Prose by Tax Pros

The IRS continues to challenge partnerships that donate conservation easements, implementing extreme enforcement techniques as part of the process. As this article explains, the newest tactic is depriving partnerships of their general right to seek reconsideration by the Independent Office of Appeals before engaging in long, expensive, complicated tax litigation. To maximize their chances of prevailing against the IRS, taxpayers must remain hyperaware of the evolving enforcement tools. 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 Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

Substance is important, but procedure is often king when it comes to disputes with the IRS. This is what taxpayers facing large penalties for not reporting foreign accounts have discovered. FBAR duties are not contained in the tax code, yet the quintessential tax agency, the IRS, audits potential violations and asserts penalties. Such disconnect has sparked a number of questions, most of which center on whether FBAR penalties can be treated as a “tax” for certain purposes. This article examines origins of the FBAR, delegations of power, key tax provisions, and four noteworthy cases providing guidance on how, when, and where to fight FBAR penalties. 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 Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

  The Coronavirus revealed several important things, one of which is how much people crave certainty. Aggressive enforcement actions by the IRS have increased insecurity for many taxpayers, particularly partnerships that donated conservation easements. Seeking certainty, some partnerships obtained tax insurance, and the IRS began attacking in three ways. This article analyzes the attacks and the challenges the IRS faces. 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 Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

Failure by foreign corporations to file Forms 1120-F (U.S. Income Tax Return of a Foreign Corporation) triggers extreme problems. Specifically, in addition to asserting normal penalties for late filing, late payment, and late information returns, the IRS disallows business-related deductions and credits that corporations normally could claim. Thus, the IRS imposes taxes on gross income, instead of net income. This outcome is particularly harsh when one considers that many fledgling businesses operate a net loss for several years. This article explains U.S. filing duties of foreign corporations, the result in a recent Tax Court case, Adams Challenge v. Commissioner , and solutions still available to non-compliant foreign corporations. 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 Shareholder in the Tax Controversy Section of Chamberlain Hrdlicka and Chair of the International Tax Group.

  Litigation over unreported foreign account is unpredictable. Many rejoiced in 2017 when a District Court determined in Bedrosian v. United States that the taxpayer was not “willful” in failing to declare a large Swiss account. They were down, though, when the same District Court, on remand, reluctantly held that the taxpayer acted “recklessly,” which sufficed. Less than one month later, the government agreed to settle willful FBAR penalty case at the last minute in Jones v. United States. Details of the settlement are confidential, but logic dictates that the government, after a string of FBAR victories and a win in Bedrosian, would not concede anything, unless it had real concerns about losing and setting precedent favorable to taxpayers. The enclosed article describes the applicable law, the two notable FBAR decisions, and where things stand with respect to willfulness. Read the full article here.   About Hale E. Sheppard HALE E. SHEPPARD, Esq. (B.S., M.A., J.D., LL.M., L...

There is so much misinformation, hyperbole, distortion, chest-thumping, and other “noise” surrounding conservation easement disputes nowadays that it is difficult to get to the truth. Most rational people agree on a few things, though. these include that Congress has expressly incentivized donations of real property interests to charity for over 50 years, increasing numbers of taxpayers have pooled their interests recently to take advantage of this tax benefit, and the Internal Revenue Service(“IRS”),convinced that some taxpayers are inappropriately exploiting the system, has implemented a long list of tactics to challenge what it calls syndicated conservation easement transactions (“SCETs”). However, there is considerable disagreement about whether the IRS’s actions have gone too far, undermining both congressional intent and public confidence in the integrity of tax enforcement procedures.  This article explains the rules related to conservation easement donations, long-stan...

  In fighting the battle against offshore tax avoidance, the U.S. government has raised some creative arguments to establish that a taxpayer “willfully” failed to disclose foreign accounts by filing FinCEN Forms 114 (“FBARs”). These include the concept of “constructive knowledge,” whereby the U.S. government contends that, because Schedule B (Interest and Ordinary Dividends) of Form 1040 (U.S. Individual Income Tax Return) specifically asks about foreign accounts, because Schedule B directs taxpayers to additional sources of information about foreign account duties, and because taxpayers must sign their Forms 1040 declaring that they have reviewed the entire Form 1040, including all Schedules and Statements attached, any FBAR violation must be “willful” and thus subject to the highest possible penalty. This notion sounded absurd to many in the tax community at the outset, but it has been embraced by several courts. Not all courts have accepted the position, though, giving hope to ...