b urnett federal tax€¦ · the bradley burnett federal tax update 2019 by bradley burnett bradley...
TRANSCRIPT
THE BRADLEY BURNETT FEDERAL TAX
UPDATE2019
By Bradley Burnett
Bradley Burnett Tax Seminars Ltd
JD LLM (Taxation)
Comprehensive Reference Tool
for Preparing 2019 Returns in the
2020 Busy Season
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
(Complete with Tax Cuts and Jobs Act)
Bradley Burnett JD LLM (Taxation)
bradleybradleyburnettcom
Bradley Burnett Tax Seminars Ltd
BradleyBurnettTaxSeminarscom
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
Disclaimer
These seminar materials are intended to provide seminar participants with guidance in federal tax law matters The materials and related presentation(s) do not constitute and should not be treated as professional advice regarding the use of any particular tax treatment of the consequences associated with any technique Every effort has been made to ensure the accuracy of these materials Bradley Burnett Tax Seminars Ltd Bradley Burnett the sponsoring organization(s) the marketing organization and any others associated with the dissemination of these materials and related presentation(s) do not assume responsibility for any individualrsquos reliance upon the written or oral information provided in the materials or during the seminar Readers of the materials and seminar participants must independently verify all statements made before applying them to a particular fact situation and independently determine the impact of any particular tax planning or compliance technique implementing it
I acknowledge and thank Mary Neely from Springfield Missouri for her extraordinary work navigating the word processing software and assembling and formatting the materials
I also acknowledge and thank my friend Greg White CPA from Seattle Washington for his intelligent tax-related banter and capable occasional critique of materials This is a far better book because of him
Bradley Burnett
ldquoAs I sit looking at the place the piano used to be before I had to sell it to pay my income tax
I find myself in a thoughtful moodrdquo
PG Wodehouse
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
i
copy 2019 Bradley Burnett Tax Seminars Ltd
Table of Contents
Chapter 1 Individual 1mdashi
Chapter 2 Real Estate 2mdashi
Chapter 3 Investment 3mdashi
Chapter 4 Individual Retirement Accounts 4mdashi
Chapter 5 Estate Gift and Fiduciary 5mdashi
Chapter 6 Business and Cost Recovery 6mdashi
Chapter 7 Fringe Benefit and Qualified Retirement Plans 7mdashi
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099 8mdashi
Chapter 9 C Corporations and Exempt Organizations 9mdashi
Chapter 10 S Corporations 10mdashi
Chapter 11 Disregarded Entities 11mdashi
Chapter 12 Partnerships and LLCs 12mdashi
Chapter 13 IRS Practice and Procedure 13mdashi
Chapter 14 Special Topics 14mdashi
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashi
Chapter 1 Individual
Table of Contents
Charitable Contribution Substantiation and Reporting 1mdash1
Charitable Contribution - Substantiation 1mdash1
Substantiation 1mdash1
Out-of-Pocket Expenses for Volunteer Work 1mdash1
Tax Exempt Organization Search (TEOS) 1mdash2
Tax Cuts Jobs Act (TCJA) Charitable Contributions 1mdash3
TCJA - Cash Contributions 1mdash3
TCJA - Contributions 1mdash3
TCJA ndash Charitable Contributions 1mdash4
TCJA ndash Itemized Deduction for Charitable Gifts 1mdash4
Intent 1mdash4
Donation of Easement - Fair Market Value 1mdash4
Fair Market Value 1mdash4
Donation of Easement 1mdash5
What Does Donor Expect to Receive in Return 1mdash5
Quid Pro Quo 1mdash6
Written Contemporaneous Acknowledgement 1mdash7
Charitable Contributions At Least Some Proof Is Needed 1mdash8
IRS Form 8283 1mdash10
IRS Form 8283 ndash Timeliness 1mdash10
IRS Form 8283 - Who Must File 1mdash11
IRS Form 8283 ndash Logistics 1mdash12
Form 8283 - Page 1 Part I 1mdash12
Form 8283 - Page 1 Part II 1mdash12
Form 8283 - Page 2 Part I 1mdash13
Non-Cash Contributions - Aggregation of Similar Items by Category 1mdash13
Form 8283 - Page 2 Part II 1mdash14
Appraisal - Substantial Compliance 1mdash15
Form 8283 - Page 2 Part IV 1mdash15
Appraisal Rules - No Substantial Compliance 1mdash15
Non-Cash Contributions - Charitable Fundraising Campaigns 1mdash16
Charitable Fundraising Campaigns 1mdash16
sect170(f)(12) - Vehicles Boats and Airplanes 1mdash17
Qualified Charitable Distributions - From IRAs 1mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
(Complete with Tax Cuts and Jobs Act)
Bradley Burnett JD LLM (Taxation)
bradleybradleyburnettcom
Bradley Burnett Tax Seminars Ltd
BradleyBurnettTaxSeminarscom
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
Disclaimer
These seminar materials are intended to provide seminar participants with guidance in federal tax law matters The materials and related presentation(s) do not constitute and should not be treated as professional advice regarding the use of any particular tax treatment of the consequences associated with any technique Every effort has been made to ensure the accuracy of these materials Bradley Burnett Tax Seminars Ltd Bradley Burnett the sponsoring organization(s) the marketing organization and any others associated with the dissemination of these materials and related presentation(s) do not assume responsibility for any individualrsquos reliance upon the written or oral information provided in the materials or during the seminar Readers of the materials and seminar participants must independently verify all statements made before applying them to a particular fact situation and independently determine the impact of any particular tax planning or compliance technique implementing it
I acknowledge and thank Mary Neely from Springfield Missouri for her extraordinary work navigating the word processing software and assembling and formatting the materials
I also acknowledge and thank my friend Greg White CPA from Seattle Washington for his intelligent tax-related banter and capable occasional critique of materials This is a far better book because of him
Bradley Burnett
ldquoAs I sit looking at the place the piano used to be before I had to sell it to pay my income tax
I find myself in a thoughtful moodrdquo
PG Wodehouse
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
i
copy 2019 Bradley Burnett Tax Seminars Ltd
Table of Contents
Chapter 1 Individual 1mdashi
Chapter 2 Real Estate 2mdashi
Chapter 3 Investment 3mdashi
Chapter 4 Individual Retirement Accounts 4mdashi
Chapter 5 Estate Gift and Fiduciary 5mdashi
Chapter 6 Business and Cost Recovery 6mdashi
Chapter 7 Fringe Benefit and Qualified Retirement Plans 7mdashi
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099 8mdashi
Chapter 9 C Corporations and Exempt Organizations 9mdashi
Chapter 10 S Corporations 10mdashi
Chapter 11 Disregarded Entities 11mdashi
Chapter 12 Partnerships and LLCs 12mdashi
Chapter 13 IRS Practice and Procedure 13mdashi
Chapter 14 Special Topics 14mdashi
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashi
Chapter 1 Individual
Table of Contents
Charitable Contribution Substantiation and Reporting 1mdash1
Charitable Contribution - Substantiation 1mdash1
Substantiation 1mdash1
Out-of-Pocket Expenses for Volunteer Work 1mdash1
Tax Exempt Organization Search (TEOS) 1mdash2
Tax Cuts Jobs Act (TCJA) Charitable Contributions 1mdash3
TCJA - Cash Contributions 1mdash3
TCJA - Contributions 1mdash3
TCJA ndash Charitable Contributions 1mdash4
TCJA ndash Itemized Deduction for Charitable Gifts 1mdash4
Intent 1mdash4
Donation of Easement - Fair Market Value 1mdash4
Fair Market Value 1mdash4
Donation of Easement 1mdash5
What Does Donor Expect to Receive in Return 1mdash5
Quid Pro Quo 1mdash6
Written Contemporaneous Acknowledgement 1mdash7
Charitable Contributions At Least Some Proof Is Needed 1mdash8
IRS Form 8283 1mdash10
IRS Form 8283 ndash Timeliness 1mdash10
IRS Form 8283 - Who Must File 1mdash11
IRS Form 8283 ndash Logistics 1mdash12
Form 8283 - Page 1 Part I 1mdash12
Form 8283 - Page 1 Part II 1mdash12
Form 8283 - Page 2 Part I 1mdash13
Non-Cash Contributions - Aggregation of Similar Items by Category 1mdash13
Form 8283 - Page 2 Part II 1mdash14
Appraisal - Substantial Compliance 1mdash15
Form 8283 - Page 2 Part IV 1mdash15
Appraisal Rules - No Substantial Compliance 1mdash15
Non-Cash Contributions - Charitable Fundraising Campaigns 1mdash16
Charitable Fundraising Campaigns 1mdash16
sect170(f)(12) - Vehicles Boats and Airplanes 1mdash17
Qualified Charitable Distributions - From IRAs 1mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
Disclaimer
These seminar materials are intended to provide seminar participants with guidance in federal tax law matters The materials and related presentation(s) do not constitute and should not be treated as professional advice regarding the use of any particular tax treatment of the consequences associated with any technique Every effort has been made to ensure the accuracy of these materials Bradley Burnett Tax Seminars Ltd Bradley Burnett the sponsoring organization(s) the marketing organization and any others associated with the dissemination of these materials and related presentation(s) do not assume responsibility for any individualrsquos reliance upon the written or oral information provided in the materials or during the seminar Readers of the materials and seminar participants must independently verify all statements made before applying them to a particular fact situation and independently determine the impact of any particular tax planning or compliance technique implementing it
I acknowledge and thank Mary Neely from Springfield Missouri for her extraordinary work navigating the word processing software and assembling and formatting the materials
I also acknowledge and thank my friend Greg White CPA from Seattle Washington for his intelligent tax-related banter and capable occasional critique of materials This is a far better book because of him
Bradley Burnett
ldquoAs I sit looking at the place the piano used to be before I had to sell it to pay my income tax
I find myself in a thoughtful moodrdquo
PG Wodehouse
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
i
copy 2019 Bradley Burnett Tax Seminars Ltd
Table of Contents
Chapter 1 Individual 1mdashi
Chapter 2 Real Estate 2mdashi
Chapter 3 Investment 3mdashi
Chapter 4 Individual Retirement Accounts 4mdashi
Chapter 5 Estate Gift and Fiduciary 5mdashi
Chapter 6 Business and Cost Recovery 6mdashi
Chapter 7 Fringe Benefit and Qualified Retirement Plans 7mdashi
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099 8mdashi
Chapter 9 C Corporations and Exempt Organizations 9mdashi
Chapter 10 S Corporations 10mdashi
Chapter 11 Disregarded Entities 11mdashi
Chapter 12 Partnerships and LLCs 12mdashi
Chapter 13 IRS Practice and Procedure 13mdashi
Chapter 14 Special Topics 14mdashi
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashi
Chapter 1 Individual
Table of Contents
Charitable Contribution Substantiation and Reporting 1mdash1
Charitable Contribution - Substantiation 1mdash1
Substantiation 1mdash1
Out-of-Pocket Expenses for Volunteer Work 1mdash1
Tax Exempt Organization Search (TEOS) 1mdash2
Tax Cuts Jobs Act (TCJA) Charitable Contributions 1mdash3
TCJA - Cash Contributions 1mdash3
TCJA - Contributions 1mdash3
TCJA ndash Charitable Contributions 1mdash4
TCJA ndash Itemized Deduction for Charitable Gifts 1mdash4
Intent 1mdash4
Donation of Easement - Fair Market Value 1mdash4
Fair Market Value 1mdash4
Donation of Easement 1mdash5
What Does Donor Expect to Receive in Return 1mdash5
Quid Pro Quo 1mdash6
Written Contemporaneous Acknowledgement 1mdash7
Charitable Contributions At Least Some Proof Is Needed 1mdash8
IRS Form 8283 1mdash10
IRS Form 8283 ndash Timeliness 1mdash10
IRS Form 8283 - Who Must File 1mdash11
IRS Form 8283 ndash Logistics 1mdash12
Form 8283 - Page 1 Part I 1mdash12
Form 8283 - Page 1 Part II 1mdash12
Form 8283 - Page 2 Part I 1mdash13
Non-Cash Contributions - Aggregation of Similar Items by Category 1mdash13
Form 8283 - Page 2 Part II 1mdash14
Appraisal - Substantial Compliance 1mdash15
Form 8283 - Page 2 Part IV 1mdash15
Appraisal Rules - No Substantial Compliance 1mdash15
Non-Cash Contributions - Charitable Fundraising Campaigns 1mdash16
Charitable Fundraising Campaigns 1mdash16
sect170(f)(12) - Vehicles Boats and Airplanes 1mdash17
Qualified Charitable Distributions - From IRAs 1mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
i
copy 2019 Bradley Burnett Tax Seminars Ltd
Table of Contents
Chapter 1 Individual 1mdashi
Chapter 2 Real Estate 2mdashi
Chapter 3 Investment 3mdashi
Chapter 4 Individual Retirement Accounts 4mdashi
Chapter 5 Estate Gift and Fiduciary 5mdashi
Chapter 6 Business and Cost Recovery 6mdashi
Chapter 7 Fringe Benefit and Qualified Retirement Plans 7mdashi
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099 8mdashi
Chapter 9 C Corporations and Exempt Organizations 9mdashi
Chapter 10 S Corporations 10mdashi
Chapter 11 Disregarded Entities 11mdashi
Chapter 12 Partnerships and LLCs 12mdashi
Chapter 13 IRS Practice and Procedure 13mdashi
Chapter 14 Special Topics 14mdashi
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashi
Chapter 1 Individual
Table of Contents
Charitable Contribution Substantiation and Reporting 1mdash1
Charitable Contribution - Substantiation 1mdash1
Substantiation 1mdash1
Out-of-Pocket Expenses for Volunteer Work 1mdash1
Tax Exempt Organization Search (TEOS) 1mdash2
Tax Cuts Jobs Act (TCJA) Charitable Contributions 1mdash3
TCJA - Cash Contributions 1mdash3
TCJA - Contributions 1mdash3
TCJA ndash Charitable Contributions 1mdash4
TCJA ndash Itemized Deduction for Charitable Gifts 1mdash4
Intent 1mdash4
Donation of Easement - Fair Market Value 1mdash4
Fair Market Value 1mdash4
Donation of Easement 1mdash5
What Does Donor Expect to Receive in Return 1mdash5
Quid Pro Quo 1mdash6
Written Contemporaneous Acknowledgement 1mdash7
Charitable Contributions At Least Some Proof Is Needed 1mdash8
IRS Form 8283 1mdash10
IRS Form 8283 ndash Timeliness 1mdash10
IRS Form 8283 - Who Must File 1mdash11
IRS Form 8283 ndash Logistics 1mdash12
Form 8283 - Page 1 Part I 1mdash12
Form 8283 - Page 1 Part II 1mdash12
Form 8283 - Page 2 Part I 1mdash13
Non-Cash Contributions - Aggregation of Similar Items by Category 1mdash13
Form 8283 - Page 2 Part II 1mdash14
Appraisal - Substantial Compliance 1mdash15
Form 8283 - Page 2 Part IV 1mdash15
Appraisal Rules - No Substantial Compliance 1mdash15
Non-Cash Contributions - Charitable Fundraising Campaigns 1mdash16
Charitable Fundraising Campaigns 1mdash16
sect170(f)(12) - Vehicles Boats and Airplanes 1mdash17
Qualified Charitable Distributions - From IRAs 1mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashi
Chapter 1 Individual
Table of Contents
Charitable Contribution Substantiation and Reporting 1mdash1
Charitable Contribution - Substantiation 1mdash1
Substantiation 1mdash1
Out-of-Pocket Expenses for Volunteer Work 1mdash1
Tax Exempt Organization Search (TEOS) 1mdash2
Tax Cuts Jobs Act (TCJA) Charitable Contributions 1mdash3
TCJA - Cash Contributions 1mdash3
TCJA - Contributions 1mdash3
TCJA ndash Charitable Contributions 1mdash4
TCJA ndash Itemized Deduction for Charitable Gifts 1mdash4
Intent 1mdash4
Donation of Easement - Fair Market Value 1mdash4
Fair Market Value 1mdash4
Donation of Easement 1mdash5
What Does Donor Expect to Receive in Return 1mdash5
Quid Pro Quo 1mdash6
Written Contemporaneous Acknowledgement 1mdash7
Charitable Contributions At Least Some Proof Is Needed 1mdash8
IRS Form 8283 1mdash10
IRS Form 8283 ndash Timeliness 1mdash10
IRS Form 8283 - Who Must File 1mdash11
IRS Form 8283 ndash Logistics 1mdash12
Form 8283 - Page 1 Part I 1mdash12
Form 8283 - Page 1 Part II 1mdash12
Form 8283 - Page 2 Part I 1mdash13
Non-Cash Contributions - Aggregation of Similar Items by Category 1mdash13
Form 8283 - Page 2 Part II 1mdash14
Appraisal - Substantial Compliance 1mdash15
Form 8283 - Page 2 Part IV 1mdash15
Appraisal Rules - No Substantial Compliance 1mdash15
Non-Cash Contributions - Charitable Fundraising Campaigns 1mdash16
Charitable Fundraising Campaigns 1mdash16
sect170(f)(12) - Vehicles Boats and Airplanes 1mdash17
Qualified Charitable Distributions - From IRAs 1mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashii
New SALT Cap 1mdash18
SALT Cap Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Government Response to SALT Workarounds 1mdash19
Exception to New SALT Cap - Contributions by Business 1mdash20
Charitable Contribution - Substantiation 1mdash20
Rates ndash Before and After TCJA 1mdash20
Wage Withholding 1mdash21
Underpayment of Individual Income Tax 1mdash22
Waiver of 2018 Underpayment of Estimated Tax Penalty 1mdash22
Avoiding Underpayment of Estimated Tax Penalty for 2018 1mdash22
IRS Interest 1mdash23
2019 Withholding and Estimated Tax 1mdash23
IRS Issues Explanations for Denial of Deductions Under TCJA 1mdash23
New SALT Cap 1mdash24
New SALT Cap 1mdash25
SALT Cap Workarounds 1mdash25
Government Response to SALT Workarounds 1mdash25
Effect of New SALT Cap on Form 1041 1mdash26
Exception to New SALT Cap Contributions by Business 1mdash26
Divorce Alimony and Property Settlements After TCJA 1mdash30
Divorce Rate 1mdash30
Alimony ndash Compliance Gap 1mdash31
TCJA ndash Alimony 1mdash32
2019 Form 1040 ndash Alimony 1mdash32
TCJA Divorce Filing Firestorm 1mdash33
Alimony ndash State Specific Formulas 1mdash33
Alimony ndash Timing Timing Timing 1mdash33
Alimony ndash Pre-2018 Agreement - Dragged Back Into Court 1mdash33
TCJA ndash Alimony Transition Rule 1mdash34
TCJA ndash Alimony Trusts Eliminated 1mdash35
Alimony Trusts Grandfathered In 1mdash35
Alimony Trust Margarita or Both 1mdash35
TCJA ndash Alimony ndash The Ultimate Question 1mdash36
Divorce Planning ndash Punch List 1mdash36
Marriage Penalty 1mdash37
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiii
Marriage Penalty and Tax Rates 1mdash37
Divorce Planning ndash Punch List 1mdash38
TCJA ndash Personal Exemption Deduction 1mdash39
TCJA ndash Child Family Tax Credit 1mdash39
Child Tax Credit ndash Compliance Issues 1mdash40
Child Tax Credit Planning 1mdash40
Personal Exemption Remains Relevant 1mdash40
Personal Exemption and Form 8332 1mdash40
Form 8332 - Do It Right the First Time 1mdash41
Parent vs Child Investing 1mdash41
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash42
If Pay Down Acquisition Debt Itrsquos Gone 1mdash43
TCJA ndash Home Equity Debt 1mdash43
TCJA ndash Acquisition Debt 1mdash44
Interest Tracing Rules 1mdash45
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash45
Interest Tracing Rules ndash IRS Notice 89-35 1mdash45
Head of Household ndash Due Diligence 1mdash46
Other New Divorce Developments 1mdash46
Filing Status 1mdash47
Alimony or Not 1mdash47
Child Support vs Alimony 1mdash48
Divorce and S Corp Stock 1mdash49
Divorce Related Employment Restrictions on S Stock - Not Second Class of Stock 1mdash49
Innocent Spouse Relief 1mdash49
IRS Collections - Ex-Spouses After Divorce 1mdash50
FBAR Penalties and Divorce Disclosures 1mdash50
Alimony Income 1mdash51
Alimony ndash Timing Timing Timing 1mdash51
Minister Housing Allowance 1mdash51
Minister Housing Allowance 1mdash51
TCJA ndash Comparing Top Income Tax Rates 1mdash51
TCJA ndash Individual Income Tax Rates (Single) 1mdash52
TCJA ndash Individual Income Tax Rates (HH) 1mdash52
TCJA ndash Individual Income Tax Rates (MFJ) 1mdash52
TCJA ndash Individual Income Tax Rates (MFS) 1mdash53
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashiv
Rates ndash Before and After TCJA 1mdash53
Backup Withholding 1mdash53
Kiddie Tax 1mdash54
Kiddie Tax Basics 1mdash54
TCJA ndash Kiddie Tax 1mdash54
Kiddie Tax ndash Prior (2017) TCJA (2018-2025) 1mdash54
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA Kiddie Tax ndash Effect on Tax Practice 1mdash55
TCJA ndash Kiddie Tax (Estate and Trust) Rates 1mdash55
TCJA ndashEstate and Trust Rates ndash Ordinary Income 1mdash56
Kiddie Tax ndash Higher or Lower Under TCJA 1mdash56
Capital Gains Rates (Non-Corporate) 1mdash58
Kiddie Tax on Capital Gains Income ndash Higher or Lower Under TCJA 1mdash58
NIIT ndash Investment by Parent vs Child 1mdash59
Parent vs Child Investing 1mdash59
Capital Gains Rates (Non-Corporate) 1mdash60
Top Investment Income Tax Rates 1mdash61
TCJA ndash Standard Deduction 1mdash61
TCJA ndash Percent of Itemizers 1mdash62
Standard Deduction Planning 1mdash62
Standard Deduction Planning ndash No DAF vs DAF 1mdash63
TCJA ndash Personal Exemption Deduction 1mdash63
Personal Exemption Remains Relevant 1mdash64
Personal Exemption and Form 8332 1mdash64
Head of Household ndash Due Diligence 1mdash64
TCJA ndash Child Family Tax Credit 1mdash64
Child Tax Credit ndash Compliance Issues 1mdash64
Child Tax Credit Planning 1mdash65
TCJA ndash Pease Limitation Suspended 1mdash65
3 Classes of Rich ndash Super Medium amp Poor 1mdash65
TCJA ndash Itemized Deduction for Medical 1mdash66
TCJA ndash Itemized Deduction for Medical 1mdash66
Health Savings Accounts 1mdash66
TCJA ndash Itemized Deduction for State amp Local Taxes 1mdash67
TCJA ndash Itemized Deduction for SALT 1mdash67
TCJA ndash SALT ndash State Workarounds 1mdash67
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashv
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest 1mdash68
TCJA ndash Home Mortgage Interest (2018-2025) 1mdash68
Home Mortgage Interest Up to $11 Million 1mdash68
If Pay Down Acquisition Debt Itrsquos Gone 1mdash69
TCJA ndash Loan Against Equity to Improve 1mdash69
TCJA ndash Debt to Purchase 2nd Home 1mdash69
TCJA ndash Home Equity Debt 1mdash69
TCJA - Home Mortgage Interest (2018-2025) 1mdash70
TCJA ndash Home Equity Debt 1mdash70
TCJA ndash Acquisition Debt 1mdash71
TCJA ndash Debt Exceeds $750000 Cap 1mdash71
Interest Tracing Rules 1mdash71
Int Tracing Rules ndash sect1163-10T(o)(5) Election 1mdash72
Interest Tracing Rules ndash IRS Notice 89-35 1mdash72
TCJA ndash Charitable Contributions 1mdash73
Good Alternative Qualified Charitable Distributions 1mdash73
Qualified Charitable Distribution (QCD) Planning 1mdash73
Qualified Charitable Distributions - Planning 1mdash73
Charitable Contributions 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Casualty Losses 1mdash74
Casualty Losses 1mdash74
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Itemized Deductions for Personal Theft Losses 1mdash75
TCJA ndash Gambling Losses 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
TCJA ndash Gambling Losses ndash Professional Gambler 1mdash75
Gambling Losses ndash Professional Gambler 1mdash76
TCJA ndash Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Nonprofessional Gambler 1mdash76
Gambling Losses ndash Recordkeeping 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Miscellaneous Itemized Deductions 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
TCJA ndash Misc Itemized Deductions Not Subject to 2 Floor = Not Suspended 1mdash77
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvi
TCJA ndash Miscellaneous Itemized Deductions ndash Know Your Lists 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Deductions Subject to 2 Floor 1mdash78
TCJA ndash Misc Itemized Subject to 2 Floor ndash Taxation of Nonbusiness Lawsuit Proceeds 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Unreimbursed Employee Business Expenses 1mdash78
TCJA ndash Employee vs Contract Labor 1mdash80
Employee Business Expenses for Teachers 1mdash80
TCJA ndash Expenses for Production or Collection of Income 1mdash80
TCJA ndash Investment Advisor Fees 1mdash81
TCJA ndash Hobby Losses 1mdash81
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Tax Prep Fees 1mdash82
TCJA ndash Moving Expenses 1mdash83
ACA Individual Mandate ndash Gone after 2018 1mdash83
TCJA - Education 1mdash83
Alimony and Divorce Planning Under TCJA 1mdash84
Divorce Rate 1mdash84
Alimony ndash Compliance Gap 1mdash84
TCJA ndash Alimony 1mdash84
TCJA Divorce Filing Firestorm 1mdash84
Alimony ndash State Specific Formulas 1mdash84
Alimony ndash Timing Timing Timing 1mdash85
Alimony ndash Pre-2018 Agreement Drug Back Into Court 1mdash85
TCJA ndash Alimony Transition Rule 1mdash85
TCJA ndash Alimony Trusts Eliminated 1mdash86
Alimony Trusts Grandfathered In 1mdash86
TCJA ndash Alimony ndash The Ultimate Question 1mdash86
Divorce Planning ndash Punch List 1mdash87
TCJA - Alternative Minimum Tax 1mdash88
History of AMT 1mdash88
TCJA - Alternative Minimum Tax 1mdash89
TCJA ndash AMT for Individuals 1mdash89
TCJA ndash AMT Exemption Amounts 1mdash90
Individual AMT Rates 1mdash90
Individual AMT and Itemized Deductions 1mdash91
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 1mdashvii
Root Causes of Individual AMT 1mdash91
Appropriations Act ndash California Wildfires 1mdash92
Appropriations Act ndash California Wildfires 1mdash92
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashi
Chapter 2 Real Estate
Table of Contents
QBID and Rental Real Estate 2mdash1
QBID and Rental Real Estate 2mdash1
Is Rental Real Estate a Business 2mdash1
Consequences of Real Estate as a Business 2mdash2
U S Supreme Court ndash What Is a Business 2mdash2
Is a Single Family Residence a Business 2mdash2
Is Triple Net Lease a Business 2mdash3
Is Renting Land a Business 2mdash4
Is Rental Real Estate a Business Where It Gets Foggy 2mdash4
What Do the Neighbors Say 2mdash5
Rental Real Estate ndash Safe Harbor Notice 2019-7 2mdash6
Rental Real Estate ndash Non-Safe Harbor Trade or Business 2mdash9
Passive Activity Loss 2mdash10
Activity Rules 2mdash10
Step 2 Activity Rules 2mdash10
TCJA ndash Like Kind Exchanges 2mdash14
TCJA ndash Like Kind Exchanges ndash sect1245 vs sect1250 2mdash14
TCJA ndash Like Kind Exchanges of Equipment 2mdash14
TCJA ndash Like Kind Exchanges of Intangibles 2mdash14
TCJA ndash LKEs of Real Estate Only 2mdash14
TCJA ndash Like Kind vs Non Like Kind 2mdash15
Rental Real Estate ndash A Business 2mdash15
Dealer vs Investor 2mdash15
Dealer vs Investor ndash Intent Changed Midstream 2mdash16
Dealer vs Investor - Document Document Document 2mdash17
Passive Activity Losses 2mdash18
Passive Activity Loss ndash Airplane Leasing 2mdash18
PAL ndash Material Participation 2mdash19
PAL ndash RE Professional Material Participation 2mdash19
sect469 Passive Activity Grouping 2mdash19
sect469 Grouping of Passive Activities ndash Did the Taxpayer Group or Could IRS Force Grouping ndash Passive Loss Carryovers Going Going Gone if Absorbed Against Prior
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
copy 2019 Bradley Burnett Tax Seminars Ltd 2mdashii
Year Passive Income (Stephen P and Angela M Hardy v Comm TCM 2017-16 (011717)) 2mdash19
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 3 Investment
Table of Contents
Opportunity Zones 3mdash1
Opportunity Zones ndash Statutes and Regs 3mdash2
Opportunity Zones ndash 3 Tax Incentives 3mdash2
Opportunity Zones ndash Pay Dirt 1 3mdash2
Form 8949 3mdash3
Urgency of Investing in 180 Days 3mdash3
180 Day Period for Front End Investment 3mdash3
Opportunity Zones ndash Pay Dirt 2 3mdash4
Critical Dates - Front End Benefits 3mdash4
Inclusion Events Triggering Premature Gain 3mdash4
Debt Financed Distributions Not an Inclusion Event 3mdash5
Opportunity Zones ndash Pay Dirt 3 3mdash5
Unanswered Question Sale of Asset by Lower Tier Partnership 3mdash5
Critical Dates - Back End Benefits 3mdash5
Opportunity Zones ndash Investment in QOF vs Not 3mdash6
Opportunity Zones ndash Tax Benefits 3mdash6
Estate and Gift Implications 3mdash7
Gift of QOF Interest 3mdash7
Opportunity Zones ndash Tax Practitioner Role 3mdash8
FBAR 3mdash9
Swiss Bank Accounts 3mdash9
FBAR Penalty 3mdash9
FBAR 3mdash10
FBAR Non-Willful Penalty Stakes (Potentially) Rising 3mdash10
FBAR Penalties Supreme Court Not Interested for Now 3mdash11
FBAR Prison Time 3mdash12
FBAR ndash Foreign Bank Account Reporting 3mdash12
FBAR Due Dates 3mdash16
FBAR 3mdash16
Collection of FBAR Penalties 3mdash16
Claims Against Decedentrsquos Children (and Estate) for Late Fatherrsquos FBAR Penalties Dismissed ndash But Only for Now ndash Government Messed Up Court Pleading But Gets a Second Chance ndash Amended Complaint May Be Filed by 110717 (US v Jung Joo
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
3mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Park Charles C Park James Park Nina Park and Estate of Que Te Park DC Northern Dist Illinois Eastern Division No 116-cv-10787 (100517)) 3mdash16
Cryptocurrency 3mdash17
Virtual Currency 3mdash17
Cryptocurrency New Disclosure on Form 1040 3mdash18
Cryptocurrency IRS Guidance on Hardforks 3mdash19
Virtual Currency Newly Issued QampA Guidance 3mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
4mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 4 Individual Retirement Accounts
Table of Contents
Amount Contributed to an IRA 4mdash1
Traditional IRA Deduction Phase-out Ranges for Active Participants (in Thousands) 4mdash1
SECURE Act Setting Every Community Up for Retirement Enhancement Act And Other Blown Out of Proportion Titles to Fish Stories 4mdash1
SECURE Act (Not Yet Law) 4mdash1
Recharacterization 4mdash3
Prohibited Transactions 4mdash4
Basis in Nondeductible IRAs 4mdash4
Payment of Investment Advisory Fees 4mdash4
BBA 2018 ndash Improper IRS Levy on IRAs and Retirement Accounts 4mdash4
IRAs and State Unclaimed Property Funds 4mdash5
Qualified Rollover Contributions Are Limited to One Rollover Per Taxpayer Per Year Not One Per IRA Account Per Year (Alvan L Bobrow and Elisa S Bobrow pro sese v Comm TCM 2014-21) 4mdash5
IRA distribution Made from Failed Financial Institution by FDIC as Receiver Is Disregarded for Purposes of Applying One-Rollover-Per-Year Limitation (IRS Information Letter 2017-0018 (053117)) 4mdash5
Rollovers to SIMPLE Retirement Accounts 4mdash6
Blown Rollovers 4mdash6
Retired NYC Cop with Major Depressive Disorder (Who Missed 60 Day Window to Roll Pension into IRA) Granted sect402(c)(3)(B) Hardship Waiver ndash Result No Taxable Event (John C Trimmer and Susan Trimmer v Comm 148 TC No 14 (042017)) 4mdash6
New Self Certification Procedure for IRA (or Qualified Plan Account) Owners Who Miss 60 Day Rollover Deadline (Rev Proc 2016ndash47 IRB 2016-37 (091216)) 4mdash7
Rollover Chart 4mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 5 Estate Gift and Fiduciary
Table of Contents
Tax Cuts Jobs Act ndash Transfer Taxes 5mdash1
TCJA - Estate and Gift Tax Exclusions 5mdash1
Estate Tax Stats 5mdash1
2018 IRS Data Book 5mdash1
Gift Tax Returns and Revenue 5mdash2
Gift Tax Exam Lessons 5mdash3
IRS Examination of Estate and Gift Tax Returns 5mdash3
2019 Inflation Indexed Amounts 5mdash3
Gifting 5mdash4
Gift Tax Annual Exclusions 5mdash4
Take Advantage of Gifting Now 5mdash4
Upstream Gifting 5mdash4
Clawback 5mdash4
Context for Gifting 5mdash6
Issues w Anti-Clawback Proposed Regs 5mdash6
ldquoReverse Clawbackrdquo Beast Slain 5mdash7
Clawback ndash Use It or Lose It 5mdash7
Estate Planning with IDGTs 5mdash8
Gifting Potpourri 5mdash8
Income Tax Is the New Estate Tax 5mdash8
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Adequate Disclosure 5mdash9
Gift Tax Returns and 529 Plans 5mdash9
sect2053 Gifts Within Three Years of Death 5mdash9
Gift Tax - Personal Liability of Donees 5mdash9
Morehouse College Student Loans 5mdash10
Estate Planning After TCJA 5mdash12
Estate Planning Under TCJA ndash Review Formula Clauses 5mdash12
Portability vs Credit Shelter Trust 5mdash12
Portability 5mdash12
Portability ndash Form 706 5mdash13
Portability Planning 5mdash13
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Portability ndash More Time to Make Election 5mdash14
Late Portability Elections 5mdash14
Portability vs Credit Shelter Trust 5mdash14
Portability vs Credit Shelter Trust 5mdash15
TCJA ndash Split Interest Planning 5mdash15
TCJA ndash Review Life Insurance Policies 5mdash15
Valuation 5mdash15
Estate Planning Practice Trends 5mdash15
State EstateInheritance Taxes 5mdash16
State Estate Taxes (2019) 5mdash16
State Inheritance Taxes (2019) 5mdash17
Estate Planning Context 5mdash17
Generation Skipping Tax Under TCJA 5mdash18
Generation Skipping Transfer Tax (GSTT) 5mdash18
State Income Taxation of Trusts 5mdash18
Income Taxation of Estates and Trusts 5mdash19
Rates ndash Before and After TCJA 5mdash19
TCJA ndashEstate and Trust Rates ndash Ordinary Income 5mdash19
Capital Gains Rates (Non-Corporate) 5mdash20
2019 Estate and Trust Rates 5mdash20
38 Net Investment Income Tax 5mdash20
Income Tax Structure Compels Trust Distributions 5mdash21
Income Distribution Planning 5mdash21
Form 1041 Deductions 5mdash21
TCJA - Miscellaneous Deductions - Deductible on Form 1041 5mdash22
Deductibility of Expenses - Unique vs Non-Unique 5mdash22
Bundled Fees Must Be Split 5mdash22
Form 1041 Deductions 5mdash22
Income Tax Deduction for Estate Tax on Income in Respect of a Decedent 5mdash23
Effect of New SALT Cap on Form 1041 5mdash23
Exception to New SALT Cap Contributions by Business 5mdash23
From 1041 to 1040 5mdash24
Deductions for Excess Losses (on Form 1040) on Termination of Estate or Trust 5mdash24
Convert Non-Grantor Trust to Grantor Trust 5mdash25
Multiple Trusts - What Lurks Beneath 5mdash25
Multiple Trusts 5mdash26
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID ndash Individuals Estates amp Trusts Qualify 5mdash26
Trusts and Estates 5mdash26
sect199A Final Regulations 5mdash26
sect199A Computation - Grantor Trusts 5mdash27
sect199A Computation - Trusts (and Estates) 5mdash27
sect199A Computation - ESBTs 5mdash28
sect199A Regs re Gaming With Trusts 5mdash28
Impact of Technology on Estate Planning 5mdash29
Electronic Wills 5mdash29
But Who Does the Child Inherit From 5mdash30
Discharge of Estate Tax Liens 5mdash31
All Irsquom Asking for Is a Little Respect 5mdash31
Collection of Estate Tax 5mdash31
Closing Letters 5mdash32
IRS Transcripts in Lieu of Closing Letters 5mdash32
Wipe Out 5mdash32
Wipe Out of Estate - FBAR Penalties 5mdash32
Wipe Out of Estate - Household Employment Taxes 5mdash33
Household Worker Wage Bases 5mdash33
Household Worker Employment Tax - Noncompliance 5mdash33
Household Worker Employment Tax - IRS Enforcement 5mdash33
Wipe Out of Estate - Household Employment Taxes 5mdash34
What We Know For Sure 5mdash34
Portability 5mdash35
Portability 5mdash35
sect2010 IRS Makes Wide Scale Extension of Time Available To Make Late Portability Election for Eligible Estates of Decedents Until Later of January 2 2018 or Second Anniversary of Date of Decedentrsquos Death ndash If Yoursquore Later than that You Must Request a Letter Ruling (Rev Proc 2017ndash34 IRB 2017-26 (062617)) 5mdash35
Qualification requirements for simplified method late portability election 5mdash38
Impact of relief on surviving spouse 5mdash39
If simplified method renders return timely DSUE amount is available to surviving spouse 5mdash39
Even if late return timely refunds barred by statute of limitations not recoverable 5mdash39
Claim made for refund for credit or refund of tax in anticipation of relief under Rev Proc 2017-34 will be considered protective claim 5mdash39
Example 1 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file estate tax refund claim 5mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
5mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Example 2 Estate qualifies for Rev Proc 2017-34 simplified method timely and properly files and elects portability but must also timely file gift tax refund claim 5mdash40
Example 3 DSUE not available until portability election made If DSUE claimed prior to date of portability election DSUE not available resulting tax will be assessed and timely refund claim must be filed to get tax back 5mdash40
sect2010 IRS May Examine Estate Return of First to Die (Regardless of Whether Its Statute of Limitations Has Run) to Determine Correct Portability Amount ndash Reducing Portability Amount is Fair Game if Prior Taxable Gifts Reduced It (Estate of Minnie Lynn Sower v Comm 149 TC No 11 (091117)) 5mdash40
Portability v Credit Shelter Trust 5mdash41
Material Participation by Trusts 5mdash42
Income Distribution Planning 5mdash43
Generation Skipping Transfer Tax (GSTT) 5mdash43
Generation Skipping Transfer Tax Defined 5mdash43
sect2601 Though GSTT Exemption Allocation Wasnrsquot Perfect It Was Effective ndash Though Election Does Not Strictly Comply with Form 709 Instructions or Applicable Regs It May Be Deemed Valid If Info on Return Sufficient to Indicate Personal Representative Intended to Make Election (PLR 201731005 (080417)) 5mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 6 Business and Cost Recovery
Table of Contents
Business Deductions 6mdash1
Denial of Deduction for Fines Penalties and Other Amounts (TCJA) 6mdash1
Form 1098-F 6mdash2
Loss Limitation ndash Hurdles 6mdash2
Excess Business Losses New sect461(l) 6mdash4
IRS Issues Explanations for Denial of Deductions Under TCJA 6mdash4
Non-C Corp Excess Business Losses New sect461(l) 6mdash4
Excess Business Losses New sect461(l) 6mdash4
IRS Form 461 6mdash5
sect461(l) Computation Basics 6mdash6
sect461(l) Computation Freed Up Passive Losses 6mdash6
sect461(l) Computation Business vs Non-Business Rentals 6mdash7
New sect461(l) Ambiguity re ldquoSuchrdquo 6mdash7
New sect461(l) Bottom Line 6mdash7
New sect461(l) Wages as Business Income 6mdash8
sect461(l) Computation Losses from Disposition of Bus Prop Included 6mdash9
sect461(l) Computation Losses from Capital Gain Inside a Business Included 6mdash10
New sect461(l) Business vs Non-Business 6mdash10
New sect461(l) Applies at Owner Not Pass-Through Level 6mdash10
New sect461(l) Misc Guidance Needed 6mdash10
New sect461(l) Alternative Minimum Tax 6mdash11
New sect461(l) Trusts and Estates 6mdash11
New sect461(l) Tax Exempts 6mdash11
New sect461(l) State Conformity (or Not) 6mdash11
New sect461(l) Email Question Answer 6mdash12
TCJA - Net Operating Losses 6mdash14
80 Absorption - NOLs Generated in Years Beginning gt 2017 6mdash14
Losses Generated in Calendar Year 2018 - sect461(l) 80 Absorption 6mdash14
TCJA ndash 80 NOL Absorption - Controversy as to Computation 6mdash15
TCJA ndash 80 NOL Absorption - Carryback Limited to 80 6mdash16
TCJA NOL Changes - No Treasury Guidance Yet 6mdash16
AMT NOLs 6mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Net Operating Losses - Carrybacks and Carryforwards 6mdash17
NOL - Carrybacks and Carryforwards 6mdash17
Farming Business - Defined in sect263A(e)(4) 6mdash17
NOLs - Proof 6mdash18
NOL Carryforwards - Attach NOL Schedule to Return 6mdash18
QBI Deduction Applies to Non-C Corps 6mdash19
QBID Only Reduces Income Tax Effective Rate 6mdash19
QBI and Losses 6mdash19
Loss Limitation ndash Hurdles Under TCJA 6mdash20
QBID Only Reduces Income Tax Effective Rate 6mdash20
QBI and NOLs 6mdash21
TCJA ndash Comparing Top Income Tax Rates 6mdash27
C Corp vs Non-C Corp 6mdash27
Tax Cuts and Jobs Act 6mdash27
Pass-Through vs C Corp ndash Recent Stats 6mdash28
High Income C Corps 6mdash28
High Income ndash Pass-Through vs C Corp 6mdash28
Choices Choices 6mdash29
Choose sect199A Proposed or Final Regs 6mdash30
Choice is all or nothing 6mdash30
sect199A Final Regulations 6mdash30
sect199A Final Regulations - Clarification 6mdash31
TCJA ndash Comparing Top Income Tax Rates 6mdash32
Pass-Through Deduction (QBID) 6mdash32
QBI Deduction Applies to Non-C Corps 6mdash32
QBID ndash Individuals Estates amp Trusts Qualify 6mdash33
Trusts and Estates 6mdash33
sect199A and Trusts 6mdash33
QBI Deduction Does Not Affect AGI 6mdash34
QBI Deduction Below the Line 6mdash34
QBID Only Reduces Income Tax Effective Rate 6mdash34
SSTB Rules and Passive Activity Loss Rules 6mdash35
QBID Not Available if Partnership Level Tax Under CPAR 6mdash35
Qualified Business 6mdash35
Employee Not a Qualified Business 6mdash35
Potential New Qualified Business of Former Employee 6mdash36
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
QBID and Rental Real Estate 6mdash36
Is Rental Real Estate a Business 6mdash37
Consequences of Real Estate as Business or Not 6mdash37
U S Supreme Court ndash What Is a Business 6mdash38
Is a Single Family Residence a Business 6mdash38
Is Triple Net Lease a Business 6mdash38
Is Renting Land a Business 6mdash39
Is Rental Real Estate a Business Where It Gets Foggy 6mdash40
Is Rental Real Estate a Business 6mdash40
Rental Real Estate ndash Safe Harbor Notice 2019-7 6mdash40
Rental Real Estate ndash Non-Safe Harbor Trade or Business 6mdash43
Renting Property to Related Person 6mdash44
Interaction of sect199A and sect6662 Accuracy Penalty 6mdash45
sect6662 Accuracy Penalty 6mdash45
Lower sect6662 Accuracy Penalty Threshold 6mdash45
What if (Override and) Waive of QBID 6mdash46
TCJA Uncertainty - Protocol 6mdash46
sect6694 Preparer Penalties 6mdash46
QBID Makes Non-C Corp Tax Rates Crazy Low 6mdash47
Qualified Business Income Effective Rates 6mdash47
Limits (Caps) May Reduce QBI Deduction 6mdash47
Tentative QBI Deduction 6mdash47
QBI ndash Sale of Business Assets 6mdash52
Loss Limitation - Hurdles 6mdash53
Loss Limitation ndash Hurdles Pre-TCJA 6mdash53
Loss Limitation ndash Hurdles Under TCJA 6mdash53
TCJA ndash Non-C Corp Excess Business Losses 6mdash54
TCJA ndash Net Operating Loss Rules 6mdash54
QBI and Losses 6mdash55
QBI and NOLs 6mdash55
QBI Deduction Computation 6mdash56
Limits (Caps) May Reduce QBI Deduction 6mdash56
1st Limit (Cap) on QBID = 20 x Ordinary TI 6mdash57
20 x OITI Cap 6mdash57
1st Limit (Cap) on QBID = 20 x OITI 6mdash57
Limits (Caps) May Reduce QBI Deduction 6mdash58
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Last 2 Limits Reduce QBID Only if TI High 6mdash58
Phase Out of QBID if TI Exceeds Threshold 6mdash58
2nd Limit on QBID = SSTB (If Income Too High) 6mdash59
Specified Service Trade or Business (SSTB) 6mdash59
SSTB ndash What Does Phrase ldquoPrincipal Asset is Reputation or Skillrdquo Mean 6mdash59
SSTB ndash Skill or Reputation 6mdash59
SSTB ndash Health 6mdash60
SSTB ndash Law 6mdash60
SSTB ndash Accounting 6mdash61
SSTB ndash Actuarial Science 6mdash61
SSTB ndash Performing Arts 6mdash61
SSTB ndash Consulting 6mdash61
SSTB ndash Athletics 6mdash62
SSTB ndash Financial Services 6mdash63
SSTB ndash Brokerage Services 6mdash63
SSTB ndash Investing Investment Management Trading or Dealing 6mdash64
SSTB ndash Only Matters if TI Above Threshold 6mdash64
SSTB ndash Crack and Pack Strategy 6mdash65
Backstory ndash Crack and pack (divide and conquer) 6mdash65
SSTB ndash Anti-Cracking Rule 6mdash65
SSTB ndash A Cracking Permission Rule 6mdash66
SSTB ndash Cracking Permission Rule Bites Dust 6mdash67
SSTB ndash Cracking Permission Rule Bites Dust Solution Break Into 2 Businesses 6mdash67
SSTB ndash Cannot Be Aggregated With Other Entities 6mdash67
SSTB ndash De Minimis Rule 6mdash67
SSTB ndash If De Minimis Rule Not Met 6mdash68
Final Regs ndash Separating Businesses 6mdash69
Pass-Through Entity Must Report SSTB Status 6mdash71
Phase Out of QBID for SSTB If TI gt Threshold 6mdash71
Phase Out of QBI Deduction for SSTB 6mdash71
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash72
Limits (Caps) May Reduce QBI Deduction 6mdash72
Wage or WageProperty Limit 6mdash72
Wage Limit 6mdash73
Wage Limit ndash Definition of W-2 Wages 6mdash73
Wage Limit ndash W-2 Wage and Elective Deferrals 6mdash73
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Wage Limit ndash W-2 Wages ndash 3 Computations 6mdash73
Wage Limit ndash Examples 6mdash74
Phase In of Wage Limit 6mdash74
Wage Limit Planning 6mdash75
WageProperty Limit 6mdash76
Property Limit 6mdash76
K-1 Failure to Report Item 6mdash78
Wage or WageProperty Limit Planning 6mdash78
Wage or WageProperty Limit - Business-by-Business Limit 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range 6mdash79
Do Both SSTB and Wage WageProperty Limits Apply Within Phase Out Range Yes 6mdash79
Effect of Business Losses on QBID 6mdash80
Effect of Carryover QB Loss on QBID 6mdash81
Effect of QB Loss on QBID 6mdash81
sect199A and Aggregation 6mdash82
To Aggregate or Not Aggregate That is the Question 6mdash82
sect199A and Aggregation 6mdash83
SSTB ndash Aggregation at Owner or RPE Level 6mdash83
Restaurant and Catering Businesses May Be Aggregated 6mdash86
Businesses Owned Identically Through 2 Pshps May Be Aggregated 6mdash86
Mere Common Management Not Enough for Aggregation 6mdash86
Some Businesses May Be Aggregated Others Need Not Be 6mdash86
Minority Owners May Aggregate If a Majority Owner Can 6mdash87
Only Businesses Meeting All Aggregation Tests May Be Aggregated 6mdash87
Must Meet All Tests to Aggregate 6mdash87
Businesses Meeting Integration Test and Real Estate Leased to Them May Be Aggregated 6mdash87
Ownership Attributed Through Family Member Leads to Aggregation Privilege 6mdash88
Minority Owners Qualify If Any Majority Owner Does 6mdash88
If Group Owns gt 50 Aggregation Permitted C Corps May Not Be Aggregated 6mdash88
Centralized Business Elements Test Not Met May Not Be Aggregated 6mdash89
Non-Businesses May Be Aggregated 6mdash89
Parent and Subs May Be Aggregated 6mdash89
Only Businesses May Be Aggregated 6mdash89
Commercial Properties May Be Aggregated 6mdash90
No Aggregation of Commercial and Residential 6mdash90
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvi
copy 2019 Bradley Burnett Tax Seminars Ltd
Aggregation of Real Estate 6mdash90
sect199A and Aggregation 6mdash91
sect199A Aggregation on 2018 Form 1040 6mdash92
sect199A ndash Grain Glitch 6mdash92
sect199A ndash Grain Fix 6mdash92
sect199A ndash Planning 6mdash93
QBID ndash Good If You Can Get It 6mdash94
QBID ndash Which Side of the Fence A New Thinking Process 6mdash94
Income (QBI vs Non-QBI) ndash Which Side of the Fence (Do You Want Your Income On) 6mdash94
sect168(k) Bonus Depreciation 6mdash97
Cost Recovery Under TCJA 6mdash97
Fast Cost Recovery - Methods 6mdash98
sect168(k) Bonus Depreciation 6mdash98
TCJA sect168(k) 6mdash98
sect168(k) Bonus Depreciation - How to Claim Bonus 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out 6mdash99
sect168(k) Bonus Depreciation - How to Elect Out (Slightly Late) 6mdash99
sect168(k) Bonus Depreciation - Property Owner Elects Out 6mdash100
Bonus Election Out - Cannot Revoke Without IRS Consent 6mdash100
sect168(k) Bonus Depreciation - Qualified Property 6mdash100
sect168(k) - Qualified Improvement Property (QIP) 6mdash101
TCJA - Qualified Improvement Property 6mdash101
Qualified Improvement Property (QIP) - Odds of Fix 6mdash102
Qualified Improvement Property (QIP) - Mechanics of Fix 6mdash103
Qualified Improvement Property (QIP) - Effects of Fix No Fix 6mdash103
sect168(k) - Plants 6mdash104
Bonus Depreciation Available on Parts of a New Apartment Building Property 6mdash104
Cost Segregation Studies 6mdash104
sect168(k) Bonus Depreciation ndash Elections 6mdash105
sect168(k) Bonus - Retroactive (to 2017) Elections 6mdash105
Retroactive Elections - Rev Proc 2019-33 6mdash106
TCJA - Retroactive Changes to sect168(k) 6mdash106
Retroactive Elections - Rev Proc 2019-33 6mdash106
Rev Proc 2019-33 - Lots of Forks in the Road 6mdash107
Retroactive sect168(k) Elections (Revocations) - Rev Proc 2019-33 6mdash107
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashvii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rev Proc 2019-33 - Talk About a Mulligan 6mdash108
Rev Proc 2019-33 - Two Choices 6mdash109
Rev Proc 2019-33 - Mechanics 6mdash109
Income Averaging - Alive or Dead 6mdash110
sect168(k) Bonus Regulations - Allowed or Allowable 6mdash111
Allowed or Allowable - Ouch 6mdash111
sect168(k) Bonus - If No Claim Bonus and No Elect Out 6mdash111
Allowed or Allowable - Bonus Depreciation Double Whammy 6mdash112
Allowed or Allowable - Saved by the Rev Proc 2019-33 Bell 6mdash112
sect168(k) Bonus Depreciation - Newly Unveiled Final Regulations 6mdash113
sect168(k) - Treasury and IRS Guidance 6mdash113
sect168(k) Bonus Depreciation Final Regs - Issued on Friday the 13th 6mdash113
sect168(k) ndash Treasury Guidance 6mdash114
sect168(k) ndash Treasury Guidance Choices Choices 6mdash114
sect168(k) Bonus -Two Questions 6mdash114
sect168(k) Bonus - Acquisition Date 6mdash115
sect168(k) - Placed in Service 6mdash115
Entertainment Meals 6mdash125
Business Entertainment and Meals Under TCJA 6mdash126
Pre-TCJA Entertainment 6mdash126
TCJA ndash Business Entertainment 6mdash126
Entertainment ndash Objective Test 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash126
Business Meals 6mdash126
TCJA ndash Business Meals 6mdash126
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA ndash Business Entertainment and Meals 6mdash127
TCJA Cuts Entertainment Leaves Meals 6mdash127
TCJA Cuts Entertainment Deduction 6mdash128
TCJA Cuts Entertainment Leaves Meals 6mdash128
Business Meals Under TCJA 6mdash128
TCJA ndash Employer Credit for Paid Family amp Medical Leave 6mdash128
TCJA ndash Cash Method for C Corps 6mdash129
TCJA ndash Inventories and Cash Method 6mdash129
TCJA ndash sect263A Uniform Capitalization Rules 6mdash129
TCJA ndash RampD Costs 6mdash130
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashviii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Moving Expenses 6mdash130
TCJA ndash Credit for Paid FamilyMedical Leave 6mdash130
TCJA - Gambling Expense Deduction 6mdash130
TCJA ndash Listed Property 6mdash130
TCJA - sect163(j) Business Interest Expense Limit 6mdash131
Scope of sect163(j) 6mdash131
Why Why Why Why 6mdash132
Pre-TCJA sect163(j) - (Old Regime) 6mdash132
Carryovers from Old Regime to New Regime 6mdash133
TCJA sect163(j) - (New Regime) 6mdash133
sect163(j) ATI Limit ndash Example 6mdash134
IRS Form 8990 6mdash134
sect163(j) - Definition of Business 6mdash134
sect163(j) Applies to Taxpayers 6mdash135
sect163(j) Business Interest Expense Limit 6mdash136
sect163(j) ATI Limit ndash Example 6mdash136
IRS Form 8990 - Business Interest Expense (BIE) 6mdash136
Interest Tracing Rules 6mdash137
Interest Tracing Rules - ldquoPretend Rulesrdquo 6mdash137
Int Tracing Rules ndash sect1163-10T(o)(5) Election 6mdash138
Interest Tracing Rules ndash IRS Notice 89-35 6mdash138
Investment Interest Expense 6mdash138
Interest Tracing Rules - Business vs Investment Interest Expense 6mdash139
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash139
TCJA ndash Are Guaranteed Payments - Now Walking the Plank 6mdash140
TCJA - Guaranteed Payments 6mdash141
Guaranteed Payments vs Allocations of Gross Income 6mdash141
Business Interest Expense (BIE) - Prop Regs Broaden Definition 6mdash141
Business Interest Expense (BIE) - Anti-Avoidance Rule 6mdash141
IRS Form 8990 - Computation of Limit on BIE and Allowable BIE 6mdash142
sect163(j) Business Interest Expense Limit 6mdash142
sect163(j) ATI 6mdash143
sect163(j) ATI Computation Additions 6mdash143
ATI Computation Depreciation 2018 vs 2022 6mdash143
sect163(j) ATI Computation Depreciation Amortization and Depletion 6mdash144
IRS Form 8990 Computation of ATI ndash Additions 6mdash144
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashix
copy 2019 Bradley Burnett Tax Seminars Ltd
sect163(j) ATI Computation Subtractions 6mdash144
IRS Form 8990 Computation of ATI ndash Subtractions 6mdash145
ATI Computation Depreciation Capitalized 6mdash145
sect163(j) ATI Computation 6mdash146
sect163(j) Business Interest Expense Limit 6mdash146
sect163(j) Computation - Business Interest Income (BII) 6mdash146
IRS Form 8990 Computation of ATI ndash Computing BII 6mdash146
sect163(j) Business Interest Expense Limit 6mdash147
sect163(j) ATI Computation - Floor Plan Financing Interest 6mdash147
sect163(j) ATI Limit ndash Example - Vehicle Dealer 6mdash147
Carryforward of Disallowed BIE 6mdash148
IRS Form 8990 Computation of Carryforward (EBIE) 6mdash149
Small Business Exemption 6mdash149
Exempt Small Business $25 Million Gross Receipts and Attribution 6mdash150
sect163(j) Anti-Abuse Rule 6mdash150
sect163(j) ndash Gross Receipts Test 6mdash151
sect163(j) ndash Gross Receipts Test - Computation 6mdash151
sect163(j) ndash Gross Receipts Test - Individuals 6mdash151
sect163(j) ndash Gross Receipts Test - Tax Exempt Organizations 6mdash151
sect163(j) ndash Gross Receipts Test - S Corp or Partnership 6mdash152
Attribution Rules - Getting Snagged 6mdash152
sect163(j) ndash Gross Receipts Test Aggregation Rules 6mdash152
sect163(j) Taxpayer Later Meets Small Business Exemption ndash Fate of Carryover 6mdash154
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash154
Going In and Out of Exempt Status 6mdash155
Tax Shelters (Syndicates) - Not Exempt from sect163(j) 6mdash156
sect163(j) ndash Tax Shelter 6mdash156
sect163(j) and Real Property 6mdash157
Real Property Business Elect Out Depreciation Consequences 6mdash158
Switch to ADS ndash Example 6mdash158
sect163(j) and Agriculture 6mdash159
sect163(j) ndash Farming Business Elect Out 6mdash159
sect163(j) ndash Co-ops May Elect Out 6mdash160
How to Elect Out - Real Property Business or Farming Business 6mdash160
How to Elect Out - Partnership 6mdash161
sect163(j) Exempt or Excepted Businesses 6mdash161
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashx
copy 2019 Bradley Burnett Tax Seminars Ltd
Allocations Between Excepted and Non-Excepted Businesses 6mdash161
How Does sect163(j) Vary with Entity Type 6mdash161
sect163(j) and C Corps 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 1 6mdash162
sect163(j) ATI Limit ndash Example C Corp ndash Year 2 6mdash162
sect163(j) Applies at Partnership Level 6mdash163
EBIE Flows to Partner and Stacks at Partner Level 6mdash163
Partnership Allocation Among Partners 6mdash163
Partnership Reporting to Partners Schedule K-1 Box 13 6mdash164
Partnership Reporting to Partners Schedule K-1 Box 20 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 1 6mdash164
sect163(j) ATI Limit ndash Example Partnership ndash Year 2 6mdash165
sect163(j) and Partners 6mdash165
Excepted Pass-Through - May Need to Be Tapped for Info 6mdash166
EBIE and Partnerrsquos Outside Basis 6mdash166
Excess Taxable Income (ETI) - Computed and Distributed by Pass-Through 6mdash166
Excess Business Interest Income (EBII) - Computed and Distributed by Pass-Through 6mdash166
IRS Form 8990 - Partnership Pass-Through Items 6mdash166
IRS Form 8990 6mdash167
Carryforward of Disallowed BIE 6mdash167
sect163(j) and S Corps 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 1 6mdash168
sect163(j) ATI Limit ndash Example S Corp ndash Year 2 6mdash169
sect163(j) and S Corps 6mdash169
sect163(j) Computation Self Charged Interest 6mdash169
IRS Form 8990 S Corp Pass-Through Items 6mdash169
IRS Form 8990 6mdash170
Interaction of sect163(j) with Other Code Sections 6mdash170
Loss Limitation - Hurdles 6mdash171
Interaction of sect163(j) with Other Code Sections 6mdash171
sect163(j) and Tax Prep Software 6mdash171
Research Credit Interaction with sect163(j) 6mdash171
TCJA - sect163(j) Business Interest Expense Limit 6mdash172
sect163(j) Business Interest Expense Limit Summary 6mdash172
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
6mdashxi
copy 2019 Bradley Burnett Tax Seminars Ltd
Planning to Reduce Impact of sect163(j) 6mdash173
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 7 Fringe Benefit and Qualified Retirement Plans
Table of Contents
Health Reimbursement Accounts (HRAs) 7mdash1
Controversy Over Recent Short Term Health Insurance Plan Regs 7mdash1
sect401(k) Plans Exception to sect72(t 7mdash2
TCJA ndash Moving Expenses 7mdash2
TCJA ndash Bicycle Commuting Expense 7mdash2
TCJA ndash Employer Credit for Paid Family amp Medical Leave 7mdash2
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 7mdash3
Employer Mandate Penalty 7mdash3
Employer Mandate Penalty ndash Storm Brewing 7mdash3
Fringe Benefits 7mdash3
Fringe Benefit Defined 7mdash3
Fringe Benefit Formula 7mdash3
Thinking process 7mdash4
Look out for workers comp premium wage base 7mdash6
IRS Spruces Up Pub 15-B to Discuss Fringes in More Detail (Pub 15-B (2017)) 7mdash6
Frequent Flyer Miles 7mdash6
Frequent flyer miles earned from business travel 7mdash6
Bank ldquoThank Yourdquo Points for Opening a New Account Are Taxable 7mdash6
De Minimis (Minimal) Benefits (sect132(a)(4) (e)) 7mdash7
Is Employer Provided Fitbit Tax Free to Employee as De Minimis Fringe 7mdash7
sect274 Cost of Professional Hockey Teamrsquos Away Game Meals 100 Not 50 Deductible ndash Qualify as De Minimis Fringes to Players and Other Traveling Employees (Jeremy M Jacobs and Margaret J Jacobs v Comm 148 TC No 24 (062617)) 7mdash8
Bruins meet de minimis exception 7mdash8
Employer-Provided Cell Phones (sect132(e) sect1132-6(b)) 7mdash8
Noncompensatory business purposes 7mdash8
Cell phones provided to promote goodwill boost morale or attract prospective employees not excluded from employeersquos wages 7mdash8
HSA Contribution Limits 7mdash8
Cafeteria Plans (sect125) 7mdash9
$2600 (2017) ($2650 for 2018) Contribution Limit to a Health Flexible Spending Arrangement (FSA) ($2550 for 2016) ( 7mdash9
Health Reimbursement Arrangements (HRAs) (sect105(h) sect1105-11) 7mdash9
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
An HRA is a Group Health Plan 7mdash10
HRAs Incompatible with ACA Market Reforms ndash So Says the Government (Notice 2013-54 Notice 2016-17) 7mdash10
Obamacare murders most free standing HRAs 7mdash10
Transitional relief for carryover HRA balances 7mdash10
Three types of HRAs survive ACA 7mdash10
Integration with group health insurance may spare an HRArsquos life 7mdash11
HRAs generally cannot be integrated with individual policies 7mdash11
Health Insurance Premium Reimbursement Gets the Axe 7mdash11
Exceptions to $100Day Penalty 7mdash11
HRA Reporting Rules 7mdash11
HR 34 and Medical Reimbursement Arrangements (HR 34 (21st Century Cures Act sect18001)) 7mdash12
Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) 7mdash12
Extension of Period for Furnishing Written QSEHRA Notice to Eligible Employees (Notice 2017-20) 7mdash12
Qualified Retirement Plans 7mdash13
Qualified Retirement Plan Changes 7mdash13
Compensation Limit for 2017 (and 2018) 7mdash13
Elective Deferral Limit for 2017 (in 2018) 7mdash13
Defined contribution limit for 2017 (2018) 7mdash13
SIMPLE plan salary reduction contribution limit for 2017 (and 2018) 7mdash13
Catch-up contribution limit for 2017 (and 2018) 7mdash13
Qualified Retirement Plan Topics 7mdash14
SIMPLE Plans 7mdash14
SIMPLE Plan Adoption Due Date 7mdash14
Chart Retirement Plan Rules 7mdash14
Forms 5500 7mdash15
Forms 5500 Filing Requirements 7mdash15
Due date for Form 5500 Last day of 7th month after plan year ends 7mdash15
Late Filing Penalty for Form 5500 7mdash15
Aggregation Rules 7mdash15
sectsect410 414 Aggregation Rules Apply to Blow ESOP Out of Water ndash Qualified Plan Minimum Participation Standards Not Met ndash Covering Only Sole Employee of One Corp Not Enough When Controlled Group Brother Sister Corp Had Five Employees Not Covered (Paza Staffing Services Inc v Comm Docket No 6881-12R (081717)) 7mdash15
Qualified Plans of Each of Two Entities Under Common Control Required to Be Aggregated for Annual Contribution Limit Testing (TAM 201715001) 7mdash15
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
7mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect415 Contribution Limits 7mdash16
sectsect401 501 ESOP Loses Qualified Status for Exceeding sect415 Contribution Limit (DNA Pro Ventures Inc Employee Stock Ownership Plan v Comm 8th Circuit No 16-1168 (050917) Affgrsquo TCM 2015-195 (100515)) 7mdash16
Loans Not Taxable Distributions if Ground Rules Met 7mdash16
Loan must be evidenced by a legally enforceable agreement 7mdash17
Loan is deemed distributed if payment not made on due date or within grace period 7mdash17
Cure period extends to last day of calendar quarter following calendar quarter in which required installment payment was due 7mdash17
If payment not made by end of cure period entire balance of loan deemed distributed 7mdash17
sect401 Busted 401(k) Loan Cure Period Results in Distribution of Entire Loan Amount ndash Cure Period Extends to Last Day of Calendar Quarter Following Calendar Quarter in Which Loan Payment Was Missed ndash No Hardship Withdrawal Relief for sect72(t) 10 Tax (Gregory J Gowen v Comm TCS 2017-57 (072417)) 7mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 8 Employment Tax Self-Employment Tax and Forms 1099
Table of Contents
sect7434 Fraudulent Filing of Info Returns 8mdash1
Employment Tax Crackdown 8mdash2
FICA and Medicare Taxes 8mdash2
FICA and Medicare Wage Bases 8mdash2
2018 FICA and HI Taxes ndash Table 8mdash2
TCJA ndash Employment Taxes 8mdash3
FICA Earnings Required for Quarter of Credit 8mdash3
SE Wage Base 8mdash3
Household Worker Wage Base 8mdash4
IRS Letter to Tax Preparers (e-news for tax professionals 2017-4) 8mdash4
Future of Social Security (OASDI) Trust Fund 8mdash5
Projected FICA Wage Bases (2019-2026) ((2017 Annual Report page 116) 8mdash6
Social Security Scam 8mdash6
Inspector General Warns Public About SSA Employee Impersonation Scheme (Posted (072017)) 8mdash6
W-2 Scams 8mdash7
Form W-2SSN Data Theft Information for Businesses and Payroll Service Providers (IRS website) 8mdash7
W-2 Filing Stats for Filing Season 8mdash9
New Wage Verification Process Holds Promise but IRS Faced Implementation Challenges (GAO-17-525T (042617)) 8mdash9
W-2 W-3 and 1099-MISC Due Dates 8mdash10
New filing due date (for 2016 and later) Forms W-2 W-3 and 1099-MISC 8mdash10
Penalty for Delinquent Information Returns 8mdash10
Delinquent Information Return Penalty Dramatically Increase (Effective for Info Returns and Statements Required to be Filed After 2015) 8mdash10
Information Reporting Penalty De Minimis Safe Harbor 8mdash10
IRS De Minimis Error Safe Harbor to sectsect6721 and 6722 Penalties (Notice 2017-09 (012317)) 8mdash10
Fraudulent Information Return (Form 1099) Lawsuits 8mdash14
sect7434 Issuance to Misclassified Worker of Form 1099 (Instead of W-2) Not a Fraudulent Filing of an Information Return ndash Correct Amount of Pay Reported But Allegedly Wrong Form Used ndash Thus $5000 in Damages Not Awarded ndash Court Said to Misclassified Worker (Alleged Employee) Had Other Remedies (Thom V Tran
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
v Ngoc Tran Case No 816-cv-1356-T-23AEP DC MD Florida Tampa Division(030717) (not following Magistratersquos Recommendation (020117) in samecase) 8mdash14
IRS Propaganda re Employment Tax Returns 8mdash17
IRS Pub 5146 Employment Tax Returns ndash Recently Revised 8mdash17
Interest free 2 requirements 8mdash18
Pay the tax when you sign IRS Agreement to Assess or file Form 941-X 8mdash19
IRS Employment Tax Research Audits 8mdash19
GAO Report re IRS Employment Tax Research Audits (GAO-17-371 April 2017) 8mdash19
Change of Business Address or Responsible Party 8mdash20
Responsible party 8mdash21
Notify IRS If Address or Responsible Party Changes (IRS Form 8822 or IRS Form 8822-B) (Rev Proc 2010-16 IRB 2010-19 (051010)) 8mdash21
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss YourCollection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your HeadHanded to You ndash Seller of Construction Company Liable for Taxes Incurred AfterHe Sold Company ndash Better to Let IRS Know Yoursquore No Longer the ResponsiblePerson (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 8mdash23
Private Delivery Services 8mdash25
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHLAdded But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) (IRS webpage Private Delivery Services PDS page last reviewedor ipdated 22-May-2017) 8mdash25
Outsourcing Payroll Duties 8mdash26
Tips for Employers Who Use a Payroll Service (SSAIRS Reporter Spring 2017) 8mdash26
Professional Employer Organizations (PEOs) 8mdash27
PEO Throws Customer Under the Bus ndash PEO Embezzles Customerrsquos Payroll Tax Monies and Obviously Fails to Deposit ndash Customer Remains Liable for All Tax Plus $425000 in Failure to Pay and Failure to Deposit Penalties and Interest ndash Due Diligence Required When Utilizing Payroll Service Providers (Kimdun Inc et al v US No 216-cv-01500-CAS (RAOx) DC CD CA (081516)) 8mdash27
Company learned of outside payroll providerrsquos failures in 2009 and continued using their services until 2012 8mdash27
Professional Employer Organizations (PEOs) Certification Qualified Plans and ACA 8mdash28
Robust standards 8mdash28
Audited annual financials 8mdash28
Bond and surety 8mdash29
Business entity 8mdash29
Consent to disclosure 8mdash29
IRS must perform due diligence on CPEOs 8mdash29
With a PEO the PEOrsquos customer remains liable for federal employment taxes 8mdash29
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
With a CPEO the PEOrsquos customer is generally relieved of liability for federal employment taxes 8mdash29
Buyer beware 8mdash29
CPEO is new breed of statutory employer 8mdash29
Tacking of wages allowed with CPEO 8mdash29
CPEOrsquos customer gets to keep wage related credits 8mdash30
CPEOs not a perfect solution for everything 8mdash30
Thorny issues remain for PEOs and qualified employee benefit plans and ACA employer mandate and reporting thorny issues 8mdash30
PEO as sponsor of qualified plan 8mdash30
CPEO as sponsor of qualified plan 8mdash30
CPEO and ACA employer mandate penalty 8mdash30
PEO and ACA reporting 8mdash31
CPEOs not a perfect solution for everything 8mdash31
Form I-9 Verification re Immigration Status 8mdash31
Fines for I-9s and Other Immigration Violations Jumped Up as of 080116 8mdash31
Hiring New Employees Paying Contract Labor Do Not Overlook Form I-9 8mdash31
Eligibility for employment 8mdash31
Events Management Company Reportedly Socked for $605250 for Failure to Properly Complete I-9 Paperwork (Roy Maurer SHRM blog post (080317)) 8mdash32
Duty of Consistency 8mdash32
sect6501 Milwaukee Restaurateurrsquos Attempted Deduction for Wages Violated Duty of Consistency ndash Increased Wages Reported on Lame Duck 941s Do Not Qualify for Increased Income Tax Deductions ndash To Allow It Would Be Wallydraigle (Alaa I Musa v Comm No 16‐1841 7th Cir (042617)) 8mdash32
Recordkeeping 8mdash34
Keep records minimum 4 years but forever is better 8mdash34
FICA Tax Refunds and Employee Consent 8mdash34
Employee Consent for Employer FICA Tax Refund ndash Electronic Consents Permitted and Reasonable Efforts (in Event Consent is Not Secured) Clarified (Rev Proc 2017-28 IRB 2017-14 040317) 8mdash34
Independent Contractor vs Employee 8mdash38
sect3402 In IRS Contract Labor vs Employee Dispute Employer Could Directly from IRS Discover Information Regarding Whether Worker Paid Income Tax ndash This Court Case Deserves Applause (Mescalero Apache Tribe v Comm 148 TC No 11 (040517)) 8mdash38
IRS to IRS Employees Severely Limit Employer Access to Worker Return Info ndash Mescalero Has Extremely Limited Application (CCA 201723020 (050517)) 8mdash38
Work Opportunity Credit and Employment Tax 8mdash39
Work Opportunity Tax Credit (WOTC) for Exempt Organizations Hiring Veterans is Available to Offset Employment Tax (sect51 IRS Form 5884-C) 8mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
8mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
Research Credit Payroll Tax Offset 8mdash41
Qualified Small Business Payroll Tax Credit for Increasing Research Activities 8mdash41
Reporting 8mdash41
Election by Qualified Small Business to Claim Payroll Tax Credit for Increasing Research Activities (Notice 2017ndash23 IRB 2017-16 (041717)) 8mdash41
Payroll tax election capped at $250000 8mdash41
No payroll tax credit election if made a payroll tax credit election for 5 or more preceding taxable years 8mdash41
FICA and NQ Deferred Comp 8mdash42
sect3121(v)(2) FICA and Nonqualified Deferred Comp (NQDC) - Payment of FICA Barred by Statute of Limitations in Order to Elect Special Timing Rule (and Avoid FICA Tax Later) No Longer Allowed - IRS Slams on the Brakes and Reverses Course (IRS Chief Counsel Memorandum AM2017-001 (CCM) (011317)) 8mdash42
SE Taxes and sect1402(a)(13) Limited Partner Exception 8mdash43
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 8mdash43
Trust Fund Recovery Penalty 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Not Liable for Trust Fund Recovery Penalty ndash Delivering Payroll Checks and Transferring Bank Balances Did Not Sink Her ndash She Did Not Know Payroll Taxes Went Unpaid ndash Neither Responsible or Willful - Responsibility is a Matter of Status Duty and Authority (Christina M Fitzpatrick v Comm TCM 2016-199 (110216)) (Fitzpatrick 1) 8mdash43
sect6672 Wife of Half Owner of Failed Florida Wine Bar Wins Attorney Fees for Litigation Finding Her Not Liable for Trust Fund Recovery Penalty ndash Attorney Fee Award Limited to Statutory Rate ndash No Special Factors to Justify a Higher Amount ndash At Statutory Rates of $180ndash200Hour from 2012 through 2016 Court Awarded Attorney Fees of $179000 ndash Delinquent Trust Fund Taxes Were Only $138700 (Christina M Fitzpatrick v Comm TCM 2017-88 (052417)) (Fitzpatrick 2) 8mdash43
sect6672 Owner of Business Liable for $4323000 Trust Fund Recovery Penalty as Consequence of Lending $100000 to Business (After an Employee Had Embezzled $10 Million) to Pay Payroll But Not Enough to Pay Payroll Taxes ndash Which Came First the Chicken or the Egg (McClendon (DC TX 111716) 8mdash43
Tips v Service Charges 8mdash43
IRS Employer Reminder Reporting Tips versus Service Charges Key Differences Between Categories Affect Employees Tax Reporting (FS-2017-08 042517) 8mdash43
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 9 C Corporations and Exempt Organizations
Table of Contents
Capital Contributions vs Income 9mdash1
Suspended Corporation 9mdash1
Private Foundations Granting Scholarships 9mdash1
Form 1120 9mdash2
Late Filing Penalty 9mdash2
TCJA ndash Comparing Top Income Tax Rates 9mdash2
TCJA ndash Corporate Tax Rates 9mdash2
TCJA ndash Corp Tax Rates ndash Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp AMT 9mdash3
TCJA ndash AMT Repeal ndash Rate Blended for 1st FY Ending After 2017 9mdash3
TCJA ndash C Corp MTC Carryover 9mdash4
C Corps and Buy Sell Agreements 9mdash4
C Corp Income Tax Structure 9mdash5
Dividends Received Deduction 9mdash5
Should You Switch to a C Corp 9mdash5
C Corps are Like Lobster Traps 9mdash6
C Corp Planning ndash Splitting Income with C Corprsquos Lower Brackets 9mdash6
C Corp vs Non-C Corp 9mdash6
Accumulated Earnings Tax (AET) 9mdash7
C Corp vs Non-C Corp 9mdash7
C Corp sect1202 (QSBS) Stock 9mdash7
sect1245 Rollover of sect1202 Stock 9mdash8
sect1202 Stock Planning Pointers 9mdash8
C Corp vs Non-C Corp 9mdash8
S Corp Conversions to C Corp 9mdash9
Exempt Organizations 9mdash10
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash10
Exempt Organizations Computation of UBTI 9mdash10
Exempt Orgs ndash Ground Rules 9mdash11
TCJA ndash Excise Tax on Tax Exempts for Employee Parking 9mdash11
TCJA ndash New Excise Tax Aimed at Exempt Orgs w Highly Compensated Employees 9mdash11
Exempt Organizations ndash Action Points 9mdash14
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
TCJA ndash Corp Tax Rates ndash Blended for 1st Fiscal Year 9mdash15
sect11 TCJA Blended rate (between prior law (up to 35) and TCJA (21)) applies for fiscal year straddling 2017 and 2018 9mdash15
Legislation ndash Highway Act (PL 114-41 sect2006 (073115)) 9mdash15
sectsect6072 6081 Form 1120 (and Related Extension) Due Dates Change for 2016 and Later Returns (IRS webpage ldquo6-Month Extension Period for Calendar Year C Corporations -- 08-FEB-2017rdquo) 9mdash15
C Corporation Return Due Dates 9mdash15
Income Tax Return Due Dates 9mdash15
Tax Return Extension Periods 9mdash16
FBAR 9mdash17
C Corporation Penalty for Late Filing 9mdash17
Accumulated Earnings Tax (AET) 9mdash17
AET Applies to C Corps that Accumulate Excess Earnings 9mdash17
Accumulating EampP beyond reasonable needs of business triggers AET 9mdash17
IRS must prove accumulation is beyond reasonable needs of business 9mdash18
Reasons deemed acceptable for accumulating EampP 9mdash18
Reasons not deemed acceptable for accumulating EampP 9mdash18
A mere holding or investment company is prima facie evidence of tax avoidance purpose 9mdash18
sect531 Accumulated Earnings Tax Applies to Corporation Holding Only Partnerships (CCA 201653017 (123016)) 9mdash18
C Corporation Year End Planning Maneuvers 9mdash19
Income deferral generally desirable 9mdash19
Acceleration of income can avoid higher rates 9mdash19
Acceleration of income into earlier year to prevent bracket creep in later year 9mdash19
Manipulate income to keep C Corp ldquosmallrdquo to avoid application of AMT 9mdash19
Pushing income into 2017 can preserve AMT exemption for 2017 9mdash20
Creating a little not a lot of income tax can preserve exception from estimated tax penalty 9mdash20
To qualify for ldquo100 of last yearrsquos taxrdquo safe harbor there must have been income tax liability in the prior year 9mdash20
Accelerate income if necessary to make safe harbor available 9mdash20
Balance benefits of NOL carryback against benefits of lower estimated tax threshold and lower prior year tax bracket 9mdash20
Manipulate income to avoid ldquolarge corporationrdquo status for estimated tax penalty avoidance purposes 9mdash20
Exclusion of Gain on sect1202 Stock (Made permanent by PATH Act sect126) 9mdash20
sect1202 Qualified Small Business Stock 9mdash21
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Updates
9mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect1202 Providing Laboratory Reports to Health Care Professionals Not ldquoHealthrdquo Within Meaning of sect1202(e)(3)(A) ndash Thus Stock Not Disqualified as sect1202 QSBS Stock ndash Stock Eligible for Qualified Small Business Stock Gain Exclusion (PLR 201717010 (042817)) 9mdash21
C Corporations and Reasonable Compensation 9mdash22
Chicagorsquos Premiere Intellectual Property Law Firm Not Permitted to Pay Out All Profits in Compensation ndash A Reasonable Investor Must Enjoy a Reasonable Rate of Return Even from a Professional Corporation ndash Accuracy Penalty Stuck ndash Could Not Prove Sought Advice as to Whether Amount of Salaries Paid Reasonable (Brinks Gilson amp Lione a Professional Corporation v Comm TCM 2016-20 (021016) 9mdash22
sect162 Tax Court Trims Rent Paid by Arkansas Wholesaler (KampK Veterinary Supply Inc v Comm TCM 2013-84 (032513)) 9mdash22
Paying the Wrong Personrsquos Expense 9mdash24
Payment by C Corp of Related Corporationrsquos Expenses Taxable Dividend to Shareholder ndash Deductible to No One (Key Carpets v Comm TCM 2016-30 (022516)) 9mdash25
sect385 Advances by Shareholder Were Not Loans But Investments in Equity ndash Lack of Loan Documentation and Related Protocol Doesnrsquot Get You Far (John M Sensenig and Alta Z Sensenig pro sese v Comm TCM 2017-1 (010317)) 9mdash25
Exempt Organizations 9mdash25
sect501(c)(3) Organization Denied Tax Exempt Status Denied Because Organization Gave Money to Specific Family Rather Than Indefinite Class of Individuals (LTR 201738012 063017)) 9mdash25
sect501(c)(3) Organizationrsquos Tax Exempt Status Revoked Because Organization Failed to File Form 990 and Comply with IRSrsquos Info Requests in Connection with IRS Exam (LTR 201738013 (032917)) 9mdash25
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 10 S Corporations
Table of Contents
2019 Form 1120S Draft (093019) 10mdash1
Ruling ndash Termination of S Corp 10mdash2
Form 1120S 10mdash3
IRS Ceases to Issue S Corp Guidance 10mdash3
C Corp vs Non-C Corp 10mdash3
TCJA ndash S Corp Conversions to C Corp 10mdash4
Should You Switch from C to S Corp 10mdash4
S Corp Stock Basis 10mdash5
Basis in S Corp Stock and Debt 10mdash5
No Basis for Guaranty of Debt by Shareholder 10mdash5
S Corporation Tax Structure 10mdash5
S Corp Reasonable Compensation 10mdash5
Loan vs Salary 10mdash6
S Corp Reasonable Comp ndash Bye Bye Tax Court 10mdash7
Assignment of Income 10mdash7
sect199A Planning 10mdash7
S Corp Return Due Dates 10mdash7
Income Tax Return Due Dates 10mdash7
Tax Return Extension Periods 10mdash8
FBAR 10mdash8
S Corp Late File Penalty 10mdash8
If 1120S is late filed base penalty is $200shareholdermonth (not to exceed 12 months) ($195 for 2016 returns) ($200 for 2017 and 2018 returns) 10mdash8
If tax is due base penalty is added to with more penalty 10mdash9
S Corp Failure to Furnish Information Timely 10mdash9
Requesting Penalty Relief (IRM 201135 (11-25-2011)) 10mdash11
First Time Abate (FTA) (IRM 2011361 (08-05-2014)) 10mdash12
Built In Gains Tax 10mdash12
PATH Act Makes 5 Year Built In Gains Recognition Period Permanent (PATH Act sect127) 10mdash12
Built In Gains Tax Basics 10mdash13
Later Spike in Value of Asset After Date of Conversion from C Corp to S Corp Not Built In Gain Taxable ndash Itrsquos Value on Date of Switchover That Counts ndash Tax Court Liked Taxpayerrsquos Arguments and Appraiser Better ndash Be Careful What You Disclose
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
as ldquoBuilt In Gainrdquo on 1120S for Year of Conversion (Ringgold Telephone Company v Comm TCM 2010-103 (051010)) 10mdash14
Termination of S Election 10mdash16
Automatic Termination 10mdash16
Revocation 10mdash16
sect1362(f) Inadvertent Termination of S Election Not Fatal ndash Trust Had Become Ineligible Shareholder ndash Since S Corp Complied with LTR Criteria and Paid $400 User Fee All is Forgiven ndash S Election Lives to See Another Day (LTR 201739007 (062717)) 10mdash17
sect1362 Excess Net Passive Income Tax 10mdash17
sect1362 Rental Income from Actively Managed and Maintained Medical Buildings Not Passive Investment Income for Sting Tax Purposes ndash How Much Less Could a Landlord be Involved and Still Dodge the Bullet (PLR 201725022 (062317)) 10mdash18
sect267 Deferral of Deductions for Related Persons 10mdash18
sect267 Defers S Corprsquos Deductions for Accrued Unpaid Payroll Expenses to Year Pay Received and Includible by ESOP Employees ndash sect267(a)(2) Defers Deductions for Expenses Paid to Related Person Until Payments Included in Income by Related Person (Steven M Petersen and Pauline Peterson v Comm 148 TC No 22 (061317)) 10mdash18
S Corps and Charitable Contributions (PATH Act sect115) 10mdash18
Assignment of Income Doctrine 10mdash18
Financial Plannerrsquos Income Taxed to Him Personally Not to His S Corp ndash Payer of Income Did Not Contractually Recognize S Corp ndash Assignment of Income Doctrine Prevented Shift ndash SE Taxes and Other Carnage Result (Ryan M Fleischer v Comm TCM 2016-238 (122916)) 10mdash18
S Corporation Reasonable Compensation 10mdash20
sectsect3121 3301 California Real Estate Broker S Corp Gets Stuck With Reasonable Salary Employment Tax Assessment on Part Not All of Distribution ndashTax Court Engages in ldquoSplit-the-Babyrdquo Analysis ndash Tax Court ldquoShort Sheetsrdquo IRS Expertrsquos Higher Salary Estimate to Lower (from $100755 ($4844hr) to $83200 ($40hr) of $240000 Distribution) ndash Percentage of Gross Receipts Test (To Arrive at Salary) Rejected Facts and Circumstances Test Adopted (Sean McAlary Ltd Inc v Comm TCS 2013-62 (081213)) 10mdash20
sect3121 Payments of Shareholderrsquos Personal Expenses Were Repayments of Loans (Early On) and Return of Capital Contributions (Later On) ndash Though Promissory Note Protocol Not Followed Perfectly Substance and Backstory Avoided Major Employment Tax Disaster ndash Glory Day (Scott Singer Installations Inc v Comm TCM 2016-161 (082416)) 10mdash20
sect3121 Action on Decision IRB 2017-15 (041017) Subject Scott Singer Installations Inc v Comm TCM 2016-161 ndash Agree in Result Only (AOD 2017-04 IRB 2017-15 (041017)) 10mdash23
sect3121 Draws from Out of Control S Corp Law Firm Were Repayments of Capital Contributions ndash Not Loan Repayments (No One in Right Mind Would Have Lent) ndash Not Salary Either (Law Firm Horribly Unprofitable) (Goldsmith amp Associates Ltd v Comm TCM 2017-20 (012617)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
10mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7426 6201 No Tax Court Jurisdiction for Additional Employment Tax Asserted Against Officer Employee ndash District Court or Court of Claims Are the Leftover Choices ndash Tax Court Only Has Jurisdiction Over Employment Tax Worker Classification Actual Controversies (Notice of Employment Tax Determination under sect7436 - Additional Compensation to Officer Employees (PMTA 2017-005 (033017)) 10mdash23
Phantom Income 10mdash23
sectsect460 1366 50 Shareholder Liable for Income Tax on $451531 of Income He Didnrsquot a Penny Of ndash Wording of Settlement Agreement Between He and Other Shareholder Wasnrsquot Tight Enough to Avoid the Problem ndash His Own Brother (the Other 50 Shareholder) Threw Him Under the Bus (and Then Backed Up and Ran Over Him a Few More Times) ndash Completed Contract Method Bunching Up Income at the End Poured Fuel on the Fire ndash Itrsquos Too Late to Cry About It Later in a Collection Hearing ndash A Buy Sell Agreement Entered a Long Time Ago Could Have Helped Mightily (Michael Howard Dalton pro se v Comm TCM 2017-43 (031317)) 10mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 11 Disregarded Entities
Table of Contents
Prospectively Watch Out for CPAR 11mdash1
Tax Preparer Penalties 11mdash1
Disregarded Entities Are Disregarded for Federal Income Tax But Not Other Purposes 11mdash1
Disregarded entities are not disregarded for all purposes 11mdash1
Disregarded for federal income tax but not for other purposes 11mdash1
Disregarded entities donrsquot follow the beaten path 11mdash2
Disregarded or regarded The color of the chameleon depends on the context within which you find it 11mdash2
What is a ldquodisregarded entityrdquo 11mdash2
Punch line 11mdash2
DE Federal Income Tax vs Other 11mdash2
Three Types of Disregarded Entities 11mdash2
Tax Recognition of an Entity Disregarded for Income Tax Purposes 11mdash3
DE Was a Regarded Entity in a Prior Period 11mdash3
DEs and Employment Taxes 11mdash3
DE (for Income Tax Purposes) Regarded for Administration Assessment and Collection of Employment and Excise Taxes 11mdash3
DE treated as separate Corp for employment and excise tax administration assessment and related reporting 11mdash3
Employment tax payment and reporting on DErsquos shoulders 11mdash3
Taxpayer Identification Numbers (TIN) and DEs 11mdash4
Beware the income tax K-1 TIN trap 11mdash4
Employment Taxes and DE as Partner in Partnership 11mdash4
Temp Regs Take Position Partner Cannot be Employee of DE Owned by Partnership (TD 9766 (050416)) 11mdash4
New Temp Regs Confirm in IRSrsquo View Rev Rul 69-184 is Good Law (TD 9766 (050416)) IRS doesnrsquot like partners in partnerships to receive W-2s See Rev Rul 69-184 1969-1 CB 256 (written before the advent of DEs and sect3017701-2(c)(2)(iv)(A)) 11mdash4
Employment Tax Liability and Collection Issues 11mdash4
Liability for predecessor entityrsquos taxes 11mdash4
Liability shield for non-trust fund employment taxes for multimember LLC 11mdash5
sectsect6651(a)(1) (2) and 6656(a) Failure to Tend to Payroll Taxes Leads to Failures to File Pay and Deposit Penalties ndash Delegating to a Weak Employee Wonrsquot Get You Far ndash At Least Since Itrsquos Post-2008 Employment Taxes Minnesota SMLLCrsquos Owner
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Not on Hook Personally for All of It (Xibitmax LLC v Comm TCM 2017-133 (070517)) 11mdash5
DEs Regarded for Foreign Asset Reporting Purposes 11mdash5
DEs Subject to FBAR Reporting Requirements 11mdash5
IRS Form 5472 Reporting Requirements Expanded to Include Domestic Disregarded Entities Owned by a Foreign Person (sect16038A-1(c) 26 CFR 16038A-1(c) TD 9796 (effective for taxable years of reporting disregarded entities beginning after 123116 and ending on or after 121317)) 11mdash5
Form 5472 historically applies to Corps now to DEs as well 11mdash6
Final regulations treat a domestic disregarded entity wholly owned by a foreign person as a domestic corporation separate from its owner for reporting purposes 11mdash6
Reportable information 11mdash6
DE might have to file both Form 5471 and 5472 11mdash6
Reportable transactions 11mdash6
DEs Regarded for Gift Tax Valuation Purposes 11mdash6
SMLLC Regarded for Gift Tax Valuation Purposes (Pierre v Comm 133 TC 24 (082409)) 11mdash7
sect2053 Decedentrsquos Estate May Not Deduct Gift Tax Liability Which Donees Agreed to Pay For ndash Yet Gift Tax Included in Gross Estate ndash Who Bears Liability for Resulting Additional Estate Tax Read Agreements with Donees Decedentrsquos Will and State Law ndash Surviving Spouse Saddled With It (Estate of Sheldon C Sommers v Comm 149 TC No 8 (082217)) 11mdash7
DEs and Estate Tax Liens 11mdash9
Form 4422 Newly Revised (IRS Form 4422 (March 2017)) 11mdash9
Discharge of Estate Tax Lien ndash IRS Changes Internal Procedure ndash Interim Guidance (SBSE-05-0417-0011 (040517)) 11mdash9
Considerations Regarding Estate Tax Lien Discharge Applications 11mdash9
DEs and Discharge of Indebtedness 11mdash10
Creditor Discharge of Indebtedness of DE 11mdash10
Discharge by creditor of DE debt is sale proceeds not COD income to DErsquos owner 11mdash10
But if the DErsquos owner purchases the debt from the creditor COD might result 11mdash10
sect108 Exclusions ndash The Basics 11mdash10
If the sect108 exclusion relies on status of the taxpayer whether a DE is involved matters 11mdash10
IRS Final Regs Take Position Owner Must Be in Bankruptcy or Insolvent To Be Entitled to sect108(a) Relief (TD 9771 (Effective 061016)) 11mdash11
DEs and Charitable Contributions 11mdash11
Allocation of Partnership Liabilities for DE as Partner in Partnership 11mdash11
sect707 Liabilities Assumed by Partnership (Through a Disregarded Entity (DE)) in Connection with Partnershiprsquos Transfer of Substantially All of Its Assets and Liabilities to Partnership Constitute Qualified Liabilities for Purposes of Disguised Sale Rules ndash Thus Not a Taxable Event (PLR 201714028 (040717)) 11mdash11
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
11mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Partnership Late Filing Penalty When DE is Partner 11mdash12
DEs and Like Kind Exchanges 11mdash13
Like kind exchanges 11mdash13
Interests in DEs can be like kind traded for assets and visa versa 11mdash13
If assets owned by DEs are part like kind and part not like kind better to trade assets themselves than to trade DEs 11mdash13
Transfer of Asset for Asset 11mdash13
DEs and Accounting Methods 11mdash13
Disregarded Entity Was Separate Trade or Business Entitled to Use Own Accounting Method (CCA 201430013) 11mdash14
DE State Law Issues 11mdash14
Reverse Veil Piercing 11mdash14
State laws vary as to reverse veil piercing 11mdash14
Reverse veil piercing in Colorado 11mdash14
Reverse veil piercing in California 11mdash14
DEs and Husband and Wife Owned Entities 11mdash14
Husband wife owned entity in community property state can be either DE or partnership 11mdash14
Joint return not required 11mdash15
Non-community property states 11mdash15
DEs LLCs and Divorce 11mdash15
Restrictions on transfer of LLC membership rights and obligations upheld 11mdash15
C Corps and DEs 11mdash15
DEs widely used to facilitate corporate reorganizations 11mdash15
Use of DE preserves tax loss still gets the job done to get subrsquos asset into Parentrsquos hands 11mdash15
DEs Facilitate Many Different Types of Reorgs 11mdash15
A Reorganization 11mdash15
Comparison of QSubs and Single Member LLCs 11mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 12 Partnerships and LLCs
Table of Contents
Negative Capital Account Reporting 12mdash1
Tax Gap Mostly Driven by Underreporting 12mdash2
K-1 Matching Falls Short 12mdash2
2019 Form 1065 Schedule K-1 Draft (093019) ndash Changes from 2018 12mdash4
2019 Form 1065 Schedule K-1 12mdash5
2019 Form 1065 Draft (093019) 12mdash5
2019 Form 1065 Page 3 Draft (093019) 12mdash6
2019 Form 1065 Schedule K-1 Draft (093019) 12mdash6
Basis in Partnerrsquos Partnership Interest Bottom Dollar Guarantees 12mdash10
Disguised Sale of Partnership Interest Partnerrsquos Debt Basis 12mdash10
Notice of Inconsistent Treatment 12mdash10
sect704(d) Basis 12mdash11
Partnership Reasonable Compensation 12mdash11
C Corp vs Non-C Corp 12mdash12
Centralized Partnership Audit Rules 12mdash13
TCJA - sect199A Pass-Through Deduction Centralized Partnership Audit Rules 12mdash13
IRS Audit Stats 12mdash13
IRSrsquos Struggle to Audit Tiered Partnerships 12mdash14
IRSrsquo Problem Congressrsquo Solution 12mdash14
Centralized Partnership Audit Rules (CPAR) 12mdash14
Prior Law 3 Partnership Audit Regimes 12mdash14
CPAR Roadmap 12mdash15
Effect of New CPAR Rules 12mdash15
CPAR ndash Default Rule 12mdash15
CPAR ndash Example of 2018 Audit 12mdash15
CPAR ndash Highway and Exit Ramps 12mdash16
Imputed Underpayment 12mdash16
Imputed Underpayment vs No Imputed Underpayment 12mdash16
Imputed Underpayment and Netting 12mdash16
IU Netting ndash Separately Stated Items on K-1 12mdash17
Imputed Underpayments and Credits 12mdash17
IU and Reallocation Between Partners 12mdash17
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Imputed Underpayment and Separate Limitation Rules 12mdash18
AICPA Requests Delayed Effective Date 12mdash18
How Does CPAR Affect Capital Accounts 12mdash18
Partnership Agreement Provisions re Imputed Underpayment 12mdash19
Early Election into CPAR Available 12mdash19
CPAR Applies to Entities Filing Form 1065 12mdash19
Scope of CPAR Rules 12mdash19
CPAR Highway and Exit Ramps 12mdash20
Exit Ramp 1 Partnership ldquoElects Outrdquo of CPAR 12mdash20
Exit Ramp 1 Tiered Partnerships 12mdash21
Exit Ramp 1 Tiered Partnership Example 12mdash21
Exit Ramp 1 CPAR Elect Out Keeping Perspective 12mdash22
Exit Ramp 1 Effect of Elect Out 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Partners ldquoAmend Outrdquo via Amended Returns or ldquoPull Inrdquo 12mdash22
Exit Ramp 2 Alternative to Amend Out = Pull In 12mdash23
Exit Ramp 2 Partners Amend Out or Pull In 12mdash23
Exit Ramp 2 Reallocations Among Partners 12mdash23
Exit Ramp 2 ldquoAmend Outrdquo or ldquoPull Inrdquo Deadline 12mdash24
Exit Ramp 2 Partnershiprsquos Not Partnerrsquos Statute of Limitations (SL) Controls 12mdash24
Exit Ramp 2 Adjustments Binding to Partnerrsquos Tax Attributes 12mdash24
Exit Ramp 2 Amend Out or Pull In for Tiered Structures 12mdash24
Exit Ramp 3 Partnership Elects ldquoPush Outrdquo 12mdash26
Exit Ramp 3 Push Out May Increase or Decrease a Partnerrsquos Tax 12mdash27
Exit Ramp 3 Partnership Elects Push Out 12mdash27
Exit Ramp 3 Push Out Treatment of Pass-Through Partners in Tiered Structures 12mdash27
Exit Ramp 3 IRS Penalties re Push Out Statements 12mdash28
Exit Ramp 3 IRS Penalties re Push Out Statements in Tiered Structures 12mdash28
Imputed Underpayment - Modification 12mdash28
CPAR ndash Example of 2018 Audit 12mdash29
CPAR Highway ndash Flow of Procedure 12mdash29
CPAR ndash Example of 2018 Audit 12mdash29
Adjustment Year 12mdash29
Admin Adjustment Request by Partnership 12mdash29
CPAR ndash Who Can File Amended Return 12mdash29
Time Line - IRS Notice Requirements 12mdash30
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Time Line ndash Deficiency Assessments 12mdash30
Judicial Review 12mdash30
Imputed Underpayment 12mdash30
Deposit to Suspend Interest on Imputed Underpayment 12mdash30
Assessment and Collection of Imputed Underpayment 12mdash30
If Partnership No Pays IU IRS Can Go After Partners 12mdash31
Partnership Representative 12mdash31
Agreements Affected by CPAR 12mdash32
Effect on Partnership Agreements 12mdash32
Partnership and LLC Agreements 12mdash32
Should Partnershiprsquos Accountant be Partnership Representative 12mdash32
Agreement Provisions re PR 12mdash32
Partnership Agreement Provisions re Imputed Underpayment 12mdash33
Partnership Agreement Provisions re Election Out 12mdash33
Agreement Provisions Push Out Election 12mdash33
Other Agreements Affected 12mdash33
How Best to Prepare 12mdash34
CPAR ndash California Climbs Aboard 12mdash34
Appendix State Conformity (or Not) with CPAR 12mdash35
1065 Due Dates 12mdash36
Penalties for Late Filing 12mdash37
If 2017 1065 is late filed base penalty remains $200shareholdermonth (not to exceed 12 months) ($200 for 2016 returns) 12mdash37
Partnership Failure to Furnish Information Timely 12mdash37
FBAR Due Dates 12mdash37
Partnership or Not 12mdash37
sect704 Partnership or Not Nigerian Engineer Got What He Wanted Tax Court Found Existence of Partnership with His Brother ndash Also Got What He Didnrsquot Want Deductions Disallowed Because No Proof of Basis ndash In Absence of Partnership Agreement Partnership Established by Credible Testimony (Chinweike Nwabasili pro se v Comm TCM 2016-220 (120516)) 12mdash37
TEFRA 12mdash37
sectsect6221-6234 (TEFRA) and 6662 IRS Could Assert and Tax Court Could Uphold Negligence Penalty Against Partner Who Failed to Report Partnership K-1 Income on Personal Return and Did Not File Notice of Inconsistent Treatment (Bernard P Malone and Mary Ellen Malone v Comm 148 TC No 16 (050117)) 12mdash37
sect704(d) Basis 12mdash38
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Membership Unit (ie Partnership Interest) (William Namen v Comm TCM 2017-24 (013117)) 12mdash38
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect704(d) Loan Agreements and Generalized Testimony Insufficient to Establish Basis in LLC Member Unit ndash Itrsquos Not Such a Great Idea to Fail to Allocate Liabilities Among Partners on 1065 K-1s (Bobby R Hargis and Brenda J Hargis v Comm TCM 2016-232 (122116)) 12mdash39
IRS Partnership Audit Guide re Basis (IRS MSSP Audit Guide (ATG) Partnerships) (3123-017) 12mdash40
ISSUE PARTNERrsquoS BASIS IN PARTNERSHIP INTEREST 12mdash40
Outside basis maintained by each individual partner outside of the partnership books 12mdash40
Outside basis is calculated at the end of the partnership tax year 12mdash40
Basis cannot be negative Disallowed losses carried forward 12mdash41
Basis measures the partnerrsquos tax goody in the partnership 12mdash41
Withdrawals by partner reduce partnerrsquos outside basis 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero and) gain results 12mdash41
If partner withdraws cash in excess of basis (basis reduced to zero) gain deferred 12mdash41
If partnership interest is disposed of and partner receives more or less than partnerrsquos basis gain or loss results 12mdash41
If partnerrsquos share of losses exceed partnerrsquos outside basis losses suspended and carried forward 12mdash41
Partner may have basis even if book capital account is negative 12mdash41
ISSUE PARTNERSHIPrsquoS BASIS IN ITS ASSETS 12mdash42
Inside basis is the partnershiprsquos tax basis in its assets 12mdash42
At inception the partnershiprsquos inside basis equals all partnersrsquo outside basis 12mdash42
Later events may cause inside and outside basis to drift apart 12mdash42
But a sect754 election may eliminate discrepancies 12mdash42
Examination Techniques 12mdash42
Issue Identification 12mdash43
Documents to Request 12mdash44
Interview Questions 12mdash44
Deemed Sale of Partnership Interest 12mdash44
sect731(a) Taxable Gain Resulted from Deemed Sale of Partnerrsquos Partnership Interest ndash Payment by Partnership on Partnerrsquos Behalf (of Partnerrsquos Personal Expenses) Exceeded Partnerrsquos Basis in Partnership Interest (Reza Zia-Ahmadi and Rachelle L Zia-Ahmadi pro se v Comm TCS 2017-39 (061417)) 12mdash45
sect752(b) Partnerrsquos Drop in Partnership Liabilities Followed by Deemed Distribution Yields Taxable Event (Michael E Kohn and Catherine K Kohn pro sese v Comm TCM 2017-159 (081417)) 12mdash45
Charitable Contributions and Partnerships 12mdash46
sect170 Charitable Contribution Appraisal Substantial Compliance ndash Part Sale Part Gift Upheld (Cave Buttes LLC v Comm 147 TC No 10 (092016)) 12mdash46
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
12mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
SE Tax and LLCs 12mdash47
Partnerships LLCs SE Tax and W-2s 12mdash47
Payments from Partnership to Partner ndash 3 Categories 12mdash47
SE Tax - Employee or Partner 12mdash47
Partners including LLC members are not employees 12mdash47
Self-Employment Tax for Partners 12mdash47
Investment Management Partners Not Exempt from SE Tax - Partners pay SE tax on distributive shares of business income unless an exception applies To be a limited partner income in the form of a return on investment and not compensation for active participation in the partnerships business operations Being service partners in a service partnership sunk their boat (CCA 201436049 (090514)) 12mdash48
NM Federal District Court ldquoGeneral Memberrdquo of LLC Treated as a Partner Subject to SE Tax ndash W-2 Wages LLC Paid To the ldquoPartnerrdquo Inappropriate (Riether v US 919 F Supp 2nd 1140 (DNM 062112)) 12mdash48
LLC Member Received Guaranteed Payments Subject to Self-Employment Tax (Lauren A and Michael H Howell v Comm TCM 2012-303 (110112)) 12mdash48
SE Taxes and sect1402(a)(13) Limited Partner Exception 12mdash49
sectsect469 1402 Physicianrsquos Distributive Share of Income from Multimember Surgical Center LLC Was Passive and Separate Activity from Medical Practice ndash Physician Was Limited Partner for SE Tax Purposes Under sect1402(a)(13) and Thus Not Subject to SE Tax (Stephen P Hardy v Comm TCM 2017-16 (011717)) 12mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 13 IRS Practice and Procedure
Table of Contents
Passports 13mdash1
IRS Therersquos a New Sheriff in Town 13mdash1
IRS 13mdash1
Cyber Security Grim Reaper 13mdash2
2020 IRS Form W-12 PTIN Application Question 12 Data Security Responsibilities 13mdash2
Cyber Security IRS Pub 4557 13mdash3
Cyber Security FTC Safeguards Rule 13mdash3
Cyber Security Safeguards Rule Checklist 13mdash3
Cyber Security But Does IRS Follow Its Own Advice 13mdash8
IRS PTIN Fees Here We Go Again 13mdash10
Treasury Priority Guidance Plan 2019-2020 13mdash10
IRS Update 13mdash14
ITINs 13mdash14
IRS TCJA Training Materials for IRS Examiners 13mdash15
IRS TCJA Training Materials Excise Tax Exemption for Aircraft 13mdash15
IRS TCJA Training Materials Small Business 13mdash16
Just Say No to Drugs and IRSrsquos Private Debt Collectors 13mdash17
IRS Collection Private Debt Collectors with a Twist 13mdash17
2018 IRS Data Book 13mdash17
IRS Customer Service 13mdash18
IRS Announces Rolling Out of ChatBot 13mdash18
Passports and Delinquent Taxes 13mdash18
Amended Returns 13mdash19
Retaliation Against an IRS Employee 13mdash19
Skimming Cash and Freedom 13mdash20
Some Rules You Kind of Need to Follow 13mdash21
sect7206 ndash Willful Filing of False Return Even if Tax Liability Stays Low 13mdash21
Electronic Acknowledgement of Timely Filing 13mdash21
Criminal Corner 13mdash23
North Carolina Doctor Lands One Year in Jail 13mdash23
West Virginia County Magistrate Sentenced to Prison for Not Reporting Bribes from Bail Bondsman 13mdash23
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
West Virginia Bail Bondsman Gets 3 Years Probation for ldquoImpeding Tax Collectionrdquo and Not Filing Return 13mdash23
Alaskan Commercial Fishing Couple Charged with Willful Failure to Pay Over $400000 in Income Taxes on Income Earned for 13 Years (Department of Justice Press Release 17-736 (072617)) 13mdash23
Expansion of IRS Exam to Other Years 13mdash24
Passports and Taxes 13mdash24
Application of Tax Payments 13mdash25
Circular 230 ndash OPR Prosecutions of Tax Practitioners 13mdash26
IRS Criminal Prosecution 13mdash26
Penalty Abatement 13mdash26
Identity Theft 13mdash27
Identity Theft ndash ldquoNew Clientrdquo Email Scam 13mdash27
Criminal Prosecution of Employment Tax Non-Compliance 13mdash27
When Collect Employment Tax But Donrsquot Pay 13mdash27
IRS Criminal Investigation 13mdash28
IRS Collection 13mdash28
IRS Collection ndash Allowable Living Expenses 13mdash28
IRS Collection ndash Private Collection Agencies 13mdash28
Tax Preparer Penalties 13mdash28
Refund Claims 13mdash29
sect7422 6402 New Yorker Denied $800000 Refund for NOL Carryback ndash Form 1040X Not Used ndash Form 1045 Application for Tentative Refund Did Not Cut It ndash Is It a Good Idea for Anyone to Use a Form 1045 Likely Not (David B Silipigno v United States 115-CV-0017 (ND NY (071217)) 13mdash29
sectsect7422 6511(b)(2)(A) Return Omitting Income Was Invalid to Constitute a Claim for Refund Even Though IRS Knew of Missing Items ndash It Appears a Tax Preparer Must Obtain IRSrsquos IRP File (W-2 1099 K-1 1098 etc Matching File) to Make Sure Everything is Listed Every Time (Anthony J Kiselis pro se v US Ct Claims No 1-15-cv-00380 131 Fed Cl 54 (032017) 13mdash29
Offset of Refunds by IRS 13mdash30
sect6402 Overpayment Reflected on Original Form 1040 Promptly Offset Against Prior Deficiency Not Available Later to Pay Subsequent Additional Assessment ndash Beware the Refund Reaper that Robs You of What You Currently Need (Robert Williams pro se v Comm TCM 2017-182 (091817)) 13mdash30
IRS Disaster Relief 13mdash30
IRS Webpage Tax Relief in Disaster Situations (webpage) 13mdash30
Planning for Disasters 13mdash30
IRS Advises Taxpayers to Prepare for Hurricanes Floods and Other Natural Disasters (IR-2016-128) 13mdash30
Update Emergency Plans 13mdash31
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiii
copy 2019 Bradley Burnett Tax Seminars Ltd
Create Electronic Copies of Key Documents 13mdash31
Document Valuables 13mdash31
Check on Fiduciary Bonds 13mdash31
IRS ready to help in event of federally declared disaster 13mdash31
Confidentiality - Identity Theft and Tax Fraud 13mdash31
Unauthorized Disclosure by Tax Preparer 13mdash31
sect7216 Unlawful Disclosure 13mdash32
Circular 230 and Malpractice Exposure 13mdash32
Cyber Security 13mdash32
Safeguarding Tax Data 13mdash33
IRS Pub 4557 (Rev 10-2015) ndash Safeguarding Taxpayer Data (A Guide for Your Business) 13mdash33
Protect Your EFIN and PTIN 13mdash34
Due Diligence and Tax Credits 13mdash34
PATH Act Expands Due Diligence Requirements (beyond EITC) to ACTC and AOTC 13mdash34
Applicability of penalty broadened and penalty amount increased 13mdash34
Form 8867 Paid Preparers Checklist 13mdash34
IRS Issuing Injunctions Against Problem EITC Preparers 13mdash34
25000 To Get Letter from IRS About 2014 EITC 13mdash34
Acknowledgement Alerts about Missing Forms 8867 13mdash34
IRS to Release EITC Warning Letters 13mdash35
Consequences of failure to meet due diligence requirements 13mdash35
IRS Sending Tax Preparers Due Diligence Letters 13mdash35
sect6695 State of Washington CPA Failed to Perform EITC Due Diligence on 14 Tax Clients ndash At $500 a Pop $7000 Penalty Got Pricey ndash Referral to Director of OPR Stung Quite a Little Bit Too (Abdiwali Suldan Mohamed pro se v Comm TCS 2017-69 (082917)) 13mdash35
Change of Address and Responsible Person 13mdash36
sectsect6320 6330 One Day Late and Thousands of Dollars Short ndash Donrsquot Miss Your Collection Due Process (CDP) Filing Deadline by One Day Yoursquoll Get Your Head Handed to You ndash Seller of Construction Company Liable for Taxes Incurred After He Sold Company (Eric L Cox pro se v Comm TCS 2016-53 (090616)) 13mdash36
Proof of Mailing Extension 13mdash38
sectsect6081 6651 Late Filing Penalty Sticks ndash Extension Not Valid Where CPA Did Not Certified Mail Extension Otherwise Had No Proof of Sending and Did Not Testify at Trial to Shore Up the Gaps (Jarold R Laidlaw and Diane Laidlaw v Comm TCM 2017-167 (082817)) 13mdash38
Private Delivery Services 13mdash39
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashiv
copy 2019 Bradley Burnett Tax Seminars Ltd
sect7502(f) IRS List of Approved Private Delivery Services Updated AGAIN ndash DHL Added But FedEx and UPS Ground Remain Conspicuous by Absence (Notice 2016-30 2016-18 IRB) 13mdash40
sect6404(e) No Abatement of Interest Where Illinois Couple Being Audited Drug the Audit Out for a Long Time ndash Interest Abatement Not Available Unless Unreasonable Error or Delay by IRS in Performing a Ministerial or Managerial Act (Terry E Hornbacker and Georgia R Hornbacker pro sese v Comm TCM 2016-65 (041416)) 13mdash40
Internal Revenue Manual re IRS Interest Abatement 13mdash40
20274 (04-27-2016) IRC 6404(e)(1) Unreasonable Error or Delay in Performing a Ministerial or Managerial Act 13mdash41
IRM 202741 (05-09-2014) IRC 6404(e)(1) Criteria 13mdash41
Penalty Abatement 13mdash42
sect6651(a)(2) Waiting on Accountant to Repair Incorrectly Prepared Tax Return Grounds to Abate Failure to Pay Penalty Nope ndash So What Was the Poor Client Supposed to Do Yank Task from Preparer and Go Elsewhere (Allen B Miller v Comm TCM 2016-73 (042116)) 13mdash42
sectsect7491 6662 and 6651 Sole Proprietor Liable for Income Tax Accuracy Penalty and Late Filing Penalty Even Though His AccountantAttorney Stole His Money and Business Records ndash Burden of Proof on Taxpayer ndash He Did Not Prove He Had Good Records Before They Were Stolen (James E Philbrick pro se v Comm TCM 2016-64 (041316)) 13mdash42
Retention of Tax Records 13mdash42
Retention of Tax Records (IRS online narrative How long should I keep records Page Last Reviewed or Updated 24-Jan-2017) 13mdash42
Such narrative contains the exact language referenced in the James Philbrick court case above 13mdash42
How long should I keep records 13mdash42
Period of limitations that apply to income tax returns 13mdash43
Are the records connected to property 13mdash43
What should I do with my records for nontax purposes 13mdash43
sect6330 IRS Guidance Says Go Ahead and Shred Your Tax Records Generally After 3 Years ndash California Couple Finds Out You Can Really Get Your Head Handed to You For Doing That ndash IRS Has 10 Years to Collect Tax ndash If You Cannot Prove You Paid Tax 7 Years Ago You Can Pay It Again (William Henry Paynter and Elizabeth A Paynter pro sese v Comm TCS 2017-12 (030817)) 13mdash44
Offers In Compromise 13mdash44
sect6015 Husband Left Holding Joint Income Tax Bag After IRS Granted Wife OIC Relief as Marriage Rolled On (Eric Alan Harris pro se v Comm TCS 2017-77 (100317)) 13mdash44
Miscellaneous IRS Practice Topics 13mdash44
sect6109 ITIN Expiration Dates Tweaked by IRS (sect6109 IRS General Information Form W-7 Instructions) 13mdash44
sect6334(a)(2) and (3) Property Exempt from Levy 13mdash45
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
13mdashv
copy 2019 Bradley Burnett Tax Seminars Ltd
Innocent Spouse 13mdash45
sect6015(f) Equitable Relief 13mdash45
sect6015(f) Innocent Spouse Equitable Relief Awarded to Louisiana Widower to Abate Late Filing and Late Payment Penalties and Interest ndash His Late Wife Failed to Mail Return to IRS Three Years Before and He Didnrsquot Know It (Joseph Patrick Boyle pro se v Comm TCM 2016-87 (050216)) 13mdash45
Fixing Americarsquos Surface Transportation (FAST) Act (HR 22) 13mdash45
Tax Collection and Passports 13mdash45
sect7345 Revocation or Denial of Passports to Certain Delinquent Taxpayers 13mdash45
Collection Due Process Cases 13mdash46
sect6330 IRS Appeals Did Not Improperly Reject OIC ndash Dissipated Assets Though No Longer Available Used Against Taxpayer ndash Amount of Future Income to be Used Against Taxpayer Also Explored - And What is Chutzpah Anyway (John N Alphson v Comm TCM 2016-84 (050216)) 13mdash46
sect6330(d)(1) IRS Properly Rejected OIC (Offer In Compromise) ndash Reasonable Collection Potential Was Triple the Amount Offered - Taxpayer Did Not Prove Liquidation of Its Accounts Receivable Would Be Detrimental to Its Survival (David Strong v Comm TCM 2016-70 (041916)) 13mdash47
Treasury Offset Program 13mdash47
sectsect6402(d)(1) 6330 No CDP Hearing Relief Available to Block ldquoTreasury Offset Programrdquo Seizure of IRS Refund ndash Disgruntled Debtor Barking Up the Wrong Tree (Gary I Terry pro se v Comm TCM 2016-88 (050316)) 13mdash47
How the US Government Collects Delinquent Debt 13mdash48
How the Treasury Offset Program (TOP) Works 13mdash49
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashi
copy 2019 Bradley Burnett Tax Seminars Ltd
Chapter 14 Special Topics
Table of Contents
Electric Car Credit 14mdash1
Electric Car Credit Basics 14mdash1
Electric Car Credit Requirements 14mdash1
Electric Car Credit Phase-Out 14mdash2
Electric Car Credit Compliance Issues 14mdash2
Credit ndash Hybrid and Electric Cars 14mdash3
BBA 2018 ndash Extender Bill ndash Energy 14mdash3
Appropriations Act ndash California Wildfires 14mdash4
Consolidated Appropriations Act ndash California Wildfires (ConApp 2018) 14mdash5
ConApp 2018 ndash California Wildfires 14mdash5
Ag Tax 14mdash6
No SE Tax on CRP Payments Received by Non-Farming Farm Ground Owner (Rollin J and Maureen B Morehouse v Comm 8th Cir No 13-3110 (101014)) 14mdash6
Farm Inputs Stepped Up Basis and Tax Benefit Rule 14mdash10
sectsect162 461 102 1014 Cash Basis Husband Prepaid and Deducted $318000 of Farm Supplies (Expenses) in 2010 and Died in March 2011 ndash Wife Got $235500 Stepped Up Basis in Farm Supplies and Deducted Them Again ndash Yes This Works Just Fine ndash IRSrsquos Effort to Gun It Down Via Tax Benefit Rule Faltered (Estate of Steve K Backemeyer Deceased Julie K Backemeyer Personal Representative v Comm 147 TC No 17 (120816)) 14mdash10
Self Employment Tax and Ag Property Rents 14mdash11
sect1402(a) Lessor of Chicken Coops Not Liable for SE Tax on Rent Portion ndash Since Rent Charged At or Below FMV Services Factor Ignored ndash Tax Court Reverses Course Across the Board to Follow 8th Circuit (Charles D Martin and Laura J Martin pro se v Comm 149 TC No 12 (092717)) 14mdash11
To be self-employment income income must arise from income producing activity subject to SE tax 14mdash11
Rental real estate income generally excluded from net earnings from self-employment 14mdash11
Ag related rental income SE taxable if derived from ldquoarrangementrdquo to produce ag commodities and owner materially participates 14mdash11
McNamara Case 14mdash12
Tax Court Holdings in Martin 14mdash15
Farming Syndicates ndash Might Be Much More Common Than You Think 14mdash16
ldquoFarming Syndicatesrdquo Must Use Accrual Method ndash 5th Circuit in Burnett Ranches Held Partnership with Prominent S Corp Partner Not a Farming Syndicate ndash IRS Nonacquiesces Burnett Ranches (AOD 2017-1 (IRB 2017-7 (021317)) 14mdash16
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu
2019 Federal Tax Update
14mdashii
copy 2019 Bradley Burnett Tax Seminars Ltd
Rodeo 14mdash17
sect162 Are Expenses of Teenagers Riding in Rodeos Deductible Of Course They Are When Their Parents in the Horse Boarding Training and Sales Business Are Out to Prove Their Horses Are ldquoKid Saferdquo (Gary C Jr amp Traci W Bryant v State of Alabama Alabama Tax Tribunal Docket No 16-500 (011217)) 14mdash17
Livestock Replacement Due to Drought 14mdash17
Extension of Replacement Period for Livestock Sold on Account of Drought ndash Newly Clarified Extension Period Ends When the Drought Ends (IRS Notice 2017-53 (092717)) 14mdash17
Charitable Contributions of Easements and Qualified Farmers and Ranchers 14mdash18
sect170 Donors of Farm Property Not ldquoQualified Farmersrdquo for Purposes of sect170(b)(1)(E) ndash Proceeds from Sale of Farmland Do Not Constitute Farming Income ndash Consequence Charitable Contribution of Donated Easement Not Deductible Up To 100 of Contribution Base But Rather a Mere 50 (Mark A Rutkoske Sr v Comm and Felix Rutkoske Jr and Karen E Rutkoske v Comm 149 TC No 6 (080717)) 14mdash18
Foreign Earned Income Exclusion 14mdash22
Foreign earned income exclusion amount is $102100 in 2017 ($104100 in 2018) 14mdash22
sect911 23 Percent of Income Earned in Foreign Country Excluded ndash After Qualifying for Exclusion (Under Bona Fide Residence Test) Amount Excluded is Not an ldquoAll or Nothingrdquo Gig (Wendell Wilson and Angelica M Wilson pro sese v Comm TCS 2016-19 (042516)) 14mdash22
Purchase and download the complete Federal Tax Update at httpscpatrendlinescomshopbb18ftu