Tax News & Views is Listening Roundup

July 18, 2023

Couple 'Astonishingly' Owe Tax On Stolen Funds, Judge Says - Theresa Schliep, Law360 Tax Authoirty ($):

A Florida couple "astonishingly" have to pay taxes on $1.2 million in retirement savings that their daughter stole from them, a federal judge ruled Monday, calling the outcome "unjust" but saying it's required by the federal tax code.

U.S. District Judge Tom Barber said in an order that Dennis and Suzanne Gomas can't get a $412,000 refund for taxes they paid to the Internal Revenue Service on the withdrawals from their individual retirement and pension accounts that were stolen by their daughter... The Tax Cuts and Jobs Act of 2017 temporarily did away with a deduction for victims of theft, the judge said.

It can be hard to time your theft losses for optimal tax law treatment.


U.S. Companies Score Partial Reprieve From Global Minimum Tax Deal - Richard Rubin, Wall Street Journal. "Under the updated agreement negotiated by the Treasury Department, companies will have an extra year—until 2026—before foreign countries can start imposing new taxes on any U.S. companies deemed to pay too little tax in the U.S. And the clean-energy tax credits at the core of last year’s Inflation Reduction Act will be counted in a more favorable way than some companies had feared, offering certainty as a tax-credit trading market gets under way."

OECD Eases Pressure on U.S. Companies With Pillar 2 Measure - Alexander Rifaat, Tax Notes ($):

In administrative guidance on the global anti-base-erosion (GLOBE) rules released July 17, the OECD said any company with an ultimate parent entity (UPE) based in a jurisdiction that has a corporate tax rate of at least 20 percent will not be subject to the UTPR — formerly known as the undertaxed payments rule — enshrined in pillar 2 until 2026.

The U.S. has a 21% corporate rate.

Pillar 2 of the two-pillar global tax reform plan calls for a minimum effective corporate tax rate of 15 percent on multinational enterprises whose annual group revenues exceed €750 million. If a company is found to pay below that minimum in tax in its home jurisdiction, it could then be subject to a top-up tax to make up the difference.

The OECD plan's "top up tax" is controversial because it can wipe out the benefit of incentive tax credits, like the energy tax credits from last year's Inflation Reduction Act. The story below shows how the OECD proposes to work around the problem.

Energy Credits’ Treatment in Global Tax Deal Detailed By OECD - Lauren Vella, Bloomberg ($):

Under the IRA, energy companies participating in green projects can sell the credits. The sale can only occur once, and purchasers will be able to lower their federal taxes.

A taxpayer who sells the transferable credit could be treated as having a marketable transferable tax credit, or a credit that can be sold.

The marketable transferable tax credit is treated for the seller like additional income, or a grant—a favorable outcome under the Pillar Two calculations. This treatment also applies for taxpayers who could’ve sold the credit but chose not to.

Related: Eide Bailly International Tax Services.


IRS reminder to storm victims in 4 states: File and pay by July 31; parts of Arkansas, Indiana, Mississippi and Tennessee affected - IRS:

The July 31 deadline applies to taxpayers affected by four different disaster declarations for incidents occurring during late March and early April of this year. These include:

-Three counties in Arkansas due to severe storms and tornadoes on March 31. The disaster area includes Cross, Lonoke and Pulaski counties.
-Thirteen counties in Indiana due to severe storms, straight-line winds and tornadoes on March 31 to April 1. The disaster area includes Allen, Benton, Brown, Clinton, Grant, Howard, Johnson, Lake, Monroe, Morgan, Owen, Sullivan and White counties.
-Seven counties in Mississippi due to severe storms, straight-line winds and tornadoes on March 24 to 25. The disaster area includes Carroll, Humphreys, Monroe, Montgomery, Panola, Sharkey and Washington counties.
-Thirteen counties in Tennessee due to severe storms, straight-line winds and tornadoes on March 31 to April 1. The disaster area includes Cannon, Giles, Hardeman, Hardin, Haywood, Johnson, Lewis, Macon, McNairy, Morgan, Rutherford, Tipton and Wayne counties.


A bipartisan path forward on the Child Tax Credit - Benjamin Guggenheim, Politico:

If you followed last year’s negotiations over the end-of-year government spending bill, you would know that Democrats held firm over their ultimatum that there should be no R&D breaks for companies without the expansion of family relief that was enacted during the pandemic. And at the end of the day, neither side came close to offering a solution that could bridge the gap, creating frustration among pretty much everyone.

But if you’ve been watching closely, the tone of the conversations around the tax items is slowly but surely shifting.

Bipartisan efforts on child tax credit afoot in House - Laura Weiss, Roll Call. "The subcommittee’s ranking member, John Thune of South Dakota, said ahead of the hearing that Republicans would like to extend their expansion of the child credit from the party’s 2017 tax law that's currently set to expire after 2025. He said the GOP is open to proposals from Democrats, but not their full 2021 expansion."

Related: Capitol Hill Recap: Are taxes on the legislative agenda?


High-Earning Retirement Savers Are Losing Some of Their 401(k) Tax Break - Anne Tergesen, Wall Street Journal. "Catch-up contributions will have to be done after taxes for those who make more than $145,000"

Disaster Relief: What the IRS giveth, the IRS taketh away. Or so it seems for disaster relief taxpayers until you get to page 4 of the collection notice (Part One) - Erin Collins, NTA Blog:

Imagine you live in a county that has been battered by storms or wildfires so severe that the federal government has included your county in a disaster declaration. Imagine that the IRS grants you an extra four or six months to file your tax return and make your tax payment. Then imagine you file your return early but properly decide to hold off on making payment until the postponed deadline. That is what an estimated one million taxpayers living in California and seven other states (AlabamaArkansasFloridaGeorgiaIndianaMississippi, and Tennessee) have done in the last few months. To their surprise and dismay – and contrary to IRS guidance and press releases – those taxpayers are now receiving “notice and demand” collection letters from the IRS telling them their payments are currently due and the IRS will begin to charge interest and penalties if the taxpayer doesn’t pay by a specified date on the notice which is months earlier than IRS guidance permits. Confused taxpayers and practitioners are wondering why they are receiving a balance due notice since they live in a disaster relief area and had months of additional time to pay.

Related: Eide Bailly IRS Collections Issues.


Vermont flood victims get tax relief, including a Nov. 15 deadline for 2022 extensions and estimated taxes - Kay Bell, Don't Mess With Taxes. "All 14 of the Green Mountain State's counties now are eligible for some type of federal assistance. The Internal Revenue Service also has granted tax relief to the state's individual and business taxpayers."

Tips For Taxpayers On National Get Out Of The Doghouse Day - Kelly Phillips Erb, Forbes. "Open your mail. This remains at the top of my best tax advice ever. While I understand that a stack of letters from the IRS can be daunting, letting that mail sit is the worst thing you can do when it comes to tax matters. It's rarely as bad as you think—and opening the mail can't make it worse."

IRS Defers Proposed Regulation RMD Requirements by at Least One Year, Provides Temporary Rollover Relief to Those Born in 1951 - Ed Zollars, Current Federal Tax Developments. "In Notice 2022-53, the IRS stipulated that the minimum distribution rules for defined contribution plan balances (including IRAs) inherited from a beneficiary who had passed away after their required beginning date— as outlined in the proposed regulations under the SECURE Act—would not take effect until 2023 at the earliest. However, with the release of Notice 2023-54, the IRS has further delayed the implementation of these rules by at least one year, meaning they will not be applicable until 2024 at the earliest."


Taxpayer Had Reasonable Cause for Incomplete Substantiation of Conservation Easement - Parker Tax Pro Library. "Murfam Enterprises, LLC, is a partnership owned by the Murphy family, a multi-generation farming family from Bladen County, North Carolina. In 2010, Murfam donated a conservation easement on a tract of undeveloped land to the North American Land Trust. The conservation easement deed specifically prohibited any agricultural activities on the land. Murfam hired an appraiser to value the conservation easement. The appraiser determined that the value of the land before the donation of the easement was $10.5 million, computed the after value to be $4.8 million, and therefore valued the easement at $5.7 million."

Remember You Are Mortal And Make Your Annual Exclusion Gifts In January - Peter Reilly, Forbes. "One of the most basic estate planning technique for someone likely to have a taxable estate is regular annual exclusion gifts. That's the amount you can give to each person without it counting against your unified credit. In 2023 the amount is $17,000. You can give $17,000 to each of your kids, each of your grandkids, each of your nephews and nieces and so on. There are some technical issues like about whether your gift is a gift of a present interest, but if all you do is mail them a no strings attached check that stuff does not come up. What can go wrong?"


Stock Buybacks and International Tax - Alex Parker, Things of Caesar. "It’s a good reminder that anything affecting international taxes will prove to have unintended implications, and that capturing all possible avoidance routes inevitably requires making finely-grained distinctions that create exponentially-increasing compliance headaches."

Be Like America, Except for This Bad Tax Policy - Robert Goulder, Tax Notes Opinons. "But there is one matter regarding which I encourage the rest of the world not to replicate the American experience: the taxation of citizens who live abroad."

Understanding Form 3520: Reporting Foreign Gifts and Distributions From a Foreign Trust - Olivier Wagner, 1040 Abroad. "Late filing or incomplete/incorrect information on Form 3520 can result in penalties."

Related: Eide Bailly Foreign Trust & Estate Tax Compliance


Accused Long Island Serial Killer Had Long History of Tax Issues - Rebekah Barton, TaxBuzz. "CNN reported that Nassau County, New York records confirm Heuermann was subject to six tax liens filed by the IRS from 2010 through 2021. He owed a total of over $425,000 in taxes going back to 2005."

There are worse problems than tax problems, for sure.


Tax preparer gets 12 years for illegally filing tax returns - IRS (Defendant name omitted):

From 2016 through 2019, Defendant prepared at least nine tax returns in which she created fake businesses that allegedly operated at losses. They also claimed false fuel tax credits, state income tax deductions for Texas residents (who did not pay a state income tax), false medical expenses, unemployed reimbursement expenses, false contributions to charity, other false expenses for businesses and failed to report IRA distributions.


At trial, evidence showed that 98 percent of her clients obtained a refund even though several owed as much as $25,000 and did not pay any income taxes throughout the year. One such client had been obtaining a refund in excess of $8,000 each year. However, after Defendant became aware she was under investigation, that client was informed she owed over $10,000. When she inquired as to the change, Defendant untruthfully claimed that it was due to a change in the tax law and due to the client's son now attending college on a full-time basis.

Further, a large percentage of Defendant's clients claimed fuel tax credits despite the fact that only 0.2 percent of all tax payers would be eligible for that benefit.

The biggest refund doesn't always come from the best preparer. The defendant's clients have certainly had their own chance to get to know the IRS collection process through her work.


I'm sorry, did you say something? It's World Listening Day.

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