Before the roundup, a quick thank you to our guest posters from the week ending February 27th. Michael Desmond joined us once again, posting on the likelihood of legislative responses to the court’s stopping regulation of paid preparers. We also welcomed Marilyn Ames as a first time poster, writing about the binding effect of an OIC.
To the procedure from that week:
- The Service issued Rev. Proc. 2015-16, which provides updated guidance on adequate disclosure for reducing accuracy related penalties and the tax return preparer penalties under Section 6694(a). The Revenue Procedure appears to be very similar to the prior guidance found in Rev. Proc. 2014-15, and reincorporates some examples from the guidance in 2013, which the Service decided it should not have removed.
- The facts of a substantial valuation misstatement penalty case in Na v. Commissioner, which the taxpayer won, are fairly interesting. In Na, the Service used the bank deposit method to recreate a taxpayer’s income. Prior to the year in question, the taxpayer did not have much annual income and never gambled. The taxpayer also spoke little English. During the audited year, the taxpayer had income and deposits of over a $1M in gambling earnings, plus substantial distributions from her employer’s companies. She explained that her employer used her personal accounts to run distributions from his companies and his gambling activity through. The Court found her evidence and testimony credible, and greatly reduced her liability. The Court did not address the specifics of the substantial valuation penalty, and instead said that was for the parties to review and calculate following the order. Anyone want to give odds on the chances of seeing a TC case in the employer’s name in the near future?
- The Service issued Rev. Proc. 2015-20, providing updated guidance for small businesses tying to comply with the final tangible personal property regulations issued in 2013 regarding capitalization of costs regarding TPP. The Service has also promulgated some FAQs on the topic. There has been a lot of consternation regarding whether or not these will require all businesses to request a change in accounting method and file Form 3115. For some small businesses, the Form will not be required.
- From the legal gossip blog, Above the Law, comes a glowing recommendation for the TV show Better Call Saul, stating that it is a far more accurate representation of the practice of law than most other legal shows. I’ve watched the first few episodes, and am completely hooked. In full disclosure, I was a huge fan of Breaking Bad, and this is a spin off. Not particularly representative of my life though. I had far less anguish over hush money and the persuasive power of violence.
- The Tax Court held that state law applied in determining what the successor in interest was for an entity that transferred assets to a related taxpayer. See TFT Galveston Port. LTD v. Comm’r.
- IRS scams on the front page of CNN.
- Last August, we touched on FDIC v. AmFin in SumOp, which was based on a dispute over ownership of a refund issued to the parent of a consolidated group. SCOTUS didn’t find the issue that interesting, and denied cert.
- Do banks get title insurance before foreclosing on properties? The District Court for the Southern District of Indiana in First Financial Bank v. US Dept. of Treas. tossed an action for quiet title filed by the bank where a subsequent title search turned up a tax lien after a deed in lieu of foreclosure. The Court found that the Service met its burden under Section 7425 in that it had a valid lien, which was recorded at least thirty days prior to the sale, and the Service wasn’t given notice of the sale.
- In the saga that is the Aloe Vera unlawful disclosure case, Aloe Vera won a significant (although not monetarily) victory last month. The District Court for the District of Arizona found the IRS wrongfully disclosed to the Japanese taxing authority confidential return information, which was actually found to be false and the Service knew the same at the time of disclosure. Unfortunately, for Aloe Vera, no actual damages were found, so the statutory damages were the extent of the recovery.