Prose by Tax Pros

Taxpayers in tax disputes with the IRS can seek judicial review in any one of three courts, but they often choose the Tax Court. This makes sense because the Tax Court is favorable to taxpayers in many ways. For instance, the parties must work cooperatively to exchange evidence, narrow issues, and agree on facts, and pre-trial discovery demands are often minimal. Things have started changing, though, particularly when it comes to cases involving conservation easements. This article explains the IRS’s main data-gathering tools during audits, pre-trial discovery actions, general limitations on depositions of potential witnesses, and three recent Tax Court Orders allowing the IRS to conduct non-consensual depositions of various persons affiliated with partnerships that donated easements. 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 Intern...

Creating foreign entities to safeguard assets is not necessarily problematic for U.S. taxpayers, but failing to characterize them appropriately sure is. Taxpayers have utilized foreign vehicles called “stiftungs” for decades. Various court decisions and administrative rulings over the years have concluded that certain stiftungs should be treated as trusts. This triggers the duty for taxpayers to file several information returns with the IRS, the most critical of which are Forms 3520 and Forms 3520-A. Violations lead to large penalties, endless assessment periods, and other things taxpayers want to avoid. This article defines the concept of foreign trusts, chronicles the major cases and IRS rulings from 1955 to the present, explains the IRS’s foreign trust compliance campaign, and explores potential relief for taxpayers thanks to a recent Revenue Procedure. 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 t...

  The IRS believes that certain partnerships that donate conservation easements are using inflated appraisals to claim excessive tax deductions. The partnerships disagree, and battles ensue. They often entail prolonged audits, administrative appeals, and Tax Court trials. All this fighting has a large cost to the IRS, the partnerships, and the judicial system. The enclosed article provides an overview of the rules related to conservation easement donations, identifies supposed “technical” flaws that the IRS attacks, describes several Tax Court holdings that are beneficial to all partnerships, explores the use of Qualified Offers, and demonstrates that easement cases can be resolved before trial where the IRS acts reasonably by focusing on the real issue, valuation. 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 Grou...

  The IRS has drastically changed its procedures for reviewing appraisals. It first issued a memo about Section 6695A penalties, which eliminated the multi-level review procedure formerly used to safeguard appraisers against improper penalties and premature disciplinary referrals. Next, the IRS ignored several suggestions from accounting and valuation organizations about potential problems. Doubling down on its initial position, the IRS most recently issued a Chief Counsel Advisory to its personnel further reducing appraiser rights. This article, which supplements an earlier one, analyzes the main concepts around conservation easement donations, evolution of appraiser penalties, disregarded suggestions from professional organizations, and recent IRS actions depriving appraisers of historical protections. 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...

According to the IRS, many partnerships have incorrectly treated their owners as “limited partners,” thereby allowing them to escape self-employment (“SECA”) taxes on their distributive shares. The positions taken by partnerships are based on a law enacted in 1977, which has never been updated or clarified, by Congress or the IRS. The broad scope of the “limited partner” exception from the outset, coupled with governmental inaction during the next five decades, has led to chaos. This article, the first in a series, chronicles the major events culminating in the current confusion about the application of SECA taxes to modern entities.  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 IRS normally must identify non-compliance within a short period, which can be tricky if the relevant matters occurred abroad. Taxpayers who have failed to report worldwide income and assets, either accidentally or on purpose, hope that the proverbial clock runs out before the IRS takes action. This sometimes happens in domestic cases, but much less often in the international context. This article, using several recent Tax Court cases as a springboard, examines three tools at the IRS’s disposal for expanding assessment-periods against taxpayers with international violations. 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.

  Taxpayers yearn for certainty, as they need it to make intelligent decisions about tax-related issues. Unfortunately, doubt has arisen in connection with Section 179D, a provision that incentivizes taxpayers to make commercial buildings more energy efficient. The unsettled state of affairs can be attributed to attempts by the IRS to disregard its longstanding guidance directly on point. This article provides an overview of Section 179D, identifies the related Compliance Campaign, explains the aggressive position recently taken by the IRS about allocation of Section 179D deductions, and analyzes a list of authorities countering the IRS’s position. 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.