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© 2017 Land Grant University Tax Education Foundation, Inc. 655 INDEX Subject Index # 21st Century Cures Act, 478–481 401(k) plans. See I.R.C. § 401(k) plans 403(b) plans. See I.R.C. § 403(b) plans A Abandoned property, 428–429 Accounting method changes, new legislation, 499 Accuracy-related penalty, for estate basis, 143 Additional depreciation, 51. See also Depreciation Additional first-year depreciation, new guidance, 487–488 Advance premium tax credit (APTC), 334, 483, 484. See also Premium tax credit (PTC) Affordable Care Act and advance premium tax credit (APTC), 334 catastrophic plan reporting, 484–485 coverage exemptions, 331–333 enrollment periods, 483, 484 individual shared responsibility payment, 328–333 and I.R.C. § 36B, 335 new legislation, 478–485 opt-out payments, 335–336 proof of coverage, 329–331 premium tax credit (PTC), 334–336, 481–484 qualified small employer health reimbursement arrangements (QSEHRAs), 479–481 and reporting minimum essential coverage, 329–331 return preparer best practices, no coverage, 331 and silent returns, 329 Agricultural tax issues abandonment of farm structures, 428–429 basis of farmland, 416–417 buying and selling farmland, 416–418 crop share leases, 420–422 demolition of farm structures, 426–430 depreciation and cost recovery, 401–402 expense deductions, 399–405 farming, definition of, 392–393 income averaging election, 398–399, 406, 421 income, reporting, 392–399 loss carryback rules, 410–411 net operating losses, 406–415 personal property, leasing, 423–424 real property, leasing, 418–423 and rental property, 418–425 tax rules for farmers, 394 wetlands, sale of converted, 430–433 Agriculture Tax Center (IRS), and audit technique guides, 216–217 Subject Index � � � � � � � � � � � � � � 655 Cases Index � � � � � � � � � � � � � � � � � 667 AICPA organization standards, 4, 12–15, 19–20, 28–29 Air conditioning units, as section 179 property, 253, 253, 260, 487. See also I.R.C. § 179; Tenant services Alter egos. See Nominee and alter ego liability Alternative depreciation system (ADS), 261, 262, 263, 401. See also Modified accelerated cost recovery system (MACRS) Alternative minimum tax alternative minimum taxable income (AMTI), 118, 122–123, 361 calculation of, 360–363 exemption, 362 loss rules, 118–124. See also Alternative tax net operating loss (ATNOL) minimum tax credit (MTC), 363 overview, 360 reporting, 363–365 tax rates, 362 Alternative tax net operating loss (ATNOL). See also Alternative minimum tax calculating, 118–119 carrying back, 119–122 limited to 90% of AMTI, 122–123 American Samoa, income exclusion, 441 Amount at risk, 85–86. See also At-risk limits Annuity distributions, 290–292 Appraisal requirements, for charitable contributions, 354–355 FINAL COPYRIGHT 2017 LGUTEF

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Page 1: Subject Index 655 Cases Index 667

© 2017 Land Grant University Tax Education Foundation, Inc. 655


Subject Index

#21st Century Cures Act, 478–481401(k) plans. See I.R.C. § 401(k) plans403(b) plans. See I.R.C. § 403(b) plans

AAbandoned property, 428–429Accounting method changes, new

legislation, 499Accuracy-related penalty, for estate

basis, 143Additional depreciation, 51. See also

DepreciationAdditional first-year depreciation, new

guidance, 487–488Advance premium tax credit (APTC),

334, 483, 484. See also Premium tax credit (PTC)

Affordable Care Act and advance premium tax credit

(APTC), 334 catastrophic plan reporting,

484–485 coverage exemptions, 331–333 enrollment periods, 483, 484 individual shared responsibility

payment, 328–333 and I.R.C. § 36B, 335 new legislation, 478–485 opt-out payments, 335–336 proof of coverage, 329–331

premium tax credit (PTC), 334–336, 481–484

qualified small employer health reimbursement arrangements (QSEHRAs), 479–481

and reporting minimum essential coverage, 329–331

return preparer best practices, no coverage, 331

and silent returns, 329Agricultural tax issues abandonment of farm structures,

428–429 basis of farmland, 416–417 buying and selling farmland,

416–418 crop share leases, 420–422 demolition of farm structures,

426–430 depreciation and cost recovery,

401–402 expense deductions, 399–405 farming, definition of, 392–393 income averaging election, 398–399,

406, 421 income, reporting, 392–399 loss carryback rules, 410–411 net operating losses, 406–415 personal property, leasing, 423–424 real property, leasing, 418–423 and rental property, 418–425 tax rules for farmers, 394 wetlands, sale of converted, 430–433Agriculture Tax Center (IRS), and

audit technique guides, 216–217

Subject Index � � � � � � � � � � � � � � 655 Cases Index � � � � � � � � � � � � � � � � �667

AICPA organization standards, 4, 12–15, 19–20, 28–29

Air conditioning units, as section 179 property, 253, 253, 260, 487. See also I.R.C. § 179; Tenant services

Alter egos. See Nominee and alter ego liability

Alternative depreciation system (ADS), 261, 262, 263, 401. See also Modified accelerated cost recovery system (MACRS)

Alternative minimum tax alternative minimum taxable

income (AMTI), 118, 122–123, 361 calculation of, 360–363 exemption, 362 loss rules, 118–124. See also

Alternative tax net operating loss (ATNOL)

minimum tax credit (MTC), 363 overview, 360 reporting, 363–365 tax rates, 362Alternative tax net operating loss

(ATNOL). See also Alternative minimum tax

calculating, 118–119 carrying back, 119–122 limited to 90% of AMTI, 122–123American Samoa, income exclusion,

441Amount at risk, 85–86. See also At-risk

limitsAnnuity distributions, 290–292Appraisal requirements, for charitable

contributions, 354–355


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Charitable contributions appraisal requirements, 354–355 athletic tickets, donation for right to

purchase, 346 of car, boat, airplane, 348 cash contributions, substantiation of,

352–353 charity benefit, donation to,

346–347 deduction carryovers, 359 deduction limits, 355–358 of intellectual property, 349 of inventory, 348–349 noncash contributions,

substantiation of, 353–355 property, contributions of, 347–350 qualified organizations, 351–352 qualifying donations, 345–351 reconstructing records, 513 reporting requirements, 359 services, contributions of, 350–351 substantiation requirements,

352–355 travel expenses, 350–351Charitable remainder trusts (CRTs),

148–149Chief Counsel Advice (C.C.A.) 2015-

04-011, and marijuana taxation, 286–287

Circular 230 and disclosure, 4–5 due diligence, and sale or transfer of

tax practice, 15–22 due diligence, case study, 30 and unconscionable fees, 31Circular loans, 79Client consent. See Consent, clientClosing costs. See Settlement costs,

purchase of farmlandCollection due process (CDP) hearing,

518–519Collection statute expiration date

(CSED). See also Limitation periods collection overview, 513 determining, 513–515 extending, 515–516 suspension of, 516–523, 544 transaction codes, 513–514Combat pay exclusions, 385–386Commercial revitalization deduction,

96Common-law marriage, and DSUE,

133Community property, acquired from

decedent, 140

and debt, 45–46 definition, 44 payment of, 44–45 receipt of, 44 and transfer of liabilities, 45–46Business entities. See C corporation;

Homeowners’ associations; Partnerships; Limited liability companies (LLCs); S corporation; Tax-exempt organizations

Business expenses amortizing start-up expenses, how

to, 247–248 beginning of active business, 250 expansion, deductible, 246 organizational expenses deduction,

250–252 reconstructing, 511–513 reporting start-up expenses,

248–249 and sharing economy workers, 343 start-up expenses deduction,

244–250Bypass trusts. See credit shelter trusts

CC corporation. See also S corporation loss limits, 89 organizational costs, amortizing, 251 return due dates and extensions,

500–501Cancellation-of-indebtedness income,

new legislation, 490, 491Capital contributions, and

homeowners’ associations, 182Capital gain property, charitable

contribution of, 347–348, 355Capital loss limits, 107Car and truck expenses, farm

deduction, 399–400Carryover periods carryback periods, general rules,

406 carryback periods, longer, 406–415 for alternative minimum tax credit,

363 for charitable contribution

deductions, 359 for net operating loss, 110–111, 115 Cash rent lease, 418–420Casualty, and passive activity losses, 90Casualty gain or loss, and natural

disasters. See Disaster tax reliefCasualty loss, carryback period,


Appropriate economic unit, 102Armed Forces. See Military tax issuesAsset classes, general, 41Attorney-client privilege, and

accounting-related services, 7–9. See also Privilege

At-risk limits amount at risk definition, 85–86 amount at risk adjustments, 87 and basis, 85, 86, 87 taxpayers subject to, 85Audits audit technique guides (ATGs),

216–217 digital correspondence audits, 215,

232 under National Research Program

(NRP), 214–215 and proposed partnership

regulations, 190–193 reconsideration, 507–508 Schedule F (Form 1040) hobby loss

audits, 393–394 statistics, 231–232

BBankruptcy, and collection statute

suspension, 521–522Basis and at-risk amount, 85, 86, 87 consistency rules, for estates,

140–143 and demolition of farm structures,

426, 428 of farmland, 416–417 and like-kind exchanges, 42–43 loss limits, 76–84 and mixed-use assets, 42–43 modified basis carryover rules, 489 order of adjustments, 80–81 partnership and LLC limits, 81–84 partnership basis adjustment,

200–201 partnership basis liquidation,

example, 201–202 and purchase costs, farmland, 417 property acquired from decedent,

general rules, 138–140 of replacement property, 42 S corporation debt, 78–80 in S corporation stock, 77–78Bona fide residence test, 446–448, 449Bonus depreciation, 267–268Boot. See also Like-kind exchanges


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Subject Index 657

debt instrument, sale or exchange of, 367

new legislation, 490–491 and original issue discount (OID),

366–371 private collection agencies, used by

IRS, 206–213 related party interests in

corporation, 485 transfer subject to, 44, 45–46Deceased spousal unused exclusion

(DSUE) advantages of electing portability,

136 amount computation, 132 and common-law marriage, 133 executor must file election, 127–128 opting out of portability, 127, 128,

135–136 ordering rules, 132 portability election, 126–134 portability legislation, 126 and QTIP election, 136 reporting, examples, 130–133 simplified method for extension,

130 tax return requirements, 129–134 timely filing portability election,

129–130Deductions. See also Basis; Business

expenses; Depreciation; Domestic production activities deduction; Loss limits; Net operating loss (NOL)

and business income, and net operating loss, 108

business organizational expenses, 250–252

business start-up expenses, 244–250 business use of car or truck, for

farmers, 399–400 business use of home, and sharing

economy, 343–344 charitable contribution, 345–359 charitable contribution deduction

limits, 355–358 depreciation, 261–271 earned income credit, 493–494 farm expenses, 399–405 foreign housing deduction, 453–454 and hobby loss limits, 71, 73 itemized deductions, and record

reconstruction, 513 joint and separate returns, allocation

of deductions, 414–415

Contractors hired by tax practitioners, and confidentiality, 9–11, 27–28

Cooperative distributions, 395Corporations. See also C corporation;

S corporation foreign owned LLCs, new reporting

rules, 474–475 homeowners’ association taxed as,

181 new legislation, 485, 500–501 organizational costs, 251Cost basis. See BasisCost of goods sold, and marijuana-

related businesses, 285, 286–287Credit shelter trusts, 137, 146Crop insurance/disaster payments,

396–397Crop share lease as nonrental activity, 94 tax treatment of, 420–422Cybercrime. See CybersecurityCybersecurity. See also Tax scams breach costs, 158–159 breach reporting, state laws,

164–165 breach, types of, 155–157 cyberattack, risk of, 154 cyberinsurance, 162–163 denial-of-services attack, 155–156 hacking, 155 IRS measures against identity theft,

218–222 malware, 156–157 phishing, 155, 222–223 risk management, 159–163 sample information security plan,

166–169 types of breaches, 155–157 viruses, computer, 156

DData security. See also Confidentiality

rules; Cybersecurity; Tax scams breaches, tax practitioner, 224–226 and confidentiality, case study,

23–24, 27–28 new IRS standards, 219–222De minimis safe harbor, real estate

improvements, 253–256Debt basis, S corporation, 78–80 charitable contribution of property

subject to, 348 debt instrument, definition, 366

Computer system security, 160. See Cybersecurity

Computer virus. See CybersecurityCondominium management

association, and I.R.C. § 528, 176Confidentiality agreement, samples,

10–11, 16–18Confidentiality rules case studies, 23–32 and Circular 230, 4–5 and client consent, 2, 3, 19–20, 23,

27 and conflict of interest, case study,

26, 32 and contractors, disclosure to, 9–11,

23, 27 and errors/omissions, 12–13, 24,

28–29 exceptions, 3, 4–5 and fraud, 13–15, 25, 29–30, 30–31,

37–38 I.R.C. § 7216, definition of, 2–3 IRS authorities, closing out, 22 nondisclosure agreement provisions,

16 nondisclosure exceptions, 3 for private collection agencies

contracted by IRS, 212–213 and privilege, 5–9, 25, 29–30 privilege laws, by state, 33–36 professional-organization standards,

4 and record retention, 20–22 and record transfer, 19–20, 23, 27 required disclosures, 4–5 Safeguards Rule, 10 and sale or transfer of tax practice,

15–22, 24, 28 and state law, 4, 13, 15, 19, 33–36 and summonses, 5 and work product doctrine, 9Conflict of interest, case study, 26, 32Consent, client, 2, 3, 18–20, 23, 27Conservation deduction, for farmers,

400–401Conservation Reserve Program (CRP) payments, taxation, 396 sale of land with CRP contract, 418Construction activities, and domestic

production activities deduction (DPAD), 278–279

Constructive liquidation, 82Contingent fee arrangement,

prohibited, 31


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and domestic production gross receipts (DPGR), 272–277

overview, 272Domestic production gross receipts

(DPGR), 272–277Doubt as to collectibility, and offer in

compromise, 532, 539–543Doubt as to liability, and offer in

compromise, 532, 537–539DSUE. See Deceased spousal unused

exclusion (DSUE)Due diligence, tax practitioner case studies, 28, 30–31, 32 DSUE portability, sample letter

confirming discussion of, 137–138Dynasty trusts, 149

EEasements, and like-kind exchanges,

58Effective tax administration, and offer

in compromise, 532–537, 543Effectively connected income (ECI),

and nonresident aliens, 459–463Employer identification number new, obtaining, 198–199 for qualified joint venture, 243Employee stock ownership plan

(ESOP), 307Employment tax, new legislation,

488–489Enrolled agent examination fee

increase, 496Errors/omissions in tax return, case

study, 24, 28–29E-Services online tools (IRS), 226–230Estates basis rules, 138–143, 489 beneficiaries, 142–143 deceased spousal unused exclusion

(DSUE) portability, 125, 126–138 and DSUE election, timely filing,

129–130 DSUE and non-US spouse, 134–135 executor must file DSUE election,

127–129 information reporting, 141–143 IRS authority to examine returns,

130 net investment income tax

reporting, 340–341 new legislation, 489, 501 tax return, complete and properly

prepared, 130–135 and transferee liability, 528

recovery periods, 263–264, 402 and sharing economy contractors,

344–345 and standard mileage rate (SMR),

270–271Disaster tax relief abatement of interest and penalties,

378–379 casualty gain, postponement of,

373–374 and casualty loss, 372–373 crop insurance/disaster payments,

396–397 federally declared disaster areas,

current, 371–372 home made unsafe, calculating loss,

375 loss year, choice of, 374–375 main home in disaster area, rules,

377 new legislation, 498–499 prior-year returns, 379 record reconstruction, 379–381 relief payments, 375–377 replacement property, 374 small business disaster losses,

408–410 tax deadlines, postponed, 377–379Disclosure of client information.

See also Confidentiality rules case study, 23, 27 definition of, 16 and private collection agencies

employed by IRS, 212–213 required, 4–5Disguised-sale rules, partnership, 486Disregarded entity. See also Limited

liability companies (LLCs) vs. corporation, 196 and nonresident alien withholding,

466 single-member LLC, change to/

from partnership, 194–198Distributions, retirement plan. See also

Retirement plans early distributions, 293–296 qualified reservist distribution

(QRD), 390 regular distributions, 290–293 required minimum distributions,

296–299 taxation of, 290–299Domestic production activities

deduction (DPAD) for construction activities, 278–279

Deductions (continued) limits on certain, 71 military personnel, exceptions to

common deductions, 386–387 and moving expenses, to or from

foreign country, 438–439 and net investment income,

337–338 net operating loss deduction,

claiming, 115 new legislation, 493 nonbusiness income, and net

operating loss, 108–109 real estate improvements, 253–261 repair or maintenance costs, real

estate, 254 research and experimental costs,

252–253 soil and water conservation, 400–

401, 421, 429–430 and vacation home limits, 73–76Deferred like-kind exchanges, 52–53Defined benefit retirement plans,

303–306Defined contribution retirement plans,

306–321Demolition of farm structures,

426–430Denial-of-services cyberattack,

155–156Depreciation. See also Basis additional, 51 additional first-year depreciation,

new guidance, 487–488 and alternative minimum taxable

income (AMTI), 361–362 bonus depreciation, 267–268, 362 deduction, structuring transaction to

maximize, 67–68 definition, 261 for farm assets, 401–402 and hobby losses, 73 home office recapture, 344 and I.R.C. § 179, 267, 421 methods, different, 264–266 and mixed-use assets, exchange of,

42–43 modified accelerated cost recovery

system (MACRS), 261–266 new legislation, 487–488 and personal property, 41, 47–51 and real property, 51 recapture, 268–270 recapture, and like-kind exchanges,



Page 5: Subject Index 655 Cases Index 667


Subject Index 659

Foreign tax credit, and foreign earned income (ECI), 453

Foreign tax issues effectively connected income, and

nonresident aliens, 459–463 FATCA (Foreign Account Tax

Compliance Act) requirements, 440, 463

FBAR filing, 439–440 FDAP (fixed, determinable,

annual, or periodic) income, and nonresident aliens, 455–459

foreign earned income, 444–453 foreign exchange rates, 438

foreign housing exclusion or deduction, 444–449, 453–454

moving expenses to/from foreign country, 438–439

new legislation, 491–493 nonresident alien reporting,

454–463 nonresident aliens, withholding on

payments to, 463–471 nonresident spouse, treated as US

resident, 471–473 scholarship recipients abroad,

442–443 US citizens living abroad, reporting,

436–443 US government employees abroad,

441–442 US LLCs, foreign owned, new rules

for, 474–475 US territories, income from,

440–441 withholding, on nonresident alien

payments, 463–471Form 656 series, and offers in

compromise, 532, 537, 538, 539–540, 541–542, 543–544, 549, 550

Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, 126–127

Form 911, Request for Taxpayer Advocate Service Assistance, 517–518

Form 1024, and homeowners’ association tax exemption, 173, 174

Form 1099-OID, Original Interest Discount, 367, 368, 370

Form 2555, Foreign Earned Income, 451–453

Form 5472, and foreign owned LLC reporting requirements, 474–475

Form 5500 series, and retirement plans, 308

Farming, general definition of, 392–393. See also Agricultural tax issues

Farmland, buying and selling, 416–418FATCA (Foreign Account Tax

Compliance Act) requirements, 440, 463

FBAR (Report of Foreign Bank and Financial Accounts), 439–440, 481

FDAP. See Fixed, determinable, annual, or periodic (FDAP) income

Federally declared disaster areas, 371–372

Fees, and ethics of, 25–26, 31FinCEN Report 114. See FBARFishing business, and income averaging

election, 398–399, 406Fixed, determinable, annual, or

periodic (FDAP) income definition, 455 and interest income of nonresident

alien, 459 tax treatment of, for nonresident

aliens, 457 types of, 455–456 withholding exceptions, 457–458Flex lease, and farmland, 422–423Flow-through entities, and nonresident

alien withholding, 466–467Foreign Account Tax Compliance Act.

See FATCAForeign earned income exclusion and bona fide residence test, 446–

448, 449 calculating, 449–451 claiming, 451–453 effect of claiming, 453–454 and government employees, 442 limit on, 449–450 and military pay, 386 and moving expenses, 439 and physical presence test, 448–449 requirements for, 444–449 revoking, 452 and withholding tax, reduced, 453Foreign financial accounts, and US

military personnel, 389Foreign financial institutions (FFIs),

new legislation, 491–492Foreign housing exclusion or deduction calculating and claiming, 454 and housing expenses, 453–454 overview, 444, 453 requirements for, 444–449Foreign Service, US, expense

allowance, 442

Ethics, tax practitioner. See also Confidentiality rules; Cybersecurity

closing out IRS authorities, 22 confidentiality, 2–4, 15–16, 23–24,

26–28, 159–161 confidentiality and misdeeds, 12–14 and contractors, disclosure to, 9–11 and cybersecurity, 159–163 and errors/omissions, 12–13, 24,

28–29 and fraud, 13–14, 25, 28–31, 37–38 information disposal, 161 information security plan, 160,

166–169 and marijuana businesses, 288 nondisclosure agreement, example,

16–18 and privilege, 5–9 professional-organization standards,

4, 12 record disclosure, sale of tax

practice, 19–20 record retention, 20–22 required disclosures, 4–5 and tax practice sale,

discontinuance, or transfer, 15–22Etsy. See Sharing economy operationsExclusion, foreign earned income and

foreign housing. See Foreign earned income exclusion; Foreign

housing exclusion or deductionExclusions, military pay, 382–384Executor (estate) must file DSUE election, 127 nonappointed, and DSUE, 127–129Exempt function income, and

homeowners’ associations, 176Expiration dates of tax provisions,

table, 501–504Extensions of collection limitation period, 521 IRS criteria for granting, 129 for military personnel, 381–382 updated legislation, 500–501

FFailure-to-file penalty, and foreign

owned LLC reporting, 475Fair Debt Collection Practices Act

(FDCPA), 210Farm expense deductions, 399–405. See

also Agricultural tax issuesFarm income, rules and reporting, 394–

399. See also Agricultural tax issuesFarm syndicate, 404


Page 6: Subject Index 655 Cases Index 667


catastrophic plan reporting, voluntary, 484–485

charitable contribution deductions, 359

compliance, and National Research Program (NRP) audits, 214–215

and DSUE, 130–134 estate tax, 141–143 and extensions, 129 farm income, 394–399 foreign bank and financial accounts,

439–440 foreign earned income exclusion,

451–453 foreign owned LLCs, new rules,

474–475 for grantor trusts, 144–145 and information document request

procedures, 183–185 IRA-based plan distributions, 292 and like-kind exchanges, 62–66 net investment income tax, 339–341 new legislation, 499–501 and nonresident alien US source

income, 454–463 and nonresident alien withholding,

470–471 profit-sharing plans, 308 as qualified joint venture, 242–243 return due dates, new, 500–501 SEP IRAs, 325 US citizens living abroad, 436–438Information security. See

Confidentiality rules; Cybersecurity; Identity theft; Privilege; Tax scams

Information technology manager, and cybersecurity, 158

Installment agreements and extension of collection statute

by agreement, 515–516 fees, 495 and offer in compromise, 532 partial payment installment

agreement (PPIA), 515–516 and suspension of collection statute,

518, 520Installment sale and like-kind exchange reporting,

62, 65–67 and passive activity losses, 105Insurance, cyber, 162–163Intangible property, and like-kind

exchanges, 41Intellectual property, charitable

contribution, 349

and community, definition of, 173 corporate tax rates, for HOA filing

under I.R.C. § 277, 181 definition of, 172, 176 Form 990 filing, 175 Form 990-EZ, new, 185–189 Form 1120-H filing, 178–180 Form 1120 filing, 181–182 and I.R.C. § 277 taxation, 181–182 and I.R.C. § 277 vs. I.R.C. § 528

taxation, 181–182 and I.R.C. § 501(c)(4), 172–173 and I.R.C. § 501(c)(7), 173–174 and I.R.C. § 528 taxation,

176–180 member services, 173 social club, definition as, 173, 174 tax exemption, 172–175 and unrelated business taxable

income, 175Household expenses, calculation for

offers in compromise, 545–548Husband and wife, definition of, 134,


IIdentity theft data security requirement measures,

222 protecting taxpayers from, 218–222 signs of tax-related theft, 218 tax practitioner awareness of, 222 victims of, assisting, 218Improvements, real estate, expensing,

253–261Inactive tax receivable, and private

collection, 207Income averaging election, farming

and fishing, 398–399, 406, 421Individual shared responsibility

payment (ISRP) and alternate proof of coverage,

330–331 calculating, 328–329 and coverage exemptions, 331–333 definition, 328 and minimum essential coverage,

reporting, 329–331Information document request (IDR)

procedures, new, 183–185Information reporting alternative minimum tax (AMT),

363–365 annuity or pension distributions,


Form 6251, Alternative Minimum Tax—Individuals, 363–365

Form 8282, Donee Information Return, 359

Form 8283, Noncash Charitable Contributions, 359

Form 8824, Like-Kind Exchanges, 62–66

Form 8898, and bona fide residence in a US territory, 441

Form W-2 data breach, 225–226Form W-8 series, and nonresident alien

withholding, 468–470Fractional interest, and like-kind

exchanges, 59–60Fraud or criminal activity fraudulent conveyance, and

transferee liability, 526 I.R.M. § indicators of,

37–38 practitioner response to, 13–15, 25,

29–30, 30–31Fulbright grants, 442–443Future State Initiative (IRS), 230,


GGambling winnings, proposed

regulations, 499General asset classes, and like-kind

exchanges, 41General depreciation system (GDS),

261, 262–263, 264, 401–402. See also Modified accelerated cost recovery system (MACRS)

Generation-skipping transfer tax (GSTT)

exemption, nonportability of, 136 and same-sex marriage, 134Grantor trusts, 144–145Grant, Fulbright, reporting, 442–443Grouping activities, 102–104, 339

HHobby vs. business income, 342–343Hobby loss audits, new program,

393–394Hobby loss limits and deductions, other allowable, 73 introduction to, 71 and profit motive, 71–72Home office depreciation recapture,

344Homeowners’ associations (HOAs) and capital contributions, 182


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Subject Index 661

limitation periods, 506, 507 National Research Program audits,

214–215 new strategic efforts, 230–234 nominee and alter ego liability

collection, 528–529 and offers in compromise (OICs),

518, 531–550 and private debt collection, 206–213 and privilege provisions, 5–9, 23,

26–27, 29–30 PTIN issuance and renewals, 233–

234, 496 return due dates, new, 500–501 substitute for return (SFR), 506–507,

508 summonses, issuance of, 5 suspension of collection activities,

516–523, 544 Tax Exempt/Government Entities

(TE/GE) examination procedures, 183–185

Taxpayer Advocate Service assistance, and collection suspension, 517–518

transferee liabilities, assessment of, 524, 525–528

virtual appeals program, 232 wrongful seizure, and collection

statute, 521

JJoint venture. See Qualified joint


KKovel privilege, 7–8

LLaptops, and security measures, 160Leasehold interest, and like-kind

exchanges, 59Leasing agricultural property, 418–425Legislation. See New legislationLiabilities, partnership, and basis,

82–84Like-class properties, 41Like-kind exchanges and basis, 42–43 and boot, 44–46 and debt, 45–46 deferred, 52–53 definition of, 40 and depreciation deductions,

maximizing, 67–68

I.R.C. § 754, partner’s basis adjustment, 200

I.R.C. § 761 election, and subchapter K, 239–240

I.R.C. § 761(a) partnership definition, 236

I.R.C. § 937, determining residence in US territory, 440–441

I.R.C. § 1022 modified carryover basis rules, 489

I.R.C. § 1031. See Like-kind exchangesI.R.C. § 1245, gain from dispositions

of certain depreciable property, 47, 268–269

I.R.C. § 1250, gain from dispositions of certain depreciable realty, 47, 268

I.R.C. § 1257 and converted wetlands, 431

I.R.C. § 2001(c) estate tax, 126I.R.C. § 6018, and DSUE election,

127I.R.C. § 7216 and nondisclosure, 2–3,

9, 10, 14, 16I.R.C. § 7433A, and private debt

collection, 212I.R.C. § 7525 privilege, 6, 29–30I.R.C. expiration dates, table, 501–504I.R.M. §, “Indicators of Fraud,”

37–38Irrevocable trusts, 146–151IRS. See also Installment agreements;

Offers in compromise (OICs) Appeals, new legislation, 494 and audit reconsideration, 507–508 audit technique guides, 216–217 authorities, closing out, 22 burden reduction, new legislation,

495 collection statute expiration dates,

513–523 current status of, 230–234 digital correspondence

examinations, 232 and disclosure of confidential

information, 4–5, 23, 26–27 and DSUE amount, authority to

examine, 134 enrolled agent examination fee, 496 e-Services online tools, 226–230 Fast Track Mediation and

Settlement programs, 496 Future State Initiative, 230, 232–233 and identity theft, 218–226 and information breach, 161,

224–226 installment agreement fee, 495

Interest (entity) sale of LLC interest, examples,

194–196 sale of partnership interest, 200–201Interest (income) abatement of, disaster relief, 378 and farm mortgages, deduction, 403 income, of nonresident alien, 459 income, recharacterization as

passive activity, 102Intermediary, for deferred like-kind

exchange, 52–53Inventory, charitable contribution of,

348–349Investment property and like-kind exchanges, 40 as nonrental activity, example,

94IRA-based retirement plans, 290, 292,

297–299, 321–326, 452I.R.C. § 36B, premium tax credit,

335–336I.R.C. § 61, and marijuana business

income, 284–285I.R.C. § 72(p), and loans to retirement

plan participants, 292–293I.R.C. § 118, capital contributions

exclusion, 182I.R.C. § 162, business expense

deduction, 244, 246, 250, 253, 285I.R.C. § 168, and depreciation, 259,

260, 268, 487–488I.R.C. § 174, amortizing research and

experimental costs, 252–253I.R.C. § 175, soil and water

conservation deduction, 400–401, 421, 429–430

I.R.C. § 179, deduction for certain depreciable property, 260–261, 267, 421, 487

I.R.C. § 183, and hobby losses, 71–72, 73

I.R.C. § 199. See Domestic production activities deduction (DPAD)

I.R.C. § 263A, and de minimis safe harbor, 253–256, 286

I.R.C. § 277, and homeowners’ association taxation, 180–182

I.R.C. § 401(k) plans, 310–314I.R.C. § 403(b) plans, 315–317I.R.C. § 457 plans, 318–320I.R.C. § 469, and net investment

income tax, 338I.R.C. § 528, homeowners’ association

tax benefits, 172, 176–180, 181–182


Page 8: Subject Index 655 Cases Index 667


income-related monthly adjustment amount, calculating, 301

Part B, 301–302 Part D, 302–303 parts, explanation of, 300Military tax issues death in combat zone, and tax

forgiveness, 388–389 deductions, exclusions, and

extensions, exceptions to, 386–387 extensions of time, 381–382 and foreign financial accounts, 389 moving expenses, 386 pay exclusions, 382–386 qualified reservist distribution

(QRD), 390 US Armed Forces, definition of, 381 veterans, 388Minimum essential coverage (MEC) alternate proof of coverage,

330–331 and coverage exemptions, 331–333 and premium tax credit (PTC), 483 and qualified small employer health

reimbursement arrangements (QSEHRAs), 479, 480–481

reporting, 329–331Minimum tax credit (MTC), 363Mixed-use assets, and basis, 42–43Mobile devices, and security, 160. See

also CybersecurityModified accelerated cost recovery

system (MACRS), 261–266, 401Money purchase pension plan, 307Mortgages, transfer of, 44, 45–46, 416Moving expenses deduction rules for moves to or from

a foreign country, 438–439 for Armed Forces personnel, 386

NNational Research Program (NRP)

audits, 214–215Net investment income tax (NIIT) allowable deductions, 337–338 calculating NIIT, 339–341 and crop share lease, 420 and crop share lease, farmland, 422 and grouping, 339 net investment income,

determination of, 336–338 and net operating loss, 116–118 overview, 336 and real estate professionals, 338

and nonrecourse financing, amount at risk, 86

from profit-sharing plans, 309 to retirement plan participants or

beneficiaries, 292–293 S corporation, 78–80Loss limits alternative minimum tax limits,

118–26 at-risk limits, 85 basis limits, for partnerships and

S corporations, 76–84 capital loss limits, 107 disallowance of certain losses,

71–76 hobby loss rules, 71–73 introduction to, 69–71 and net operating losses, 108–123 passive activity loss limits, 87–106 vacation home rules, 73–76Loss recognition, and like-kind

exchange, 68Lyft. See Sharing economy operations

MMalware, and cybersecurity, 156–157Manufactured, produced, grown, or

extracted (MPGE), 273Marijuana and hemp taxation business expense deduction

prohibited, 285 Chief Counsel Advice (C.C.A.)

2015-04-011, 286–287 and cost of goods sold, 285, 286–287 dual-purpose businesses, 287–288 federal laws, 282 federal tax deposits and banking,

283–284 risks for tax professionals, 288 state laws, 280–282 tax laws, 284–288Marriage, definition of, 494Material participation vs. active participation, 88 and C corporation, example, 89 and net investment income tax, 339 and partnerships, 100, 241 and qualified joint ventures, 241 vs. significant participation, 100–101 tests, 97–99 and trusts, 99Medicare premiums 2017 costs, 301 impact of income on, 299–303

Like-kind exchanges (continued) and general asset classes, 41 and intangible property, 41 and mixed-use assets, basis of,

42–43 and personal property, 41, 47–51 of personal residence, 56–57 qualifying property, 40–41 and real property, 40–41, 51, 58–62 and recapture, 47–51 and related parties, 54–56 replacement period for deferred

exchange, 52 reporting, 62–67 reverse, 53–54 structuring transaction to not qualify

as, 67–68 and vacation home, 56–57Like-kind property. See Like-kind

exchangesLimitation periods on assessment, 506, 508 on collection, 513–523 enforcement of delinquent returns,

510 on refunds, 507 on return filing, 507Limited liability companies (LLCs). See

also Partnerships basis limits for members, 81–84 classification as partnership for tax

purposes, 193–194 employer identification number,

new, 198 foreign owned, and US source

income, new rules, 474–475 interest, sale of, examples, 195–196 and material participation, 100 ownership, and subchapter K, 241 vs. partnership, 193–194 single-member to multimember,

and vice versa, 194–198 single-member LLC election to be

taxed as corporation, 195 taxation as disregarded entity or

partnership, 193–194, 194–195Limited liability partnership (LLP), and

management authority, 100Limited partner rules, 100LLC. See Limited liability companies

(LLCs)Loans costs, and purchase of farmland, 417 disaster area, and federal loan

cancellation, 376


Page 9: Subject Index 655 Cases Index 667


Subject Index 663

basis loss limits, 76, 81–84 and consistent income treatment,

192 death of partner, example, 203–204 definition of, 236–238 disguised sale rules, 486 and disregarded entity, transition to/

from, 194–198 election out of centralized audit

regime, 191 employer identification number,

new, 198–199 factors indicating, 236 foreign owned partnerships, new

reporting rules, 474–475 foreign partnership, and nonresident

alien withholding, 467 and imputed underpayments, 193 initial basis of interest in, 81–82 interest, sale of, 200–201 investing partnerships, 238 liabilities, effect on basis, 82–84 and material participation, 100 new legislation, 486, 501 and operating agreements, 238–239 organizational costs, 251–252 ownership changes, 193–204 vs. qualified joint venture, 241–243 representative, for new audit regime,

192–193 retirement or death of partner,

201–204 return extension, 501 sale of interest, 200–201 and subchapter K, electing out of,

236–244 tax classification change, 194–198 and tenant services, as tax

classification criterion, 237–238 termination of, 199–200 and unincorporated organizations

excluded from partnership rules, 238–241

Passive activity loss (PAL) limits and C corporation losses, 89 carryforward of PAL, 91–92 and cash rent leases, 419–420 and casualty losses, 90 and crop share leases, 422 disposition of interest in passive

activity, 104–106 gift of passive activity, 105 and grouping activities, 102–104 introduction to, 87–88

Nonexempt function income, and I.R.C. § 528, 172, 176–177

Nonfilers, 509–513Nonprofit organizations, new

legislation, 485–486Nonrecourse financing, and amount at

risk, 86Nonresident aliens and effectively connected income

(ECI), 459–463 and fixed, determinable, annual, or

periodic (FDAP) income, 455–459 and personal exemptions, 460–461 reporting of US source income,

454–463 spouse, election to be treated as US

resident, 471–473 withholding on payments to,

463–471Non-US-citizen surviving spouse, and

DSUE, 134–135

OOffers in compromise (OICs) basis for, 532–537 calculation of minimum amount,

448–450 eligibility for, 532 filing, 537–543 payment options, 543–544 and reasonable collection potential,

544–548 suspends collection activities, 518 Organizational expenses. See Business

expensesOriginal issue discount (OID) and Form 1099-OID, 370 market discount, 371 overview, 366 reporting, 367–370 and sale or exchange of debt

instrument, 367Outsourcing, and nondisclosure, 23, 27

PPartial interest in passive activity, sale

of, 106Partial payment installment agreement

(PPIA), 515–516Partnerships. See also Limited liability

companies (LLCs) and administrative adjustment

request, 193 audit regulations, proposed,


and self-rentals, 425 and trade or business income, 338Net operating loss (NOL) allocation between joint and

separate returns, 412–415 and alternative minimum tax

(AMT), 118–124 and alternative tax net operating

loss (ATNOL), calculation, 118

carryover amount, 111–115 carryover periods, 110–111, 115,

406–410 claiming NOL deduction, 115 computing, 108–109 failure to claim, 412 and farmers, 406–415 and net investment income tax,

116–118 specified liability loss, 411–412 timing of, 412–413New legislation accounting method changes, 499 Affordable Care Act, 478–485 corporations, 485, 500–501 debt, 490–491 deductions, 493 depreciation, 487–488 disaster relief, 498–499 employment tax, 488–489 estates, 489, 501 expiration dates, table of, 501–504 foreign tax issues, 491–493 information returns, 499–501 IRS issues, 494–496 marriage, 494 nonprofits, 485–486 partnerships, 486, 501 payroll tax credits, 486–487 penalties, 496–497 PTIN numbers, 496 retirement, 497–498 trusts, 489, 501Nominee and alter ego liability,

528–531Nondisclosure agreement provisions to include, 16 and sale of tax practice, 28 sample, 16–18Nondisclosure rules. See Confidentiality

rules; Disclosure of client information

Nondiscrimination testing, retirement plan, 308–309, 310–311


Page 10: Subject Index 655 Cases Index 667


Property. See Intangible property; Personal property; Real property; Rental property

Property title, and deferred/reverse like-kind exchanges, 52, 53

Proposed partnership audit regulations

content of, 190–193 election out of, 191–192 and imputed underpayments, 193 issuance, 190 and partnership representative,

192–193PTIN. See Preparer tax identification

number (PTIN)Publication 4518, and private collection

agencies, 208–210

QQTIP election, and DSUE, 136Qualified domestic trust (QDOT), and

DSUE, 134–135Qualified exchange accommodation

arrangement (QEAA), 52–53Qualified improvements, under section

179, 258–261Qualified intermediary (QI)

withholding agreement, 492Qualified joint venture definition of, 241–242 and employer identification

number, 243 and material participation, 241 partnership status, 241 reporting as, 242–243 and subchapter K, electing out of,

243Qualified nonrecourse financing, and

amount at risk, 86Qualified organizations, charitable

contribution deductions, 351–352

Qualified production activities income (QPAI) domestic production activities deduction (DPAD), 272

Qualified reservist distribution (QRD), 390

Qualified revocable trusts (QRTs), 145–146

Qualified small business, definition for payroll tax credit, 486–487

Qualified small employer health reimbursement arrangements (QSEHRAs), 478–481

Qualified subchapter S trusts (QSSTs), 151

vacation home limits, 76Phishing scams, 155, 222–223Physical presence test, 448–449Portability. See Deceased spousal

unused exclusion (DSUE), portability election

Practitioners. See Tax return preparersPrepaid farm expenses, deductible,

404–405Premium tax credit (PTC) and advance PTC, 334 and federal poverty line, 334 final regulations, 335 introduction, 334 and opt-out payments, 335–336Preparer tax identification number

(PTIN) and data security, 226 issuance and renewals, 233–234 new legislation, 496Presumption rules, and nonresident

alien withholding, 470Privacy laws, by state, 164–165. See also

CybersecurityPrivate collection agencies (PCAs) civil damages, possible, under I.R.C.

§ 7433A, 212 collection procedure, 208 definition of, 206 and disclosure of taxpayer

information, 212 historical use by IRS, 206–207 list of current PCAs used by IRS,

207 new IRS use of, 206–213 and Publication 4518, 208–210 regulation of, 210–212 safeguarding taxpayer information,

212–213 and taxpayer assistance orders, 212 vs. tax scams, 213Privilege. See also Confidentiality rules attorney-client, 7–8 case studies, 23, 25, 26–27, 29–30 definition, 2 and I.R.C. § 7525, 6 Kovel privilege, 7, 8 overview, 5–6 state laws, 6–7, 33–36 and work product doctrine, 9Productive use in a trade or business,

40Profit motive, definition of, 71–73Profit-sharing plans, 306–310

Passive activity loss (PAL) limits (continued)

and net investment income tax, 338

nonrental activity classification, 94 partial interest in passive activity,

sale of, 106 passive activity credit, 92 passive activity definition, 90 passive activity status change, 104 and passive income,

recharacterization of, 100–102 real estate professionals, special

rules, 96–97, 338 related party transactions, 105 and rental activities, 92–94 and self-charged interest, 102 self-rental rule, 101, 103, 424–425 significant participation passive

activity, 100–101 taxpayers subject to, 88–89Passive income, recharacterization of,

100–102Past-due returns. See also Nonfilers filing, 510 reconstructing records, 510–513Payroll tax credits, new legislation,

486–487Penalties. See also Collection statute

expiration date (CSED); Offers in compromise (OICs); Transferee liability; Nominee and alter ego liability

disaster-related penalty abatement, 378–379

estate basis, accuracy-related penalty, 143

failure-to-file penalty, for foreign owned LLCs, 475

new legislation, 496–497 unauthorized collection actions,

212Pension or annuity distributions,

290–292Personal property. See also Real

property casualty loss in disaster, 372–375 depreciable, and recapture, 47–51 home in disaster area, 375, 377 leasing, 423–424 and like-kind exchanges, 41, 56–57 personal use real property,

calculation, 57 replacement property, 374 reporting exchange of, 62–63


Page 11: Subject Index 655 Cases Index 667


permanent residence address, definition, 492

and physical presence test, 448–449

US territories, determining residency status, 440–441

outside United States, and collection action suspension, 519–520

Retirement plans. See also I.R.C. § 401(k) plans; Roth IRAs; Social security benefits; Medicare premiums

401(k)s, 310–314 defined benefit plans, 290, 303–306 defined contribution plans, 290,

306–321 distributions, overview, 290 distributions, taxation of, 290–299 early distributions, 293–296 IRA-based plans, 290, 292,

321–326 multiple, 320–321 new legislation, 497–498 qualified retirement plans, 303 required minimum distributions,

296–299 types of, 303–326Rev. Proc. 2002-22, 59–61Rev. Proc. 2017-34, simplified method

for electing portability, 130Reverse like-kind exchange, 52–53Revocable trusts basis of, 139–140 definition, 143–144 types of, 144–146Roth IRAs, 292, 297. See also IRA-

based retirement plans

SS corporation 2% shareholder health care, 479 basis limits, 76, 77–80 debt basis, 78–80 loans, 79–80 organizational costs, 251 qualified subchapter S trusts

(QSSTs), 151Safeguards Rule (Standards for

Safeguarding Customer Information Rule), 10, 27

Sale of tax practice, and duties toward client information, 15–22, 24, 28

Same-sex marriage. See Husband and wife, definition of

Scam. See Tax scam

Recapture depreciation recapture, overview,

268–270 depreciation recapture, and sharing

economy operations, 344–345 and like-kind exchanges, 47–57Record reconstruction and disaster loss, 379–381 and past-due returns, 510–513Records, client. See Confidentiality

rulesRecourse financing. See Nonrecourse

financing, and amount at riskRecovery periods, depreciation, farm property, 401–402 general ADS and GDS, 263–264Related parties and exchanges of property, 54–56 interests in corporation, 485 and I.R.C. § 179 deduction, 267 and passive activity interest

transactions, 105 and tax avoidance, 55–56Rental activities. See also Rental

property Airbnb, VRBO, etc., 334. See also

Sharing economy operations grouping as appropriate economic

unit, 102–103 and passive activity classification,

92–94 rental income, and self-employment

tax for qualified joint ventures, 243Rental property $25,000 loss allowance, 94–96 beginning point, and start-up

expenses, 250 charitable contribution, not

deductible, 350 farmland, 418–423 and passive activity classification,

92–94 and self-rental rule, 101, 424–425 and undivided fractional interest, 62Replacement property in disaster area, 373–374 like-kind exchanges, 42Reporting, tax information. See

Information reportingResearch and experimental costs,

deduction, 252–253Residence bona fide residence test, 446–448,

449 vs. domicile, 447

Subject Index 665

Qualified terminable interest property (QTIP)

election, and estate tax, 136 and estate tax reporting

requirements, 131 overview, 146–147

RRansomware, 156Real estate. See also Real property;

Rental property de minimis safe harbor, 253–256 qualified improvements, 258–261 repair or maintenance costs,

expensing, 254 residential real estate management

association, and I.R.C. § 528, 176–177

taxes, and purchase of farmland, 417

and unit of property, 256–258Real estate professionals, special rules

for, 96–97, 338Real property. See also Intangible

property; Personal property; Rental property

acquired from decedent, examples, 140–141

casualty loss of, example, 372–373 depreciable, and recapture, 51 easements, and like-kind exchanges,

58 fractional interests, and like-kind

exchanges, 59–62 home in disaster area, 375, 377 leasehold interests, and like-kind

exchanges, 59 leasing farmland, 418–423 and like-kind exchanges, 40,

58–62 and nonrecourse financing,

qualified, 86 and passive losses, $25,000

allowance, 94–96 and qualified improvements,

258–261 qualified real property, section 179,

260–261, 421, 487 reporting exchange of, 64–65 sale of primary home exclusion, and

military personnel, 387 timberland, and like-kind

exchanges, 58–59 and time-limited interests, 40Reasonable collection potential (RCP)

calculation, 544–548


Page 12: Subject Index 655 Cases Index 667


Tax practice, sale, transfer, or discontinuance of, 15–22

Tax practitioners. See Tax return preparers

Tax return information, definition of, 2Tax return preparers. See also

Ethics, tax practitioner; IRS; Confidentiality rules

closing out IRS authorities, 22 and confidentiality rules, 2–38 and contractors, confidentiality

rules, 9–11 data breaches, 224–226 definition of, 2 and privilege, 8 scams targeting, 222–224Tax scams. See also Data security data breaches, 224–226 identity theft signs, assistance, and

protection from, 218–222 vs. private collection agency

communications, 213 targeting practitioners, 222–224Tax-sheltered annuity. See I.R.C.

§ 403(b) plansTenant services, and partnership

classification, 237–238Tenants in common, and like-kind

exchange treatment, 59–61Theft loss. See Casualty loss, carryback

periodThird-party liability. See Transferee

liability; Nominee and alter ego liability

Timberland, and like-kind exchanges, 58–59

Time-limited interests in real estate, 40

Trade or business income, and net investment income tax, 338

Transferee liability assessing, 526–528 defenses against, 528 definition of transferee, 524–525 and property transfers, 525 and trust and estate transfers, 528Travel expenses charitable, examples, 350–351 military exclusion, 387Treas. Reg. § 301.7216-2 and

confidentiality, 3, 15–16, 27–28Treas. Reg. § 301.9100-3 and extension,

129Trust fund doctrine, and transferee

liability, 526

Social welfare, promotion of, and I.R.C. § 501(c)(4), 172

Spendthrift trusts, 150Spouse, definition of. See Husband and

wife, definition ofStandard mileage rate (SMR) deduction for farmers, 399 and depreciation, 270–271Start-up expenses. See Business

expensesStatute of limitations. See Limitation

periodsStocks distribution to controlled

corporation, 485 S corporation stock basis, 77–78Subchapter K advantages of electing out of,

243–244 electing out of, 236–244 and qualified joint ventures,

241–243 and unincorporated organizations

excluded from partnership rules, 238–241

Substantiality test, and I.R.C. § 528 tax benefits, 176

Substitute for return (SFR), 506–507, 508

Summonses, IRS issuance of, 5Superseding returns, 506, 508–509Supplemental needs trusts, 149–150Suspension of collection statute of

limitations, reasons for, 516–523

TTax advice, and privilege rules, 6Tax avoidance, and related party

exchanges, 55–56Tax-exempt organizations Form 990-EZ, updated, 185–189 Form 990 series filing, 175 homeowners’ associations (HOAs),

tax-exempt status, 172–175 information document request

procedures, new, 183–185 I.R.C. § 501(c)(4) or (c)(7) definition,

172–173Tax forgiveness, and death in combat

zone, 388–389Tax home, definition of, 445–446Taxpayer Advocate Service assistance,

and collection, 517–518Taxpayer assistance orders, and private

collection agencies, 212

Schedule F (Form 1040), 394, 395, 396, 397, 399, 403, 404. See also Agricultural tax issues

Scholarship recipients abroad, reporting grants and wages, 442–443

Security breach. See also Cybersecurity; Identity theft; Tax scams

case study, 23–24, 27–28 costs of, 158–159 risk management, 159–163 of tax practitioner, 224–226Security. See CybersecuritySecurity Summit Initiative 2017, and

IRS data protection measures, 219–222

Self-employment tax and crop share lease, 420–421 and leasing personal property, 423 and leasing real property, 418–419 and net investment income, 337 and rental income, 243 and self-rentals, 425 and sharing economy workers, 342 summary, 419 for US citizen residing in US

territory, 441Self-rental rule, 101, 103, 424–425SEP IRAs, 324–325Settlement costs, purchase of farmland,

417Sharing economy operations business income and expenses,

342–345 business use of home, 343–344 depreciation, 344–345 employee vs. independent

contractor, 341 hobby vs. business income, 342–343 reporting and payment

requirements, 341–342 self-employment tax, 342Significant participation passive

activity, 100–101SIMPLE IRA plans, 321–324Small employer health plan. See

Qualified small employer health reimbursement arrangements (QSEHRAs); Affordable Care Act

Social club I.R.C. § 501(c)(7) definition,

173–174 taxation under I.R.C. § 277, 181Social security benefits, impact of

income on, 299–300


Page 13: Subject Index 655 Cases Index 667


Bahas v. Commissioner, T.C. Summary Opinion 2010-115 [An office man-ager of a real estate agency was enti-tled to receive 6% of the net profits of the agency as compensation for her services. She did not own any stock in the agency, and she did not qualify for the exception to the passive activ-ity loss rules for taxpayers in a real property business.], 97

Bernardo v. Commissioner, 104 T.C. 677 (1995) [The accountant was the tax-payers’ primary representative, his communications with their attorneys were incidental to his representation of the taxpayers, and the attorney-cli-ent privilege does not attach to such communications.], 8

Bolton v. Commissioner, 694 F.2d 556 (9th Cir. 1982) [The taxpayer can allocate interest and taxes to rental property based on the ratio of the number of days rented to the total days in the year.], 74

C. Bean Lumber Transport, Inc. v. United States, 68 F.Supp.2d 1055 (W.D. Ark. 1999) [The transfer of old equipment to the dealer and purchase of the new equipment from him is a nontaxable expense under I.R.C. § 1031, even though the purchaser and the seller execute separate contracts and treat the purchase and sale as unrelated transactions for recordkeeping pur-poses.], 67

Californians Helping to Alleviate Medical Problems v. Commissioner, 128 T.C. 173 (2007) [The nonprofit taxpayer could take business deductions for the patient care portion of its medical marijuana dispensary operations.], 287–288

Candelaria v. United States, 518 F.Supp.2d 852 (W.D. Tex. 2007) [The taxpayer could use a leasing company’s loss to offset the active income from his radiology practice if he elects to group the two activities.], 103

Carlos v. Commissioner, 123 T.C. 275 (2004) [The taxpayers could group their two rental properties as a sin-gle activity, but the income from the profitable rental is not passive because it was rented to an S corpora-tion in which the taxpayer materially participated. The loss from another unprofitable rental is treated as pas-sive, and the taxpayers cannot use the loss to offset the rental income from the other property.], 103

expense allocation, 74–76 expense limits, 74 like-kind exchange of, 56–57 personal use, 76Vehicles, I.R.C. § 179 deduction limit,

267Veterans, excludable payments, 388

WWetlands, disposition of converted,

430–433Withholding on gambling winnings, 499 on nonresident alien payments,

463–471 qualified intermediary withholding

agreement, 492 withholding foreign partnership

and withholding foreign trust agreements, 492–493

Work product doctrine, 9Wrongful seizure by IRS, and

collection statute suspension, 521

Case Index

Agro-Jal Farming Enterprises v. Commis-sioner, 145 T.C. 5 (2015) [The class of items described under I.R.C. § 464 as feed, seed, fertilizer, or other similar farm supplies does not include pack-ing materials.], 404

Allgreens, LLC v. Commissioner, T.C. Docket No. 13860-14 [The IRS issued penalties against a marijuana dispensary for failure to pay esti-mated taxes through the electronic federal tax payment system (EFTPS). The taxpayer had paid its taxes in cash. The case was dismissed.], 283

Assaf v. Commissioner, T.C. Memo. 2005-14 [The taxpayer provided extraor-dinary personal services, and her LLC qualified for the exception to the definition of a rental activity.], 93

Backemeyer v. Commissioner, 147 T.C. 17 (2016) [Recapturing the deduction for farm inputs could result in a dou-ble taxation of the value of the farm input, and the tax benefit rule did not require recapture.], 405

Badaracco v. Commissioner, 464 U.S. 386 (1984) [A taxpayer is under no legal obligation or duty to file an amended return even after an error or omis-sion is discovered.], 28

Case Index 667

Trusts basis rules, general, 138–140 charitable remainder trusts (CRTs),

148–149 credit shelter trusts, 137, 146 dynasty trusts, 149 exchange of interest in, 57 foreign trusts, and nonresident alien

withholding, 467 grantor retained annuity trusts

(GRATs), 147–148 grantor trusts, 144–146 irrevocable trusts, 146–151 and material participation, 99 net investment income tax

reporting, 340–341 new legislation, 489, 501 qualified revocable trusts (QRTs),

145–146 qualified subchapter S trusts

(QSSTs), 151 qualified terminable interest

property (QTIP), 146–147 revocable trusts, 139–140, 143–146 spendthrift trusts, 150 supplemental needs trusts,

149–150 types of, 143–152 UUber. See Sharing economy operationsUndivided fractional interest (UFI), and

like-kind exchanges, 59–62Uniform capitalization rules, and real

estate de minimis safe harbor, 256Unincorporated organizations,

exclusion from partnership rules, 238–241

Unit of property, definition, 256–258United States Armed Forces. See

Military tax issuesUnrelated business taxable income

(UBTI), and homeowners’ associations, 175

US citizens living abroad. See also Foreign tax issues

FBAR filing, 439–440 filing requirements, 436–438 moving expenses, 438–439US territories, income from, 440–441

VVacation home 14-day rule, 76 deduction limits, 73–76


Page 14: Subject Index 655 Cases Index 667


Iovine v. Commissioner, T.C. Summary Opinion 2012-32 [The logs that the taxpayer created in response to an IRS audit were only an estimate and insufficient to prove hours spent on real estate activities.], 97

James v. United States, 366 U.S. 213, 218 (1961) [Illegal cannabis businesses must pay federal income tax on their taxable income under I.R.C. § 61(a).], 284

Lamas v. Commissioner, T.C. Memo. 2015-59 [The taxpayer’s promotion activities were critical to the man-agement of the business and the tax-payer was a material participant in the business.], 99

Leland v. Commissioner, T.C. Memo. 2015-240 [Reconstructed logs, receipts, and invoices related to farm expenses as well as credible testi-mony were all reasonable means of calculating time spent on the activ-ity.], 98

Luna v. Commissioner, 42 T.C. 1067 (1964) [The court explained the factors to consider in determining whether a partnership exists.], 236

Madison Gas and Electric Co. v. Com-missioner, 72 T.C. 521 (1979) [The taxpayers’ election to not have subchapter K apply was not an admission of the existence of a part-nership.], 240

Madler v. Commissioner, T.C. Memo. 1998-112 [Management decisions that are relevant to show active par-ticipation include approving new tenants, deciding on rental terms, approving capital or repair expendi-tures, and other similar decisions.], 95

Mattie K. Carter Trust v. United States, 256 F.Supp.2d 536 (N.D. Tex. 2003) [Participation of a trust in the opera-tion of a ranch could be determined by reference to participation of its fiduciaries, agents, and employees.], 99

McHan v. Commissioner, T.C. Memo. 2006-84 [The taxpayer’s sale of mari-juana generated gross receipts, cost of goods sold, and gross profit.], 286

McKinney v. Commissioner, 732 F.2d 414 (1983) [Allocation of interest and taxes to rental property can be made based on the ratio of the number of days rented to the total days in the year.], 74

Franklin v. Commissioner, T.C. Memo. 1993-184 [Section 280E does not dis-allow adjustments to gross receipts for COGS.], 286

Garnett v. Commissioner, 132 T.C. 19 (2009) [The taxpayers were not man-aging members of two LLCs, but they were not precluded from man-agement due to the nature of their interests in the entities, and the tax-payers’ interests were not presump-tively passive.], 100

Gibson & Associates, Inc. v. Commissioner, 136 T.C. 195 (2011) [A substantial renovation must increase the value of the property, prolong the proper-ty’s useful life, or adapt the property to a new or different use.], 278

Gilday v. Commissioner, T.C. Memo. 1982-242 [If the shareholder for-mally assumes the S corporation’s debt, the shareholder will have debt basis in the amount of the assumed debt.], 74

Gregg v. United States, 186 F.Supp.2d 1123 (D. Or. 2000) [The taxpayer was not limited in his power to con-trol the company, and he should not be treated as a limited partner for purposes of I.R.C. § 469.], 100

Haggar Co. v. Helvering, 308 U.S. 389 (1940) [A superseding return is generally treated as the taxpayer’s original return, and the superseding return is in effect incorporated into and treated as relating back to, and modifying or superseding, the earlier return.], 508

Hardy v. Commissioner, T.C. Memo. 2017-16 [The IRS cannot regroup activities if there is no evidence that the taxpayers are trying to circum-vent section 469.], 104, 603, 604

Heinbockel v. Commissioner, T.C. Memo. 2013-125 [The taxpayers sold a vine-yard without ever having planted a grapevine. The court found that the taxpayers did not start an active trade or business.], 250

Heinold v. Commissioner, T.C. Memo. 1979-496 [The court explained when the cost of supplies purchased in the current year for use in the following year is deductible by a cash basis tax-payer in the current year.], 405

Hylton v. Commissioner, T.C. Memo. 2016-234 [The taxpayer did not overcome the presumption that her horse business was a hobby.], 72

Cohan v. Commissioner, 39 F.2d 540 (2d Cir. 1930) [If the taxpayer can deter-mine the existence of an expense, the precise amount can be estimated for most expenses.], 508

Commissioner v. Culbertson, 337 U.S. 733 (1949) [To form a partnership, the taxpayers must intend to join together in the present conduct of the enterprise.], 236

Commissioner v. Lincoln Savings and Loan Association, 403 U.S. 345 (1971) [Under I.R.C. § 162 a taxpayer can deduct ordinary and necessary expenses paid or incurred during the tax year in carrying on any trade or business.], 244

Commissioner v. Tower, 327 U.S. 280 (1946) [To form a partnership, the parties must intend to share profits and losses.], 236

DeGuzman v. United States, 147 F.Supp.2d 274 (D.C. N.J. 2001) [Janitorial work such as cleaning and snow plowing does not qualify as time spent on a real property trade or business.], 96–97

Doe v. Wachovia Corp., 268 F. Supp. 2d 627 (W.D.N.C. 2003) [The I.R.C. § 7525 privilege does not apply to issuance of an administrative sum-mons to a taxpayer’s bank where there is no proceeding in which the IRS appeared.], 6

Duggar v. Commissioner, 71 T.C. 147 (1978) [The court defined when an owner or tenant is cultivating, oper-ating, or managing a farm for profit.], 392

Edmondson v. Commissioner, T.C. Memo. 1981-623 [The court found that most of a drug dealer’s expenses were expenses made for a trade or busi-ness and were both ordinary and necessary (note this case was decided before enactment of I.R.C. § 280E).], 284

Estate of George H. Bartell, et al. v. Commis-sioner, 147 T.C. 140 (2016), nonacq. 2017-33 I.R.B. 194 [The exchange facilitator held title for 17 months and leased the property to the corpo-ration, and the transaction qualified for like-kind exchange treatment. The IRS does not agree with this decision.], 54, 599

Frank Aragona Trust v. Commissioner, 142 T.C. 9 (2014) [Activities of trustees can qualify a trust for real-estate-pro-fessional status.], 99


Page 15: Subject Index 655 Cases Index 667


Case Index 669

Richmond Television Corp. v. United States, 345 F.2d 901 (4th Cir. 1965) [A tele-vision broadcasting station com-menced business when it obtained a license and started broadcasting.], 250

Riggs v. Commissioner, T.C. Memo. 1992-323 [A 50% shareholder in an S corporation borrowed money from another corporation that was wholly owned by the other 50% shareholder. The borrowing shareholder was not treated as being at risk with respect to the borrowed amounts.], 86

Starker v. United States, 602 F.2d 1341 (9th Cir. 1979) [Use of property solely as a personal residence is anti-thetical to its being held for invest-ment.], 56–57

Steele v. United States, 120 A.F.T.R. 2d (D.C. Dist. Col. 2017) [The IRS has authority to issue PTINS but cannot charge a PTIN fee], 233, 234, 597, 598

Tarighi v. Commissioner, T.C. Summary Opinion 2015-28 [The taxpayer did not bid on any highway engineering jobs, and had no income. The tax-payer was not yet engaged in a trade or business.], 250

Thomann v. Commissioner, T.C. Memo. 2010-241 (2010) [Because the tax-payers had leased their farm prop-erty under an oral lease, there was insufficient proof that the term of the lease was less than 50% of the class life of the leased property, and they could not claim the section 179 deduction.], 421

Thompson v. United States, 87 Fed. Cl. 728 (2009), acq. in result, 2010-14 I.R.B. (March 9, 2010) [The taxpayer’s LLC interest was not a limited part-nership interest for purposes of the passive loss rules.], 100

Tinsley v. Commissioner, T.C. Summary Opinion 2017-9 [A guarantee of an S corporation loan does not create basis for purposes of allowing a loss.], 79, 600, 601

United States vs. Ackert, 169 F. 3d 136 (2d Cir. 1999) [The section 7525 privilege does not apply to commu-nication between the taxpayer’s tax practitioner and a third-party who provides information about the tax-payer to the practitioner.], 6

and his four wholly owned corpora-tions with no actual economic outlays or amounts at risk.], 79

Penley v. Commissioner, T.C. Memo. 2017-65 [The taxpayer could not suf-ficiently substantiate the number of hours he spent in his real estate busi-ness.], 97, 605

People v. PricewaterhouseCoopers, 2016 NY Slip Op. 32130(U), citing JP Morgan Chase & Co. v. Indian Harbor Ins. Co., 98 A.D.3d 18, 25 (1st Dep’t 2012) [The law of the place where the evi-dence in question will be introduced at trial or the location of the dis-covery proceeding is applied when deciding privilege issues.], 7

Peyton v. Commissioner, T.C. Memo. 2003-146 [Section 280E does not dis-allow adjustments to gross receipts for COGS.], 286

Phillips v. Commissioner, 283 U.S. 589 (1931) [Transferee liability is several and the IRS may proceed against one or more of any number of poten-tial transferees.], 526

Prashker v. Commissioner, 59 T.C. 172 (1972) [To create basis the loan must run directly between the corporation and the shareholder and there is no attributed basis for loans made by related parties.], 80

Raynor v. Commissioner, 50 T.C. 762 (1968) [The shareholder must make an actual economic outlay to have debt basis, and no form of indirect borrowing, be it guaranty, surety, accommodation, or otherwise, gives rise to indebtedness from the corpo-ration to the shareholders until and unless the shareholder pays all or a part of the obligation.], 79

Reading v. Commissioner, 70 T.C. 730 (1978) [A seller can have no gain until he or she recovers the economic investment that he or she has made directly in the actual item sold.], 285

Redwing Carriers, Inc. v. Tomlinson, 399 F.2d 652 (5th Cir. 1968) [Sales to a dealer from whom an asset is then purchased will generally be viewed as mutually dependent transactions and will be collapsed into a like-kind exchange when that is consistent with the facts.], 67, 600, 601

RERI Holdings I, LLC v. Commissioner, 149 T.C. 1 [The taxpayers failed to properly complete Form 8283, and the court denied their charitable con-tribution deduction.], 359, 588

McNamara v. Commissioner, 236 F.3d 410 (8th Cir. 2000) [A self-rental arrange-ment for fair rental value was not part of an arrangement for participa-tion in agricultural production, and was not subject to self-employment tax.], 425

Methvin v. Commissioner, 117 A.F.T.R. 2d (RIA) 2016-2231; 2016-1 U.S.T.C. (CCH) ¶ 50,328 (10th Cir. 2016) [Because the taxpayer’s interest was a partnership interest, the election out of subchapter K did not affect the nature of the entity, and the taxpay-er’s income from the oil and gas ven-tures was subject to self-employment tax.], 237

Miller v. United States, 39 F.Supp.2d 678 (N.D. W. Va. 1999) [The gain from the disposition of S corporation stock gave the shareholder an additional amount at risk but no increase to basis and no opportunity to deduct the prior years’ suspended losses.], 87

Mitchell v. Commissioner, T.C. Memo. 2001-269 [The taxpayer never received income from his farm and he was not a farmer for tax purposes. He could not deduct farm expenses that exceeded farm income.], 393

Moore v. Commissioner, T.C. Memo. 2007-134 [To qualify for a like-kind exchange, the primary purpose for holding the property must be invest-ment, and a mere hope or expecta-tion that property may be sold at a gain cannot establish an investment intent if the taxpayer uses the prop-erty as a residence.], 56

Newell v. Commissioner, T.C. Memo. 2010-23, [The managing member interest in an LLC that was classi-fied as a partnership is not a limited partnership interest for purposes of applying the passive activity rules.], 100

North Carolina Bank v. United States, 684 F.2d 285 F.2d 285 (4th Cir. 1982), citing Briarcliff Candy Corp. v. IRS, 475 F.2d 775 [Expenses incurred in expanding a business are gener-ally currently deductible business expenses.], 246

Oren v. Commissioner, T.C. Memo. 2002-172 [A scheme to create basis by bor-rowing from one controlled entity and lending to another did not work where the effect was a circular lending arrangement between a shareholder


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Wells Fargo v. United States , 112 A.F.T.R.2d. 2013-5380, 2013-1 U.S.T.C. ¶50368 (D. Minn., 2013), citing Simon v. G.D. Searle & Co., 816 F.2d 397 (8th Cir. 1987) [Information closely related to an attorney’s legal thinking about anticipated litigation could be protected by the work prod-uct privilege even if it is disclosed within business documents drafted by nonlawyers.], 9

Woody v. Commissioner, T.C. Memo. 2009-93 [A taxpayer who purchased rental property on the next-to-last day of the tax year and did not hold the property out for rent until the fol-lowing year was not actively engaged in business the year the property was acquired.], 250

Yates v. Commissioner, T.C. Memo. 2001-280 [Transfers from one S corpora-tion wholly owned by the taxpayer to another S corporation wholly owned by the same taxpayer were found to be loans from the taxpayer to the sec-ond S corporation and increased the taxpayer’s basis.], 80

Zaninovich v. Commissioner, 616 F.2d 429 (9th Cir. 1980) [Rental payments are not prepaid farm expenses governed by I.R.C. § 464.], 420

Zeeman v. United States, 395 F.2d 861 (2d Cir. 1968) [Following the death of a spouse, income and deductions for a carryback year must be allocated between spouses because a net oper-ating loss can be used to offset only the surviving spouse’s income in the carryback year.], 414

United States v. Kovel, 296 F.2d 918 (2d Cir. 1961) [This case extends the attorney-client privilege to commu-nications between a client and some-one an attorney retained to provide accounting-related services.], 7, 8

United States v. Textron Inc., 577 F.3d 21 (1st Cir. 2009) [An accountant’s workpapers are not protected if they are tax documents that were prepared in the ordinary course of business, and not in anticipation of litigation.], 9

Van Wyk v. Commissioner, 113 T.C. 440 (1999) [The taxpayer was not at risk with respect to a loan he made to an S corporation in which he owned 50% of the stock, where the source of the funds for the loan was the other 50% shareholder and that sharehold-er’s wife.], 86

Vandegrift v. Commissioner, T.C. Memo. 2012-14 [Post-event estimates of time spent participating in a rental activity failed to meet the taxpayer’s burden to establish time spent in a real estate business], 97

Walker v. Commissioner, T.C. Summary Opinion 2017-50 [An honest mis-take does not excuse an incorrectly claimed advance premium tax credit.], 482, 585, 586

Washington Athletic Club v. United States, 614 F.2d 670 (9th Cir. 1980) [A club that was formed as a state nonprofit corporation was not a tax-exempt entity under federal law.], 182

United States v. Adlman, 134 F.3d 1194 (2d Cir. 1995) [The court set forth the procedure to invoke the Kovel privilege.], 8

United States v. Arthur Young & Co., 465 U.S. 805 (1984), citing Couch v. United States, 409 U.S. 322 (1973) [No state-created accountant-client privilege is recognized in federal cases.], 7

United States v. Brown, 349 F. Supp. 420 (N.D. Ill. 1972) [The attorney-client privilege did not protect a memo-randum prepared by an accounting associate at the public accounting firm responsible for preparing the income tax returns of a taxpayer.], 7–8

United States v. Bushlow, 832 F.Supp. 574 (E.D.N.Y. 1993) [The taxpayer’s son was held liable for the decrease in value of the property attributable to the mortgage he took out on his mother’s house.], 525

United States v. Davis, 636 F.2d 1028 (5th Cir. 1981) [Workpapers produced in the course of preparing tax returns and the tax records upon which they were based are not privileged, because although preparation of tax returns by itself may require some knowledge of the law, it is primarily an accounting service.], 8

United States v. Deloitte, 610 F.3d 129 (D.C. Cir. 2010) [Documents pre-pared by an accounting firm for a client because of the prospect of the client’s litigation with the IRS over the tax treatment of certain transactions may be protected from discovery under the work product doctrine.], 9