Tax News & Views Changes and Improvements Roundup

August 11, 2020

Estate and Gift Tax—Are You Prepared for Changes? - Ava Archibald, Eide Bailly:

We have had the benefit of the increased gift and estate tax exemption that came into play under the Tax Cuts and Jobs Act of 2017, which doubled the exemption in 2017 from $5.5 million to $11 million per person adjusted for inflation. Under the current law, this increased exemption will sunset at the end of December 31, 2025 to $5 million per person adjusted for inflation.

Depending on election results, the sun might set on the larger exemption a lot sooner.


Trump Leaves Payroll Tax Cut Memo Implementation Up to Treasury - Jonathan Curry, Tax Notes ($). "The brief payroll tax suspension memo signed over the weekend by President Trump leaves the IRS and Treasury in charge of making it all work in practice, a job that observers say will be no easy task." 

President’s Action On Payroll Taxes - Some Detail - Peter Reilly, Forbes. "So I am putting myself in the shoes of somebody making five hundred bucks a week. This order raises my take-home pay by $31, but I still owe the money. So come year end, I owe $527, which maybe I have to pay, maybe I don’t, depending."

Trump Authorizes Mnuchin to Use Section 7508A to Extend Time to Pay Certain Employment Taxes Through End of Year - Carlton Smith, Procedurally Taxing. "Obviously, the statute prevents Secretary Mnuchin from providing for a deferral of more than one year.  However, the President is asking the Secretary to try to figure out a legal way that the taxes can simply be forgiven." 

Trump The Disrupter Takes Dead Aim At Social Security - Howard Gleckman, TaxVox. "But Trump’s interest in permanently repealing (or perhaps merely cutting) Social Security and Medicare taxes would be an entirely different matter. The trust funds for both programs already are running short of money. The Social Security fund is expected to be unable to pay all its obligations by 2035 (probably sooner when the effects of the current economic slump are taken into account). Medicare’s hospital insurance fund is in even worse shape. It is likely to face insolvency in 5 years or less."


IRS now sending some erroneously denied COVID-19 dependent relief payments - Kay Bell, Don't Mess With Taxes. "Regardless of how this corrected dependent payment amount is issued, recipients also will get another mailed notice letting them know the additional $500 EIP was issued. As with the original letter from the White House, it's an official tax document that you should keep with your other tax records."

Here’s How To Fix 13 Common Stimulus Check Problems (Some With A Little Help From The IRS) - Kelly Phillips Erb, Forbes. "Today, the Advocate delivered, explaining the kinds of problems that the Internal Revenue Service (IRS) will currently resolve, what some individuals need to do to receive a check, and how some taxpayers can claim the correct payment on their 2020 tax return."

IRS Denied PPP Write-Offs, Congress May Restore Tax Deductions - Robert W. Wood, Forbes. "If the correction bill is not passed, could bold taxpayers proceed? Despite the IRS statement, some people have said they may try to deduct these expenses anyway and fight with the IRS about it if needed. The tax law is sufficiently debatable that some of those taxpayers could win, too."


What is Qualified Improvement Property and Why it Matters - Andrea Mouw and Mark Rogers, Eide Bailly. "Qualified Improvement Property (QIP) accelerates significant deductions to enhance cash flow for taxpayers who are improving and/or renovating an existing building. QIP is a tax classification of assets that generally includes interior, non-structural improvements to nonresidential buildings placed-in-service after the buildings were originally placed-in-service."


IRS Final Rules Offer Safe Harbors for Users of SALT Workarounds - Fred Stokeld, Tax Notes ($):

Safe harbors in the August 7 final regs (T.D. 9907) allow a C corporation or specified passthrough entity that receives or expects to receive state or local tax credits in return for payments to or for the use of a section 170(c) entity to treat the credit-sized portion of the payment like an ordinary and necessary business expense under section 162.

The treatment matches the proposed rules (REG-107431-19) from December 2019 to make it clear that such payments constitute an allowable deduction as a trade or business expense under section 162 rather than a charitable deduction. 


Fight Over Income Tax Nexus Brewing in the States - Aaron Davis, Tax Notes ($):

New Hampshire Gov. Chris Sununu (R) has directed the state attorney general to investigate whether a recent Massachusetts income tax regulation results in the improper taxation of New Hampshire residents. 

Although the investigation was prompted by the Massachusetts Department of Revenue's adoption of an emergency regulation clarifying that nonresidents who worked in the state but are now working remotely because of COVID-19 will continue to pay Massachusetts state income taxes, Sununu said on August 5 that the attorney general will examine Department of Revenue actions in all states. 

As states face big revenue declines from COVID-19, expect states to agressively pursue telecommuters.


Lesson From The Tax Court: The Unwritten Advantage Of Small Case Procedure - Bryan Camp, TaxProf Blog: "The written advantages of S-Cases include a quicker trial date and a more informal trial.  In Adam Jordan Winslow v. Commissioner, T.C. Summ. Op. 2020-22 (Aug. 3, 2020) (Judge Colvin), the Court allowed the taxpayer a highly dubious alimony deduction based on an argument that would probably not have succeeded in a regular case.  To me, the case shows us an unwritten advantage of S-Cases: the Court may be willing to apply the law in a more relaxed fashion when presented with a sympathetic taxpayer."

Exotic Game Activities and the Tax Code - Rober McEowen, Agricultural Law and Taxation Blog:

Wild game “farms” are big business in the United States.  In Texas alone, in excess of four million acres are devoted to wild game farming activities.  Interest continues to grow in such activities such as the raising of captive deer, for example, often as a result of the possibility of greater profitability on fewer acres than is presently possible with raising cattle. But, how does the IRS view such activities?  Is it a “farm” for purposes of tax Code provisions that provide special tax status to “farm” businesses?

Ninth Circuit Holds that Taxpayer Waived Attorney-Client Privilege and Factual Work Product Protection - Jack Townsend, Federal Tax Procedure. "n United States v. Sanmina Corp., ___ F.3d ___ (9th Cir. 2020), here, the taxpayer’s in-house counsel prepared two memoranda supporting a very large deduction the taxpayer claimed.  The taxpayer provided the memoranda to an outside law firm which prepared a valuation report supporting the claim...When the smoke cleared in the opinion, the Court held that the taxpayer’s disclosure to the firm preparing the valuation report waived the attorney-client privilege..."

Higher Taxes Might Not Be the Solution for Canada and its Provinces - Cristina Enache, Tax Policy Blog. "First, the introduction of the wealth tax would significantly impact international capital flows and cause large economic dislocations in the short term. Second, provinces that are looking at raising their corporate tax rates might hinder capital attraction, growth, and economic recovery."


Today in history: "Actress Hedy Lamarr and composer George Antheil receive a patent for a Frequency-hopping spread spectrum communication system that later became the basis for modern technologies in wireless telephones and Wi-Fi." (Wikipedia)

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