Prose by Tax Pros

The IRS is fixated on challenging partnerships that donate conservation easements, claim the corresponding tax deductions, and pass them along to their partners. One of the many tools utilized by the IRS is conducting widespread audits and claiming that the partnerships are entitled to deductions of $0 because, among other things, their easements lack a “significant” conservation purpose. This position is interesting because it is based solely on the regulations, promulgated by the IRS, not by the related law, enacted by Congress. In other words, the IRS is essentially creating its own, expansive rules and then applying them.  This article examines the main issues in conservation easement disputes, the arguments typically raised by the IRS, various Tax Court cases focused on conservation purpose, and a new, non-easement case that might fortify taxpayer defenses. Read the full article here. About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., LL.M.T.) is a Shareho...

The IRS has a relatively short time to complete an audit and its resources are  limited. Consequently, the IRS often must ask taxpayers to “voluntarily” extend  the assessment-period by granting a Form 872 (Consent to Extend the Time  to Assess Tax) or some variation thereof. Given the significant issues at stake,  the Internal Revenue Code and IRS procedures mandate that IRS personnel  notify taxpayers and their representatives of certain rights, including the right  to reject, limit, or otherwise tailor the Form 872. A recent report by a government  watchdog agency found that the IRS is not fully meeting its notification  duties. Even if it were, many taxpayers and their representatives would remain  completely unaware of key issues affecting the decision of whether or not to  grant the IRS a Form 872. This article explains: Assessment-periods IRS duties related to extension requests The findings of the recent governmental report....

In light of the IRS’s new “compliance campaign,” nonresident aliens and those involved with foreign owners of U.S. real property would be wise to contact experienced tax/legal professionals in order to explore the options for proactively rectifying any issues with the IRS on the most beneficial terms available. The good news is that large numbers of foreign investors are injecting money into the U.S. economy by buying real property. The bad news is that many are not paying the correct amount of U.S. income taxes when they rent or sell such property. The IRS is hyper-aware of this problem and several others, thanks to three reports issued by the Treasury Inspector General for Tax Administration (“TIGTA”) over the past decade. the IRS, following its normal playbook, announced a “compliance campaign” in March 2020 designed to correct the situation. This article begins by explaining the unique U.S. tax rules applicable to nonresident aliens (“NRAs”) renting U.S. real property, as well as t...

  The IRS has implemented numerous voluntary disclosure programs over the past decade for taxpayers with international tax non-compliance. Opinions vary, of course, but many taxpayers and practitioners considered the penalties imposed under such programs fairly harsh. The IRS has softened its stance considerably with the introduction of its newest program in September 2019, called Relief Procedures for Certain Former Citizens (“RPCFC”). It is designed to benefit taxpayers who were formerly U.S. citizens, have already expatriated, had little to no U.S. income tax liability in the years preceding expatriation, were not filing U.S. tax or information returns with the IRS before expatriating, did not pay the “exit tax” under Code Sec. 877A, and would not have been subject to the exit tax were it not for their non-willful violations. This article explains the general tax and information-reporting duties for U.S. taxpayers with international connections, the application of the exit tax...

  Many people have grown weary of cases focused on penalties for failing to declare foreign accounts on FinCEN Form 114 (“FBAR”), which is understandable given all the attention heaped on this topic since 2008. However, the reality is that the Internal Revenue Service (“IRS”) continues to aggressively impose severe FBAR penalties, while the Department of Justice (“DOJ”) regularly files lawsuits in District Courts to collect them. These governmental actions, coupled with the colorful defenses raised by taxpayers, have created a significant amount of precedent in recent years. Court decisions are inconsistent, the IRS is capricious in following its own published guidance, and the key concept of “willfulness” is constantly evolving. Taxpayers who do not stay abreast of the evolution diminish their chances of success in fending off FBAR penalties. In an effort to keep taxpayers and their advisors updated, this article analyzes three recent FBAR cases, Flume, Boyd, and Cohen, which co...

In September 2020, the IRS instructed its personnel to gather and utilize, for multiple purposes and proceedings, all data possible about SCETs and SSTs. The IRS also indicated that such multi-tasking and data sharing, involving lots of unrelated parties and transactions, would not violate the general prohibition against disclosure of returns and return information found in Section 6103. The IRS, in essence, announced that it will attempt to present as much evidence as possible, relating to partnerships, promoters, appraisers, accommodating parties, and others, in overlapping tax audits, investigations, and litigation. This article: Summarizes conservation easement donations and related tax deductions Identifies the parties that the IRS is now pursuing Explains the non-disclosure rules and applicable exceptions Unpacks three IRS pronouncements attempting to justify potential violations of taxpayer protections and evidentiary rules Reminds partnerships and others affiliated with SCETs a...

The IRS has been attacking for several years what it has labeled syndicated conservation easement transactions (“SCETs”). Among the many weapons employed by the IRS are identifying SCETs as “listed transactions” in Notice 2017-10, 2017-4 IRB 544, launching a “compliance campaign” consisting of dozens of specialized Revenue Agents, featuring SCETs on the IRS’s “dirty dozen” list, and engaging in a widespread practice of claiming that tax deductions related to SCETs should be $0 and imposing severe penalties. Assaults on SCETs are now common knowledge, but what many fail to realize is that the IRS does not limit itself. Indeed, the IRS has also been challenging fee-simple donations of property to charities for years, applying many of the same techniques used more recently against SCETs.  This article examines a relatively obscure case from yesteryear, Terrene Investments, whose importance likely will increase as tax disputes involving SCETs and fee-simple property donations increase....