October 15, 2023 - Think Outside the Tax Box

October 15, 2023

What’s at Stake? It’s Not a Loaf of Bread

The IRS loves to issue cryptocurrency guidance when it’s the most inconvenient for me personally. I’m not sure how they accessed my calendar, but it certainly feels like this one was intentional. I was at a tax conference over the summer to teach an introduction to crypto class immediately after lunch. I had just finished eating when my phone started blowing up. The IRS published a new Revenue Ruling on Staking, 45 minutes before I was to teach about it. I read the six-page document, tried to digest it, and considered how I needed to adapt my material on the fly. Another frequent (but not to be named) Tax Box contributor present at the conference teased me about the situation I found myself in. The class went fine, though, because even with a surprise ruling, the IRS didn’t really say anything surprising. In typical IRS fashion, it also created more questions than it answered.

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Client Alert

Some of What You Need to Know to Do 1041 Right Because Nobody Knows Everything

There was a recent IRS memo from an associate chief counsel that should be shocking but actually isn’t. Promoters have for many years been hawking a “copyrighted non-grantor irrevocable complex discretionary spendthrift trust,” which purported to avoid capital gains tax. You could learn about it on TikTok. It “worked” by citing Section 643(a)(3), which excludes capital gains allocable to corpus from distributable net income. You and I both know that DNI is not taxable income, but not everybody who learns the tax law from TikTok has caught onto that subtle point yet. Although I have never encountered anything as egregious as the “copyrighted, etc, etc, trust” I have seen a lot of problems with trusts over the years (and partnerships and SALT – don’t get me started). Much of it has to do with working under a lot of pressure. Often, the things that are wrong end up not mattering all that much, but I get a little frightened, because maybe one of these days the IRS is going to start getting its act back together. If it does, I think things may be a little shocking to practitioners who have grown up in an environment where enforcement has been progressively gutted.

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A Supreme Court Decision Could Rewrite Penalties for Foreign Accounts

Tax reporting of overseas accounts has always been an extra chore for some American taxpayers. Now they might have to play a guessing game as well after the Supreme Court’s Bittner decision early this year. The case is a prime example of how taxpayers with international holdings might wrest better tax judgments in the future.

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TAX COURT ROUNDUP – OCTOBER 2023

The latest Federal Tax Court news, updates, and hot topics!

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