The Newport Beach Tax Attorney Blog

Treasury issued new proposed (Reg-112607-19) and final (T.D. 9885) regulations on the base erosion anti-abuse tax (BEAT) on December 12, 2019. The BEAT is a minimum tax on modified taxable income, determined by adding back base erosion payments to US taxable income. The BEAT only applies to "applicable taxpayers" that have an annual average of $500 million or more in gross receipts, calculated over 3 years, and a base erosion percentage of 3 percent (2 percent for certain financial companies) (i.e., the ratio of deductible payments made to non-US related parties' overall deductible payments).

These new provisions provide some helpful news to captive insurance companies. The proposed regulations provide an election to forego deductions in order to stay under the 3 percent base erosion percentage cliff, and the final regulations provide that certain loss payments made on behalf of unrelated underlying insureds are not base erosion payments and are not included in either the…

The Internal Revenue Service confirmed that the nation's tax season will start for individual tax return filers on Monday, January 27, 2020, when the tax agency will begin accepting and processing 2019 tax year returns.
The deadline to file 2019 tax returns and pay any tax owed is Wednesday, April 15, 2020. Remember you can extend the return due date, but not the payment date. More than 150 million individual tax returns for the 2019 tax year are expected to be filed, with the vast majority of those coming before the traditional April tax deadline.

In December 2019, the U.S. Tax Court delivered a gift to the IRS and entered its first decision on a syndicated conservation easement transaction. In TOT Property Holdings, LLC v. Commissioner, Docket No.005600-17, the Tax Court sustained in its entirety the IRS's determination that all tax benefits from a syndicated conservation easement transaction should be denied and that the 40% gross valuation misstatement and negligence penalties applied. The Tax Court found that the transaction failed the legal requirements applicable to donations of land easements and, in imposing the gross valuation misstatement penalty, found that the actual value of the easement donation was less than 10 percent of what was originally reported on the tax return.
"In denying the deductions and upholding the 40% gross valuation misstatement penalty, the Tax Court confirmed that aggressive syndicated easement transactions simply will not survive scrutiny," said IRS Commissioner Chuck Rettig. &quo…

For landowners, donating a conservation easement is a way to protect places they love. It’s also a major financial decision.  Done right the tax incentives may offset some of that loss in property value, making conservation a viable option for more landowners.  However, done wrong, the IRS may reign down on the transaction to deny the deduction as an abusive tax transaction.

In a recent case, the United States Tax Court ruled a limited liability company (LLC) was not entitled to charitable contribution deduction because the conservation purpose of the easement was not "protected in perpetuity" as required by Code Sec. 170(h)(5)(A). The taxpayer had donated a conservation easement to a qualified charitable organization. The easement deed provided that, if the property were sold following judicial extinguishment of the easement, the donee organization would receive a share of the proceeds, "after the satisfaction of prior claims," determined by a formula.
The easement …

This is a summary of 2019 legislation affecting property taxes issued by the BOE on December 4, 2019. All bills become effective January 1, 2020, unless otherwise specified.

AB 46 (Carillo), Chapter 9
Among others, amends section 253 of the Revenue and Taxation Code.
Veterans' Exemption. Replaces mental illness terms with more culturally sensitive terms and replaces gender references with gender neutral references.

AB 587 (Friedman), Chapter 657
Adds section 65852.26 of the Government Code.
Sale of Accessory Dwelling Unit. Allows an accessory dwelling unit to be sold or conveyed separately from the primary residence to a qualified buyer if all of the following are met:


The property was built or developed by a qualified nonprofit corporation receiving the welfare exemption;


A recorded contract exists that imposes an enforceable restriction upon the sale that ensures the property will be preserved for affordable housing for 45 years for owner-occupied housing;


The property is held pursuant t…

IR- 2019-199
Internal Revenue Service: Criminal Investigations Division (CID): 2019 annual report


IR-2019-199
WASHINGTON — The Internal Revenue Service today released the Criminal Investigation Division's (CI)annual report, highlighting significant successes and criminal enforcement actions taken in fiscal year 2019. The report also commemorates CI's 100th year anniversary as a law enforcement agency.
“CI is critical to the overall enforcement efforts of the IRS in pursuing its Mission in a fair, impartial, diligent and, where appropriate, tenacious manner.” said IRS Commissioner Chuck Rettig. “The Fiscal Year 2019 Annual Report summarizes various CI activities throughout the year but vastly understates the importance of CI to the overall IRS mission. CI supports the efforts of compliant taxpayers by visibly demonstrating the risks of noncompliance thereby helping otherwise honest taxpayers stay honest and compliant.”
Key focuses of CI in fiscal year 2019 included cybercrimes, with…