Opting Out of the New Partnership Audit Rules... [ read ]
In November 2015, as part of the Bipartisan Budget Act (BBA) of 2015, Congress enacted a new centralized partnership audit regime to replace the TEFRA partnership rules. The new partnership audit regime applies to all partnerships and, like TEFRA, IRS examinations and adjustments will be made at the partnership level. However, unlike TEFRA, the IRS will assess and collect tax from the partnership.
The Tax Balancing Act: Minimizing Estate Tax and Maximizing Income Tax Basis... [ read ]
The lifetime estate and gift tax exemption has risen more than 1600% over the past two decades. In 2017, with an exemption of $5,490,000, there were roughly 5,200 taxable estates but with an exemption of $11,180,000, that tally is expected to fall under 2,000 taxable estates for the 2018 tax year. As fewer estates are subject to federal estate tax, the intersection of estate tax planning and income tax planning is more pivotal than ever before.
Thoughts and Consideration Regarding the Designation of a Partnership Representative... [ read ]
In November 2015, as part of the Bipartisan Budget Act (BBA) of 2015, Congress enacted a new centralized partnership audit regime to replace the TEFRA partnership rules. The new centralized partnership audit regime is generally effective for partnership tax years beginning after December 31, 2017. As a result, the 2018 tax returns for most partnerships will be the first tax return filed under the new regime. One of the first questions partnerships, partners and tax professionals will face is determining who will be the Partnership Representative (PR). Although this would seem to be a simple question to answer, as explained below, it is much more involved than selecting a Tax Matters Partner (TMP) under the old TEFRA regime. This is especially true because any tax liability resulting from an IRS audit under the new centralized partnership audit regime is to be paid by the partnership in the current year, unless the PR takes affirmative steps otherwise. Failure by the PR to take action on a timely basis could result in a mismatch of tax burdens and tax benefits between current and former partners in a partnership.
IRS Updates Guidance on Disclosures and Accuracy Related Penalties... [ read ]
On December 20th, the IRS released Revenue Procedure 2019-9 providing guidance on whether disclosure of an item or position taken on a tax return is adequate for purposes of reducing or eliminating the Substantial Understatement of Income Tax Penalty (IRC Section 6662(d)) and the Return Preparer Penalty (IRC Section 6694(a)). Rev. Proc. 2019-9 updates Rev. Proc. 2018-11 and makes editorial but "no additional substantive changes". Rev. Proc. 2019-9 applies to any income tax return filed on 2018 tax forms for a tax year beginning in 2018, and to any income tax return filed in 2019 on 2018 tax forms for short tax years beginning in 2019.
New Rules in the United States Tax Court... [ read ]
The Tax Court has recently adopted amendments to its Rules of Practice and Procedure. These amendments come more than two years after the Tax Court proposed amendments to its rules to accommodate electronic filing of petitions and other documents. Pursuant to the new amendments to its rules, the Tax Court will soon allow electronic filing of Tax Court petitions and other documents. (The Tax Court will provide detailed information regarding the implementation of electronic filing on its website once the Tax Court is ready for electronic filing.) Under the new rules, if a Tax Court petition is filed electronically, an original signature is no longer required from the taxpayer or the taxpayer's representative.
IRS Revises Voluntary Disclosure Practice... [ read ]
On November 20th, the IRS issued Memorandum LB&I-09-1118-014 updating the process for both domestic and foreign voluntary disclosures. The IRS voluntary disclosure program is found in section 9.5.11.9 of the Internal Revenue Manual and is a long standing practice of the IRS to provide taxpayers who have potential criminal exposure a means to come into compliance with the law and potentially avoid criminal prosecution. In a prior blog post , we discussed the basics of the IRS voluntary disclosure program.
Reacting and Responding to the Commencement of an IRS Criminal Investigation... [ read ]
How a taxpayer or tax professional reacts and responds to a visit by IRS criminal investigators may mean the difference between a criminal indictment and the IRS declining to pursue a criminal case.
Changes Are Coming to Form 8867 and Preparer Due Diligence Requirements... [ read ]
Significant changes are coming to Form 8867, Paid Preparer's Due Diligence Checklist, and the associated requirements for the 2019 filing season. On November 5, 2018, the IRS issued final regulations under Treas. Reg. 1.6695-2 to clarify when and how return preparers must conduct due diligence.
If You Use it, You Won't Lose It: IRS Says Taxpayers Won't Lose Benefit of Higher Gift Tax Exemption... [ read ]
Apparently the IRS is feeling the holiday spirit. The IRS just proposed regulations allowing taxpayers to lock-in the higher gift tax exclusion amount, which was raised under the 2017 Tax Act from $5 million to $10 million per person (indexed for inflation). For married couples, the combined exclusion amount for 2018 is $22,360,000. Under these proposed regulations any future decrease in the exclusion amount will not cause otherwise non-taxable transfers made at a time when the exclusion amount was higher to be taxable - ever. Thanks Uncle Sam!
Update from the IRS Regarding Like-Kind Exchanges... [ read ]
On November 19th, the IRS issued IR-2018-227, reminding taxpayers that Like-Kind exchange tax treatment is now generally limited to exchanges in real property that is held for use in a trade or business or for investment. Real property includes land and generally anything built on or attached to it. An exchange of real property held primarily for sale still does not qualify as a Like-Kind exchange.
