IRS Offers Settlements to Some Micro-Captive Insurance Taxpayers

Posted in GT Alert, Insurance, Internal Revenue Code, IRS, tax audits

On Sept. 16, 2019, the IRS announced it is offering settlements to certain taxpayers with open audits of micro-captive insurance transactions. The IRS has targeted these micro-captive insurance transactions since 2014, and they were designated as transactions of interest in 2016.1 Although micro-captive insurance transactions have gained popularity among closely held entities, the IRS has challenged such transactions as abusive, stating that they “are inconsistent with arm’s length transactions and sound business practices.”2

Following several IRS victories in the U.S. Tax Court, the IRS decided to offer settlements to taxpayers currently under examination and mailed settlement letters to up to 200 such taxpayers. This action was not unexpected given the IRS’s three recent victories, described below, and the rash of docketed cases in the Tax Court on this issue. A settlement initiative such as this one represents an effort to deal with the volume of cases. The initiative will resolve more cases without litigation and will produce finality for those accepting the fixed settlement terms.

Click here to read the full GT Alert, “IRS Offers Settlements to Some Micro-Captive Insurance Taxpayers,” by Barbara T. Kaplan and Josh Prywes.

Applicable Federal Rates and Code Section 7520 Rate for October 2019 – Downward Trend Accelerates

Posted in Applicable Federal Rates (AFRs), Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes monthly the applicable federal rates (AFRs) under Internal Revenue Code (Code) Section 1274(d) and the Code Section 7520 rate (7520 rate) for the month following the month in which the Revenue Ruling is published in a Revenue Ruling that is released around the 18th day of the immediately preceding month. Advance knowledge of the AFRs and 7520 rate for the following month provides a window of opportunity for the immediate or delayed implementation of income, gift, and estate-tax planning techniques in response to upward or downward trends. Effective implementation and management of interest-sensitive estate planning techniques involves numerous other factors in addition to the relevant AFR or the 7520 rate, including a client’s particular personal and financial circumstances, and should be undertaken only with the advice of competent tax counsel and financial advisors.

The IRS has issued Revenue Ruling 2019-23, which provides the AFRs and 7520 rate for October 2019. Revenue Ruling 2019-23 will appear in Internal Revenue Bulletin 2019-41 dated Oct. 7, 2019. The downward trend that began in January 2019 continues, with all AFRs and the 7520 rate at or below 1.86% for October 2019. Continue Reading

Retailers Not Eligible for 100% Leasehold Improvement Write-Off Due to Legislative Glitch

Posted in Government, GT Alert, Internal Revenue Code, Real Estate, real estate tax, State Tax, Tax Cuts and Jobs Act

The 2017 Tax Cuts and Jobs Act provided a 100% first year write-off for many types of capital expenditures. Congressional tax writers intended this benefit to be available for leasehold improvements, which would be a boon to retail and restaurant businesses and their landlords. Unfortunately, in the rush to get the tax bill pushed through, there was a legislative drafting error that caused leasehold improvements to be left out of the definition of expenditures eligible for this tax benefit. Worse yet, leasehold improvements were given a longer write-off period (39 years) than under the prior law (15 years).

Click here for the full GT Alert, “Retailers Not Eligible for 100% Leasehold Improvement Write-Off Due to Legislative Glitch.”

Applicable Federal Rates and Code Section 7520 Rate for September 2019 – Downward Trend Continues

Posted in Applicable Federal Rates (AFRs), Internal Revenue Code, IRS

The Internal Revenue Service (IRS) publishes monthly the applicable federal rates (AFRs) under Internal Revenue Code (Code) Section 1274(d) and the Code Section 7520 rate (7520 rate) for the month following the month in which the Revenue Ruling is published in a Revenue Ruling that is released around the 18th day of the immediately preceding month. Advance knowledge of the AFRs and 7520 rate for the following month provides a window of opportunity for the immediate or delayed implementation of income, gift, and estate-tax planning techniques in response to upward or downward trends. Effective implementation and management of interest-sensitive estate planning techniques involves numerous other factors in addition to the relevant AFR or the 7520 rate, including a client’s particular personal and financial circumstances, and should be undertaken only with the advice of competent tax counsel and financial advisors. Continue Reading

IRS Aims to Catch Up to Tech Advancements

Posted in Cloud Transactions, Income Tax, Internal Revenue Code, IRS

Recently proposed IRS regulations would significantly affect tax on income from international cloud transactions and electronic transfers of digital content. Accordingly, CFOs should review the structure of agreements involving such transactions and transfers.

Issued on Aug. 9, the proposed regulations represent an attempt by the IRS to catch up with technological advancements, two decades after it issued regulations addressing the U.S. federal income tax treatment of cross-border transfers of computer programs.

Click here to read the full article, “IRS Aims to Catch Up to Tech Advancements,” written by Greenberg Traurig Tax attorneys Erez I. Tucner and Pallav Raghuvanshi, published on CFO.com.

In the Zone: GT Qualified Opportunity Zone News – July and August 2019

Posted in Congress, Government, Income Tax, Internal Revenue Code, IRS, Opportunity Zones, qualified opportunity funds, qualified opportunity zones, Real Estate, real estate tax, Uncategorized

Welcome to In the Zone: GT Qualified Opportunity Zone News. Our monthly digest of the latest federal and state developments in Qualified Opportunity Zones and Qualified Opportunity Funds and related Greenberg Traurig news and events will keep stakeholders apprised of the most pressing issues in this burgeoning space.

President Trump’s Tweets Show Continued Strong Support for Opportunity Zones

President Trump tweets support for opportunity zones, August 18, 2019 Continue Reading

IRS Clarifies U.S. Tax Treatment of Cross-Border Cloud and Other Online Transactions in Proposed Regulations

Posted in Cloud Transactions, GT Alert, Internal Revenue Code, IRS, Tax Planning

On Aug. 9, 2019, the IRS issued proposed regulations (Proposed Regulations) addressing the U.S. federal income tax treatment of cross-border cloud transactions. The Proposed Regulations will not become effective until final rules are adopted.

By way of background, the last time the IRS meaningfully addressed the taxation of cross-border digital content transfers was in October 1998 (1998 Regulations), which applied to software transfers.

Technological developments over the last twenty years – specifically the advent of cloud computing and streaming content – rendered the 1998 Regulations outdated. The IRS stated that the purpose of the Proposed Regulations is to bring IRS regulations current with such technological advancements. Continue Reading

29 GT New York Attorneys Listed in 2020 Edition of Best Lawyers in America, Including Barbara Kaplan as Lawyer of the Year

Posted in awards, Firm News

The New York office of global law firm Greenberg Traurig, LLP has 29 attorneys listed in the 2020 edition of Best Lawyers in America. Additionally, Tax Practice Co-Chair Barbara Kaplan was named “Lawyer of the Year” for Litigation and Controversy in Tax.  To read full press release, click here.

Greenberg Traurig's Barbara Kaplan Lawyer of the Year Litigation and Controversy In Tax - Best Lawyer in America 202

Is the 2017 Tax Law the Reason Home Sales Are Not Booming?

Posted in Internal Revenue Code, Real Estate, real estate tax, State Tax, Tax Cuts and Jobs Act

Many blame rising home prices, construction and land costs, and a lack of inventory, but a large part of the reason for this disconnect between home sales and the economy may be due to changes in the 2017 Tax Cuts and Jobs Act (TCJA) that either reduced or eliminated the tax advantage of purchasing a house rather than renting one.

The higher-end home market is being impacted by four provisions in the TCJA: a $10,000 limit on deducting state and local taxes, which for many prospective higher-end homebuyers will limit the amount of real property taxes that can be deducted; a reduction in the amount of a mortgage on which interest can be deducted—down to $750,000 from the pre-TCJA ceiling of $1 million; the elimination of interest deductions for home equity loan mortgages, which had provided a tax advantaged method of financing other purchases; and lower tax rates in general which reduce the value of these deductions.

However, the TCJA’s bigger impact on housing purchases very well might be in the lower to middle markets, especially the entry level market, as the result of the large increase of the standard deduction.

Click here to read the full Daily Business Review article by GT Shareholder Marvin Kirsner, who examines why home sales in the U.S. are sluggish.

2 Tax Updates from GT’s Blockchain & Cryptocurrency Newsletter – Spring/Summer 2019

Posted in Blockchain

IRS Warns Cryptocurrency Investors That They May Owe Tax Money

The Internal Revenue Service announced on July 26 that it has begun sending letters to taxpayers with virtual currency (also known as cryptocurrency) transactions who potentially failed to report income on them and pay the resulting tax, and/or did not report their transactions properly.

The agency, which plans to reach more than 10,000 cryptocurrency investors by the end of August 2019, says it began notifying these taxpayers the week of July 15.

“Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties,” IRS Commissioner Chuck Rettig said in a statement. “The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations.”

The IRS noted that the warning letter recipients had their names provided via “various ongoing IRS compliance efforts,” and that “virtual currency is an ongoing focus area for IRS Criminal Investigation.”

“The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations,” the agency said in its news release.

To read the full IRS news release, click here.

IRS Guidance on Cryptocurrency Tax Issues Expected Soon

The IRS may release guidance on virtual currency tax issues within the next few months, according to IRS Commissioner Charles Retting. Speaking at the Federal Bar Association Insurance Tax Seminar in Washington on May 30, Rettig added that the guidance will include a revenue ruling and a revenue procedure, and that “it’s going to be helpful for people who might be guessing at ways that digital assets might be nontaxable.”

The coming guidance is being issued as part of an effort to make virtual currencies more visible, he said. Rettig’s comments came just after he wrote in a May 16 letter to Rep. Tom Emmer (R-Minn.) that the IRS plans to issue guidance on acceptable methods for calculating cost basis and of cost basis assignment, the tax treatment of forks, as well as on other tax issues. This new information will add considerable guidance on virtual currencies, as the agency has to date only issued Notice 2014-21, 2014-16 IRB 938, which says that these currencies are considered property.

Click here for GT’s full Blockchain & Cryptocurrency Spring/Summer 2019 Newsletter.

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