Prose by Tax Pros

Imagine a world where you could create a retirement plan in a foreign country with which you have no affiliation, contribute appreciated property to such plan without triggering immediate taxation, face no limitations on the contributions you can make, defer taxes on the accretion inside the plan, start taking distributions as early as age 50, and avoid tax on the majority of the distributions from the plan. Many U.S. taxpayers, relying on flexible interpretations of the bilateral treaty between Malta and the United States, took these positions for several years. The IRS put its proverbial foot down in late 2021, announcing that taxpayers were misconstruing the treaty, and that the IRS was committed to pursuing those who participated in or promoted such abuses. This article explains general U.S. tax treatment of foreign pensions, key aspects of the treaty, examples of taxpayers claiming auspicious results, terms of the recent Competent Authority Arrangement designed to halt future act...

After courts held that the IRS violated the law when it issued Notice 2017-10 classifying syndicated conservation easement transactions (“SCETs”) as “listed transactions,” the IRS scrambled to salvage the situation. In particular, it released Proposed Regulations in December 2022, which centered on information-reporting requirements for those involved with SCETs. About three weeks later, Congress enacted the Secure 2.0 Act. That legislation did not address disclosure duties; rather, it identified easement donations that would get a tax deduction of $0 if their value surpassed a certain amount. The disparate objectives, timing, terminology, and standards in the Proposed Regulations and Secure 2.0 Act have caused confusion among easement stakeholders. The attached article examines the current situation, as well as the actions leading up to it.  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 Cont...

  The IRS has long used mandatory disclosures by taxpayers on Form 8886 (Reportable Transaction Disclosure Statement) to discourage participation in reportable transactions and carry out enforcement campaigns. The IRS has taken a different approach in the past, though, when it comes to taxpayers taking positions on returns that might be considered aggressive, novel and/or divergent from existing guidance. The IRS favored the carrot, offering penalty protection to taxpayers on the condition that they adequately revealed their positions. The recent Green Book shows that the current Presidential Administration is advocating all stick, and no carrot, when it comes to disclosures to the IRS. This article gives taxpayers and their advisors key information about this important, evolving issue.  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 ...

Many taxpayers have strong support for positions they take on their returns, but their limited understanding of complicated tax procedures sinks them. Missing deadlines, using improper forms, sending materials to the wrong place, not getting all required signatures, and other errors can be deadly to taxpayers. The IRS is aware this reality and it often attempts to claim victory and dispense with cases at the early stages based solely on technical and procedural matters, without ever having to fight over the substance. This article explains the penalties and unique mitigation standards applicable to information returns, describes the key aspects of tax refund actions, and analyzes recent cases, including Special Touch Home Care Services, Inc. v. United States, in demonstrating how confusion over tax procedures can trigger lost refunds. 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 Sec...

Battles between taxpayers and IRS about whether certain workers should be treated as employees or independent contractors are constant. The procedures applicable to such disputes change frequently, though. For example, Congress and the IRS have modified the rules related to particular types of employment tax fights in Tax Court several times over the past two decades, with the most recent adjustment coming in 2022. This article explains the main categories of workers, strategies that taxpayers can use during IRS audits or administrative appeals, evolution of the rules under Section 7436 concerning litigation of employment tax issues before the Tax Court, and taxpayer-favorable issues absent from recent IRS guidance. 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 has been attacking syndicated conservation easement transactions (“SCETs”) for more than half a decade. These disputes often involve prolonged audits, Appeals Office conferences, Tax Court trials, and appellate litigation. Such procedures can have a huge cost, not only to the partnerships, but also to the IRS and the entire judicial system. For instance, even after diverting lots of personnel to its Compliance Campaign aimed at SCETs, the IRS acknowledged in early 2022 that it was still severely understaffed and needed to spend yet more to hire, train and integrate 200 additional attorneys. At this juncture, reviewing proposed solutions, both by the IRS and state tax authorities, for resolving SCET cases is worthwhile. This article analyzes the conservation easement donation process, role of Qualified Amended Returns, prior Settlement Initiative offered by the IRS, and current approach for partners in California. Read the full article here. About Hale E. Sheppard HALE E. SHEPP...

  The article summarizes the rules affecting conservation easement donations, identifies the “technical” arguments on which the IRS has heavily relied, describes newer attacks by the IRS focused on appraisals, analyzes multiple sources supporting valuation of real property based on its highest and best use, and suggests that the IRS has failed to adequately explain why it, taxpayers, and/or the courts should ignore longstanding authorities. 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.