CPEasy Weekly Tax Update
With E. Lynn Nichols, CPA
AUGUST 17, 2015
CONTENTS
1. Fair Market Value of Transit Pass Excludable From Income
The IRS ruled that an employee may exclude from income the monthly fair market value
of a transit pass but must include as gross income the amount that exceeds the applicable
statutory limit.
(LTR 201532016; 8/7/2015)
2. Timing of Distributions to Designated Beneficiary
The IRS ruled that a non-spouse beneficiary timely elected ten-year payout options for
two annuity contracts, but because distributions didn't begin for more than a year after the
death of the contracts' owner, section 72(s) requires that all proceeds payable to her as a
designated beneficiary be paid out within five years of the owner's death.
(LTR 201532026; 8/7/2015)
3. Mortgage Interest Applies Per Taxpayer
The Ninth Circuit August 8 reversed a Tax Court opinion and held that the section 163
home mortgage interest deduction applies on a per-taxpayer basis to unmarried coowners of a qualified residence, rather than on a per-residence basis as the Tax Court
and IRS concluded.
(Bruce H. Voss; CA 9: Nos. 12-73257, 12-73261; 8/7/2015)
4. No Debt Cancellation Reporting Required for Write-Offs
The IRS ruled that a taxpayer is not required to file Forms 1099-C, "Cancellation of Debt,"
when the discharge was a result of an operation of state law and not an identifiable event
listed in reg. section 1.6050P-1(b)(2).
(LTR 201532022; 8/7/2015)
5. IRS Guidance on Circular 230 Responsibilities
The IRS has updated information on some of the professional obligations of practitioners
who are subject to the Circular 230 standards, adding a section on practitioners' personal
tax compliance responsibilities and a short list of frequently asked questions and
removing a section on fee arrangements.
Doc 2015-18397; 2015 TNT 153-63
6. Marijuana Seller Can't Claim Loss for Product Seized by DEA
The owner of medical marijuana dispensaries can't claim a loss for marijuana and related
products seized by the Drug Enforcement Agency. U.S. Tax Court Judge Goeke rules in
Beck v. Commissioner that Jason R. Beck couldn't deduct any business expenses, costs
of goods sold or losses arising from federal drug law enforcement from income earned at
Beck's West Hollywood, Calif., dispensary. Goeke says tax code Section 280E prohibits
the deduction of any expenses or losses related to carrying on a trade or business that
consists of trafficking in controlled substance.
(T.C. Memo. 2015-149; 8/10/2015)
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7. Travel Writer's Expenses Denied
The Tax Court held that a purported travel guide writer who trekked through Europe and
Africa to write about his experiences failed to show a profit motive, noting in part that he
incurred $39,000 in expenses before researching the profitability of his venture and that
his blog described but sometimes failed to identify the places he visited.
(Joshua W. Pingel; T.C. Summ. Op. 2015-48; 8/10/2015)
8. Charitable Remainder Trust Rules Curb Basis Manipulation
The IRS issues final rules that will limit taxpayers' ability to manipulate uniform basis rules
and avoid taxable gain on the sale of interests in charitable remainder trusts to third
parties after the government has sought to crack down on these transactions for nearly
seven years. The regulations (T.D. 9729) curb the amount of basis that may be allocated
to a charitable remainder trust annuity or unitrust interest by the amount of undistributed
net ordinary income described in tax code Section 664(b)(1) and the amount of
undistributed net capital gain described in Section 664(b)(2).
(T.D. 9729; 8/11/2015)
9. Legal Education Expenses May Not Be Deducted; Penalties Imposed
The Tax Court held that expenses associated with an individual's legal education in the
U.S. after he became licensed to practice law in Germany cannot be deducted, finding
that he hadn't established himself in the legal profession in the U.S. and that his expenses
were incurred in association with entering into a new trade or business.
(Colleen J. O'Connor; T.C. Memo. 2015-155; 8/12/2015)
10. Ninth Circuit Affirms Denial of Deduction for Easement Donation
The Ninth Circuit, affirming the Tax Court's denial of a couple's claimed charitable
contribution deduction for a conservation easement donation, held that to claim a
charitable deduction for an easement donation reg. section 1.170A-14(g)(2) requires the
subordination of any mortgage on the property before the donation.
(Walter C. Minnick; CA 9; No. 13-73234; 8/12/2015)
11. Spousal Relief Warranted in Light of Wife's Fear of Retaliation
The Tax Court granted an individual equitable innocent spouse relief from tax liabilities
stemming from a business she and her husband operated; the court found that her
husband's history of abuse prevented her from questioning him about their return.
(Candice E. Hollimon; T.C. Memo. 2015-157; 8/12/2015)
12. Eleventh Circuit Affirms Dismissal of Untimely Tax Court Petition
The Eleventh Circuit, in an unpublished per curiam opinion, affirmed the Tax Court's
dismissal of an individual's untimely petition for review of the IRS's denial of her request
for innocent spouse relief, finding that her petition was filed over 500 days after the IRS's
determination and the Tax Court didn't err in dismissing it.
(Gina Brasher Langley; CA 11; 8/12/2015)
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13. Temp Regs Eliminate Automatic Filing Extensions for Some Returns
The IRS has issued final and temporary regulations that remove the automatic extension
to file information returns on most forms in the W-2 series and allow only one 30-day nonautomatic extension to file the returns.
(T.D. 9730; 8/12/2015)
Proposed Regs Eliminate Automatic Filing Extensions
The IRS has issued proposed regulations that remove the automatic 30-day extension of
time to file information returns listed in concurrently issued temporary regs and allow only
one non-automatic extension.
(REG-132075-14; 8/12/2015)
14. Guidance on Requesting Competent Authority Assistance
The IRS has issued guidance on the process of requesting and obtaining assistance
under U.S. tax treaties from the U.S. competent authority.
(Rev. Proc. 2015-40; 2015-35 IRB 1; 8/12/2015)
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