IRS Archives

Jun 2, 2021

Tax Trial of the Century…

Tax Trial of the Century…[1] Which does not belong: Bad, Thriller, Moonwalk, Tax Court. Actually it is not a fair question because they all have one thing in common, Michael Jackson. The last one being the Estate of Michael J. Jackson v. Commissioner of Internal Revenue[2]. Michael Jackson died in June 2009. The Executors of his Estate filed an estate tax return reporting the value of his property, which included Jackson’s image and likeness, his 50% interest in Sony/ATV, a music catalog and music publishing business,[3] and his interest in Mijac Music, which owned musical compositions from a variety of artists,… Read more

Sep 30, 2019

IRS Finalizes Safe Harbor for Rental Real Estate Activities

On September 24, 2019, the Treasury Department finalized a safe harbor for rental real estate activities which should provide some tax benefits for lessors and investors. We addressed the draft safe harbor in a previous tax blog posting which can be found here. In this posting, we provide a summary of the final version of the safe harbor and recommendations for maximizing the benefits available under it. Background IRC Section 199A is a tax incentive for pass-through entities and sole proprietorships. It effectively reduces the federal tax rate on income arising from certain activities by as much as 20%. Thus, if… Read more

Mar 11, 2019

The Care and Feeding of Your Charity

According to Giving USA, in 2017 Americans contributed $410.02 billion to charity, crossing the $400 billion mark for the first time. Giving by individuals totaled an estimated $286.65 billion and $45.89 billion was gifted to foundations. There are over 1.5 million charitable organizations in the U.S., predominantly public charities and private foundations. A public charity receives most of its support from the general public. A private foundation, on the other hand, usually receives its support from one source – an individual, family, or corporation. Private Foundations The primary activity of a private foundation (as opposed to a private operating foundation)… Read more

Jan 22, 2019

Final Pass-Through Deduction Rules Grant Welcome Relief for Rental Real Estate Activities

On Friday, January 18, 2019, the Treasury Department issued final rules under IRC Section 199A. As part of this regulation package, Treasury also provided much-needed relief and clarity for rental real estate activities. This development creates some hope that similar rules may be in store for Opportunity Zone Funds. Background IRS Section 199A is a tax incentive for pass-through entities and sole proprietorships. It effectively reduces the federal tax rate on income arising from certain activities by as much as 20%. Thus, if income from an activity qualifies, a taxpayer who would otherwise pay taxes at the current top federal… Read more

Jan 9, 2019

LLCs, Partnerships and the Tax Time Machine

Many LLCs and partnerships amended their governing documents in 2018 because of the various new tax rules that came into effect last year. For example, many pass-throughs converted so-called “guaranteed payment” arrangements. Under new IRC Section 199A, certain types of income qualify for a lower income tax rate – depending on the facts, the federal tax on such income can be reduced by as much as 20%. However, this tax benefit does not apply to income received under guaranteed payment clauses. By eliminating these arrangements, recipients may be able to qualify for the new tax benefit. What about partnerships or… Read more

Jul 25, 2018

“Beginning of Construction” for Investment Tax Credit for Solar Energy Projects Defined by the IRS

Solar Investment Tax Credit & Solar Energy Projects

On June 22, 2018, the IRS released guidance to assist developers and owners of solar energy projects in determining the “beginning of construction” for solar energy projects for purposes of the Investment Tax Credit (ITC) under Section 48 of the Internal Revenue Code. In extending the ITC in 2015, Congress changed the previous “placed-in-service” standard for qualification for the credit to a “beginning of construction” standard for projects completed by the end of 2023. Projects beginning construction in 2019 will receive the current 30% ITC, while projects beginning construction in 2020 and 2021 will receive 26% and 22%, respectively. After… Read more

Sep 7, 2016

Call to Action: Proposed Regulations May Limit Valuation Discounts

The Internal Revenue Service published proposed regulations on August 4, 2016, that will severely limit valuation discounts on the transfer of ownership interests to family members in family-controlled entities, such as corporations, partnerships, and limited liability companies. The proposed regulations will apply to all family-controlled entities, even those that own operating businesses. Generally, when a minority interest in a family-controlled entity is being transferred the value of the interest is reduced for transfer tax purposes since the interest being transferred lacks control over the entity, as well as because the interest is not freely marketable outside of the family. These… Read more

Mar 21, 2013

Casualty Loss Deduction for Coop Owners

In the aftermath of a natural disaster or other casualty, apartment owners are faced with the cost of repairs, sorting out insurance, and tax issues – for both their own apartment and their building. Fortunately, one of the tax issues has now been resolved by the United States Court of Appeals for the Second Circuit (which includes New York City) in a manner favorable to owners of cooperatives. In Alphonso v. Comm’r of Internal Revenue, ____ F.3d ____, 2013 WL 440162 (2d Cir. 2013), the court reversed the position of the Internal Revenue Service and held that owners of cooperatives… Read more

Jan 10, 2012

Taxpayers Take Notice: IRS Issues New Voluntary Disclosure Guidelines for Overseas Accounts

Authored by: Scott Harty, Esq. On January 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program (the “2012 OVDP”) to U.S. taxpayers who wish to voluntarily disclose unreported offshore assets. Taxpayers wishing to participate in the 2012 OVDP must file amended returns for the years covered by the 2012 OVDP (generally the prior 8 years); pay any unpaid taxes, penalties, and interest; file FBAR Forms (Form TD F 90-22.1) for all undisclosed foreign accounts held by the taxpayer during the period covered by the 2012 OVDP; and pay a one time penalty equal to 27.5% of the highest aggregate… Read more

Dec 26, 2007

Amendment to the 80/20 Rule

On December 20, 2007, President Bush signed into law legislation dramatically liberalizing the so-called “80/20 Rule” restricting the amount of non-shareholder income cooperatives may receive.[1] As a practical matter, the legislation will eliminate commercial income restrictions for most cooperatives. Under the former rule, in order for a cooperative shareholder to receive the tax benefits normally afforded a homeowner, the cooperative could receive no more than 20% of its income from non-shareholder sources. As a result of this rule, cooperatives controlling substantial commercial space have often capped the rents payable by their commercial tenants below market rents in order to keep… Read more