Tax News & Views Reporting Basket Contract Deals with a Free Slurpee

The IRS and Treasury Department proposed rules Thursday that would add basket contract transactions to its list of tax avoidance schemes.

The proposed regulations (REG-102161-23, RIN 1545-BQ89) require material advisers and certain participants in basket contract transactions and other similar transactions to file disclosures with the IRS. They face penalties for failure to disclose.

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Basket contracts are a type of structured financial transaction where a taxpayer tries to defer income recognition and convert short-term capital gain and ordinary income to long-term capital gain using different types of contracts.

A Georgia firm fighting for tax credits based on land it donated subject to conservation easements can’t stop the IRS from issuing summonses to some of the parties involved, a federal court ruled Wednesday.

Norcave Properties LLC filed three separate suits over 37 summonses from the IRS related to a $108 million charitable contribution deduction on its 2018 tax return. The company had argued the summonses, some of which sought information back to 2016, were “issued illegally and unenforceable.”

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The US District Court for the Northern District of Georgia ruled that the summonses were properly undertaken in the IRS’s performance of its duties.

Three nominees for spots on the U.S. Tax Court assured Senate lawmakers Wednesday that they could resolve cases involving federal regulations and congressional intent after the U.S. Supreme Court overturned the Chevron deference doctrine.

Jeffrey Samuel Arbeit, Cathy Fung and Benjamin A. Guider III testified before the Senate Finance Committee that if approved by the Senate for 15-year terms, they would use their legal expertise to analyze tax law consistent with the high court's ruling last month in Loper Bright v. Raimondo. In that case, the justices overturned the 40-year-old Chevron doctrine, which directed courts to defer to federal agencies' interpretations of ambiguous laws.

Treasury’s partnership antiabuse rule is backed by congressional efforts to combat abuse of subchapter K, the Justice Department contended in response to Tribune Media Co.’s claim that the rule’s validity is questionable after Loper Bright.

The rule “is supported by a long and unbroken history of judicial doctrines and congressional enactments empowering the IRS to combat the kind of chicanery attempted here,” the Justice Department wrote in a July 10 letter to the Seventh Circuit in Tribune Media Co. v. Commissioner.

FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible. Accordingly, these FAQs may not address any particular taxpayer’s specific facts and circumstances, and they may be updated or modified upon further review. Because these FAQs have not been published in the Internal Revenue Bulletin, they will not be relied on or used by the IRS to resolve a case. Similarly, if an FAQ turns out to be an inaccurate statement of the law as applied to a particular taxpayer’s case, the law will control the taxpayer’s tax liability. Nonetheless, a taxpayer who reasonably and in good faith relies on these FAQs will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Any later updates or modifications to these FAQs will be dated to enable taxpayers to confirm the date on which any changes to the FAQs were made. Additionally, prior versions of these FAQs will be maintained on IRS.gov to ensure that taxpayers, who may have relied on a prior version, can locate that version if they later need to do so.

An Alaska man was sentenced yesterday to 30 months in prison for embezzling more than $1 million from the City of Houston, Alaska, and from a Wasilla-based equipment company, and then evading taxes on the embezzled profits.

The former vice president of a Miami-based aerospace company was sentenced to just over a year in federal prison after he pled guilty to fraud-related charges in connection to a scheme that involved embezzling millions of dollars and splitting the proceeds with a co-conspirator.