June 29, 2020
Economic Analysis: So Far, 133 Companies Report Over $5 Billion in CARES Act NOL Refunds - Martin Sullivan, Tax Notes ($). "Because of the pandemic, the extent and magnitude of tax losses will be much larger in 2020 than in earlier years."
Tomorrow is the last day to file "quick refund" claims for 2018 losses on Form 1045 (individuals) and 1139 (corporations). Details here.
Interesting development: IRS to add interest amount to late-issued tax refunds - Kay Bell, Don't Mess With Taxes. "The IRS this week announced this week that it will be paying a 5 percent annual interest rate on refunds issued between April 15 and June 30. Since the IRS adjusts its interest earning and collection rates quarterly, refunds issued between July 1 and Sept. 30 will earn an added 3 percent annual rate."
Lesson From The Tax Court: Cheshire Cat Jurisdiction Over Passport Revocation Petitions - Bryan Camp, TaxProf Blog:
Congress keeps expanding the Tax Court’s subject matter jurisdiction. A recent expansion came in 2015 in the cutesy-cutesy named Fixing America’s Surface Transportation Act (FAST Act, get it?), 129 Stat. 1312. There Congress created §7345 as a revenue offset. That new section authorizes the IRS to periodically give lists of seriously delinquent taxpayers to the State Department, who is then supposed to deny their passport applications or even yank their passports.
And IRS collection computers never make mistakes, except when they do. When that happens, help is available.
Appeals Court Reverses Company’s Research Credit Victory - Kristen Parillo, Tax Notes ($). "A district court erred by holding that the IRS was bound by the fixed-base percentage it agreed to use when settling a taxpayer’s earlier research credit claims in Tax Court, according to the Sixth Circuit."
Related: The Benefit of the Research & Development Tax Credit https://www.eidebailly.com/insights/videos/the-benefit-of-the-research-and-development-tax-credit
IRS Not Barred From Challenging Item Agreed to in Prior Settlements - Ed Zollars, Current Federal Tax Developments. 'In this case, the IRS had simply entered into a settlement agreement that both parties agreed to (so presumably was a compromise position), which is different from having a court rule on an issue the IRS had advanced in that case:"
Watch Your Mailbox: IRS Is Sending Notices With Past-Due Deadlines - Kelly Phillips Erb, Forbes. "According to the Taxpayer Advocate, during the shutdown, the IRS generated more than 20 million notices; however, these notices were not mailed to taxpayers."
Why Stimulus For The Dead Might Not Have Been So Bad - Peter Reilly, Forbes. "Bottom line is that when Congress wanted money shoveled out quickly IRS thought fast and made mistakes which in retrospect was absolutely the right thing to do."
Tax Week in a Nutshell - 6.26.20 - Amie Kuntz, Living the Tax Life. Last week's tax greatest hits recapped.
Is It A Gift or Not a Gift? That is the Question - Roger McEowen, Agricultural Law and Taxation Blog. "Why does it matter? The recipient doesn’t have to report into income gifted amounts. If the amount transferred is not really a gift, then it’s income to the recipient."
Chapter 7 Brings an Opportunity to Use IRS Liens to Satisfy Unsecured Creditors - Keith Fogg, Procedurally Taxing.
Pelosi’s Infrastructure Bill Takes The Wrong Road On Tax Subsidies - Howard Gleckman, TaxVox. "But the bill is more than the usual collection of road, bridge, and water projects. It also is a Christmas tree of tax breaks. I counted roughly two dozen new, restored, or expanded tax credits for everything from renewable energy, economic development, supportive services, investments in low-income housing and historic properties, and environmental justice."
Montana Voters Will Decide on Recreational Marijuana - Ulrik Boesen, Tax Policy Blog. "The impetus for the Montana initiative seems related more to decriminalization than revenue generation. This is evident by the proposed excise tax rate at 20 percent on the value of marijuana sales. While 20 percent is comparatively low nationwide, taxing by price (ad valorem) can prove problematic."
Are travel tax subsidies a good idea? - Annette Nellen, 21st Century Taxation. I suppose that depends on who we are sending on a long, long journey.
Business use documented too well. We talk a lot about the importance of documenting business use of property that also has personal uses. While that's important to claim deductions, business use can backfire, as an Indiana couple learned in U.S. District Court last week.
The taxpayers bought an RV. We wil let the judge take it from here, with the taxpayer name omitted:
The material facts are undisputed. A corporate entity, Getaway Crew, LLC, purchased the RV at issue. Mrs. Plaintiff testified that she and her husband purchased the vehicle in the LLC’s name for tax benefits, and on Getaway Crew’s tax returns, the RV was listed as a business expense. Mrs. Plaintiff said that she worked remotely out of the RV while her family was living in it. There is no genuine issue as to whether the plaintiffs used the RV for a commercial purpose. Mr. and Mrs. Plaintiff signed a limited warranty with The RV Factory that said the warranty would be void if the RV was used for a commercial or rental purpose.
The deductions weren't the issue; the warranty was. And the judge said that the business use voided the warranty.
I am not convinced that the business deduction works either. The Tax Court ruled against an RV owner claiming business deductions for an RV. The Tax Court held that RVs are "residences" for purposes of business expense rules. That brings RVs under the "home office" rules, which require a portion of the "home" to be set aside "exclusively" for business purposes. That isn't practical for most RVs, but there may be exceptions.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.