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2020 Tax Update - Tax Court strikes down Syndicated Conservation Easement Transaction

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…

Tax Litigation: Tax Court Denies Conservation Easement Deduction

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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 …

Tax Flash : Summary of 2019 Property Tax Changes

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…

IRS Criminal Investigation releases Fiscal Year 2019 Annual Report; celebrates 100 years

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…

IRS issues new guidance on tax and reporting rules for virtual currency

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Press Release
FOR IMMEDIATE RELEASE



Virtual currency: IRS issues additional guidance on tax treatment and reminds taxpayers of reporting obligations

NEWPORT BEACH November 29, 2019 — As part of a wider effort to assist taxpayers and to enforce the tax laws in a rapidly changing area, the Internal Revenue Service today issued two new pieces of guidance for taxpayers who engage in transactions involving virtual currency.

Expanding on guidance from 2014, the IRS is issuing additional detailed guidance to help taxpayers better understand their reporting obligations for specific transactions involving virtual currency. The new guidance includes Revenue Ruling 2019-24 (here) and frequently asked questions (here).

The new revenue ruling addresses common questions by taxpayers and tax practitioners regarding the tax treatment of a cryptocurrency hard fork. In addition, a set of FAQs address virtual currency transactions for those who hold virtual currency as a capital asset.

"The IRS is commit…

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to Tax Evasion

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Press Release
FOR IMMEDIATE RELEASE

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to tax Evasion

NEWPORT BEACH November 23, 2019 -- James Roy McDaniel, 66, who pleaded guilty before United States District Judge S. James Otero to one count of tax evasion, is scheduled to be sentenced on February 3, 2020. At sentencing, McDaniel could receive a statutory maximum sentence of five years imprisonment.  Because this is his second criminal tax offense his chances of receiving a higher sentence are increased.

McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. McDaniel’s ad…

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to Tax Evasion

Image
Press Release
FOR IMMEDIATE RELEASE

California Attorney, a Prior Tax Offender and Embezzler, Pleads Guilty to tax Evasion

NEWPORT BEACH November 23, 2019 -- James Roy McDaniel, 66, who pleaded guilty before United States District Judge S. James Otero to one count of tax evasion, is scheduled to be sentenced on February 3, 2020. At sentencing, McDaniel could receive a statutory maximum sentence of five years imprisonment.  Because this is his second criminal tax offense his chances of receiving a higher sentence are increased.

McDaniel was a licensed California attorney for more than two decades, until he pleaded guilty in late 2004 to one felony count of subscribing to a false income tax return. In 2005, McDaniel was sentenced to three years in federal prison for that crime, and he surrendered his license to practice law in California. In that case, McDaniel’s failure to report income resulted in a tax loss of $677,368 to the federal government, according to court documents. McDaniel’s ad…