AICPA Tax Insider (June 16, 2020): Kiddie Tax Rules Restored; 2020 Auto Depreciation Limits Issued; Final GILTI and FDII Regs Finalized; and More!

Former kiddie tax rules restored

By Kate Mantzke, CPA, Ph.D.; Brad Cripe, CPA, Ph.D.; and Suzanne Youngberg, CPA

Congress reversed the kiddie tax changes enacted in the TCJA, permitting taxpayers to choose which rules apply in 2018 and 2019 and possibly file amended returns.

2020 depreciation limits for cars and trucks are issued

The IRS issued the 2020 limits on depreciation deductions for cars and trucks first placed in service in 2020 and the income inclusion amounts for passenger automobiles first leased in 2020.

How to report coronavirus paid sick leave and family leave to employees

The IRS issued guidance on how employers should report qualified sick and family leave paid to employees under the Families First Coronavirus Response Act.

FDII and GILTI regulations finalized

Final regs. govern the foreign-derived intangible income (FDII) deduction and the global intangible low-taxed income (GILTI) provisions enacted by the TCJA.

Consolidated groups get NOL guidance

The IRS issued proposed and temporary regulations explaining how consolidated groups should apply the changes to the net operating loss rules enacted by the CARES Act.

Sec. 743(b) adjustments: Shortcuts and surprises

By Megan A. Stoner, J.D., LL.M., and Nancy M. Langdon, CPA

Here are the reasons the purchaser of a partnership may want to avoid shortcuts when estimating the federal income tax consequences associated with a Sec. 743(b) adjustment in an acquired partnership interest.

Document Summaries Week of July 13, 2020


Additional coronavirus-related deadline relief provided to hospital organizations

In response to the ongoing COVID-19 pandemic, the IRS issued a notice that extends the relief provided in Notice 2020-23 for hospital organizations that are required to meet the community health needs assessment (CHNA) requirements under Sec. 501(r)(3). Notice 2020-23 postponed until July 15, 2020, the deadline for performing any CHNA requirement due to be completed on or after April 1, 2020, and before July 15, 2020, and this notice provides a further postponement, until Dec. 31, 2020, of the deadline for performing any CHNA requirement due to be completed on or after April 1, 2020, and before Dec. 31, 2020. Notice 2020-56 (7/14/20).


Taxpayers cannot deduct property losses where basis of property was in doubt; penalties rejected

The Tax Court held that married taxpayers who owned rental properties were not entitled to deduct an ordinary loss of $971,988 from their sale of residential property in Gearhart, Ore., because they did not prove their basis in the property exceeded the sale proceeds; and they were required to include in their amount realized on the sale of the Gearhart property nonrecourse debt on the property that was discharged. The court also held that the taxpayers did not realize income from the cancellation of their debt to a bank to the extent they were insolvent when the debt was canceled; did not establish that a partnership in which the husband was a partner allocated a loss to the husband for 2012, but that the husband’s basis in the partnership in 2013 and 2014 was sufficient to allow a partnership loss deduction; and owed self-employment taxes on the guaranteed payments received by the husband in 2012, but not in 2013 and 2014 due to the reduction on net earnings for partnership losses. Finally, the court rejected penalties the IRS assessed  after holding that the IRS did not meet its burden of establishing compliance with Sec. 6751(b)(1) because it did not demonstrate that the individual who signed the civil penalty approval form was “the immediate supervisor of the individual” who made the determination to assess penalties. Duffy, T.C. Memo. 2020-108 (7/13/20).


The IRS provided specifications for the private printing of red-ink substitutes for the 2020 revisions of certain information returns. This procedure will be reproduced as the next revision of IRS Publication 1179, General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns. Rev. Proc. 2019-24 is superseded. Rev. Proc. 2020-35 (7/13/20).


Tax Court rejects partnership’s conservation easement donation deduction

In a case involving a partnership’s charitable deduction for the partnership’s donation of a conservation easement, the Tax Court held that the deed granting the conservation easement reduced the donee’s share of the proceeds in the event of extinguishment by the value of improvements (if any) made by the donor, and thus the taxpayer did not satisfy the perpetuity requirements of Sec. 170(h)(5)(A). Furthermore, the court rejected the partnership’s challenge to the validity of Regs. Sec. 1.170A-14(g)(6) and found that the construction of Sec. 170(h)(5) set forth in Regs. Sec. 1.170A-14(g)(6) is valid. Smith Lake, LLC, T.C. Memo. 2020-107 (7/13/20).

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.

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