9005 (10th Cir)11/04/2022Tenth Circuit upholds Tax Court holding that a taxpayer may claim a solar credit only if the property is used in the trade or business or held for the production of income, and applying section 183 against the taxpayer.
Attorney fees may be awarded if IRS answer to Tax Court petition is unreasonable based on information in the administrative file.Jacobs v. Comm'r of Internal Revenue, 2022 U.S. App. LEXIS 30690, No. 21-7121111/04/2022The Ninth Circuit remanded an attorney fees case to the Tax Court because the Tax Court did not consider whether the answer filed by the IRS was unreasonable given the extensive documentation in the administrative file.
Interest in closed year added to self dealing amount for 10% excise tax under IRC 4941CCA 20224300810/28/2022Chief Counsel has stated that interest that accrued during a closed tax years is added to the outstanding balance of a loan for purposes of imposing the 10% excise tax on self dealing under section 4941
Third Circuit affirms that the statute of limitations on collection is tolled by a petition for certiorariUnited States v. Charles J. Weiss; No. 21-159211/02/2022The Third Circuit affirmed a district court's grant of summary judgment to the government in a suit to collect an individual’s taxes, holding that the term “appeals therein” in section 6330(e)(1) includes a petition for a writ of certiorari filed in the Supreme Court, which tolled the statute of limitations for collection and made the government’s suit timely.
IRS Issues Fact Sheet on Hobby vs. Business Income FS-2022-3810/24/2022The fact sheet list the factors to be consider to distinguish between a hobby or a business for hobby loss rules under Section 183.
Chief Counsel rules that taxpayers needed to disclose noneconomic substance transactions on Form 8275IRS Chief Counsel Advice 20224401011/04/2022The IRS Chief Counsel ruled that taxpayers needed to disclose noneconomic substance transactions on Form 8275, Disclosure Statement, or Form 8275-R, Regulation Disclosure Statement, to avoid the 40 percent penalty under Code Sec. 6662(i). Notice 2010-62, I.R.B. 2010-40, further requires taxpayers to disclose the transaction both on Form 8886, Reportable Transaction Disclosure Statement and Form 8275. This is applicable for reportable transactions under Code Sec. 6011 and transactions lacking economic substance under Code Sec. 6662(b)(6).
The Independent Office of Appeals released its 2023 focus guideIR-2022-19511/04/2022The IRS Independent Office of Appeals has released its focus guide for the year 2023, with information regarding the steps taken to expand communications with external stakeholders to improve taxpayer service and their access to IRS Appeals, with the aim of promoting transparency and resolution of tax disputes in a fair and impartial manner without the need for litigation.
IRS Criminal Investigations Touts Conviction Rate in Annual ReportIRS Publication 3583 (Rev. 11-2022)11/07/2022The Internal Revenue Service’s Criminal Investigations division earned convictions in 90.6 percent of its cases in fiscal year 2022, according to the division’s annual report. The report notes that of the 1,837 cases referred for prosecution, 1,564 cases resulted in convictions. CI identified $32.6 billion in financial crimes, $5.7 billion of which were classified as tax fraud.