For 2018 partnership tax returns due in 2019, partnerships must report negative “tax basis” capital accounts on the Schedules K-1 for their partners. Perhaps recognizing that it may be difficult for some partnerships to timely comply with these new requirements, the IRS issued Notice 2019-20 on March 7, 2019, providing penalty relief under certain circumstances, discussed below.
On Thursday, December 20, 2018, the Tax Court released its opinion in Alternative Health Care Advocates et al v. Comm’r, 151 T.C. No. 13 (2018), a case involving the disallowance of deductions related to trafficking of marijuana mandated by Section 280E of the Internal Revenue Code. The Alternative Health Care Advocates opinion broke new ground by extending the scope of the deduction disallowance beyond the legal owner/seller of marijuana to an affiliated entity that participated in the marijuana sales.
The month of October began and ended with two celebrity names receiving unfavorable news in their tax controversy matters. On October 5th, Michael “the Situation” Sorrentino, of “Jersey Shore” acclaim, and his brother received prison sentences in Newark, New Jersey federal court. To round the month out, on November 1st, Wesley Snipes lost his Tax Court battle in which he alleged the IRS abused its discretion in not accepting his offer-in-compromise.
Having a “seriously delinquent tax deficiency” as determined under IRC §7345 can enable the IRS to certify an individual’s tax debt to the State Department, which allows the State Department to revoke, deny, or limit an individual’s passport. A taxpayer has “seriously delinquent tax debt” when he or she owes more than $51,000 including late fees and penalties (which is indexed to inflation) and when a levy has been issued or a lien has been filed by the IRS. IRC §7345(b). The right to a Collection Due Process hearing also must have lapsed or have been exhausted in order to be subject to certification.
FIRPTA, or the Foreign Investment in Real Property Tax Act, is part of the United States’ continued efforts to tax all income/gain connected to the United States. Real estate agents, escrow agents, and buyers should be aware of FIRPTA because it mandates income tax withholding and paying over to the IRS 15% of the sales price on the purchase of a U.S. real property interest from a foreign person under certain circumstances. 26 U.S.C. § 1445. In other words, buyers may not be able to pay all of the purchase price to the seller—some may have to be paid to the IRS. This can include situations where a foreign person (or entity) sells, exchanges, liquidates, redeems, gifts, or transfers in any other way a real property interest. The obligation is imposed on a buyer as well as a buyer’s agent and/or settlement/escrow officer.
On May 10, 2017, Attorney General Sessions issued a Memorandum titled Department Charging and Sentencing Policy. Prosecutors were instructed to “charge and pursue the most serious, readily provable offense” and “disclose to the sentencing court all facts that impact the sentencing guidelines or mandatory minimum sentences.”