Tax News and Views Derailed Deduction Roundup

February 6, 2020

Another Conservation Easement Derailed. The IRS is at war with marketed conservation easement shelters. The Tax Court shot down a $16 million conservation easement deduction in Railroad Holdings, LLC.

In a conservation easement, the taxpayer keeps title to a property but gives up certain rights, such as the right to build on the land, in perpetuity to a conservation organization. The IRS has gotten skilled at identifying ways taxpayers try to fudge the “perpetuity” requirement. In this case, the Tax Court determined that provisions governing the proceeds of any sale of the easement by the conservation organization were improper, causing the entire deduction to fail.

Non-cash charitable deductions of property other than publicly traded securities have to meet a list of requirements. If the value exceeds $5,000, a qualified appraisal is required. In all cases, you need to have the charity properly document the donation for the donor. Everything has to be properly reported on the tax return.

Appreciated property donations remain a powerful tax planning tool for charity-minded taxpayers. But if you don’t do everything right, like this easement donor, you might find yourself with nothing but the warm feeling of your donation to show for it.

Cite: Railroad Holdings LLC et al. v. Commissioner; T.C. Memo. 2020-22


IRS Collections Staff Up Nearly 50 Percent by Year’s End - William Hoffman, Tax Notes ($):

The IRS expects to finish hiring an additional 850 collections specialists in March, and up to 1,000 temporary phone assistors for the filing season.

 Almost one-quarter of the new collections specialists will be paid for from proceeds gathered by the IRS’s private tax debt collection program, noted Darren Guillot, deputy commissioner for collection and operations support, IRS Small Business/Self-Employed Division, during a press call February 5.

Eide Bailly has specialists in collection issues.


Free File Underused and Overcomplicated, Inspector General Reports - William Hoffman, Tax Notes ($). "More than 14 million taxpayers may have paid for tax return preparation in 2019 despite being eligible for free services through the IRS’s Free File program." Link to Treasury Inspector General report here.

Graev and the Reportable Transaction Penalty - Keith Fogg, Proceduraly Taxing. "That bright line occurs with the sending of the 30-day letter.  At the time the IRS sent that letter it lacked the approval of the revenue agent’s immediate supervisor.  Therefore, the penalty here fails."

Tax ID theft victim? Get a copy of the fraudulent return filed in your name - Kay Bell, Don't Mess With Taxes. "But there are some steps all of us can take to safeguard our personal information and prevent tax identity theft."

I would add, never send tax documents through unsecured e-mail.


How the Puerto Rico Disaster Package Targets Relief but Creates Tax Complexity - Taylor LaJoie, Tax Policy Blog. "As we’ve written before, the paradox of employing tax policy as an all-purpose tool is that the more targeted the relief that’s dispensed, the worse the tax system becomes overall, in terms of complexity and how much it distorts behavior in the marketplace. Though well-intentioned, targeted tax relief violates principles of sound tax policy and makes the tax system worse.'

Taxing (or Not Taxing) Services is Wrong Focus - How to Improve Sales Tax - Annette Nellen, 21st Century Taxation. "A simpler approach is possible and is really part of a proper sales tax system. This approach is that businesses should not pay sales tax on any of their purchases; only the final consumer should pay sales tax."

Despite Trump’s Claims, It Is Hard To See Much Economic Impact Two Years After Passage Of The Tax Cuts And Jobs Act - Howard Gleckman and Aravind Boddupalli, TaxVox.

Reviewing The Democratic Candidates’ Tax Plans: Michael Bloomberg - Tony Nitti, Forbes. "As anticipated, Bloomberg’s plan is significantly more moderate than those published by the majority of the Democratic field."


This should be a story from the Isle of Man. (Renu Zaretsky, Tax Policy Center):

After 92 years, wives on the island of Jersey can talk to tax authorities without their spouses’ permission. Jersey has its own fiscal system, independent from Britain, and is a tax haven. But under a 1928 tax law only husbands in heterosexual marriages can pay taxes. Wives’ earnings are considered part of their husbands’ income, and wives needed their husband’s permission to be treated separately or even discuss finances with the tax office. When Jersey legalized civil unions and same-sex marriages, it amended the 1928 law to allow the older partner to take the role of “husband” and the younger partner to be the “wife.” Lawmakers on Jersey now have repealed the law. Married couples and civil partners will enjoy full tax filing (and talking) equality in 2022.

I suppose that if a wife’s income belongs to her husband, he should at least have to deal with the tax people.

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