Lynn Nichols Federal Tax Update Podcast September, 12 2019, Episode 47

Listen as Lynn Nichols provides commentary on 6 Items pertaining to current developments in U.S. tax law.

1. Individual Can Rollover Deceased Husband's IRA

The IRS ruled that an individual could rollover her deceased husband’s IRA into one or more IRAs in her name and that she would not be required to include in gross income any portion of the proceeds distributed from the decedent’s IRA that is timely rolled over into IRAs set up and maintained in her name.

[ LTR 201934006, 5/30/2019, rel. 8/23/2019]

1. Horse Business Deductions Can’t Survive Dead Horse

A taxpayer claiming losses from a horse breeding and showing enterprise was either too early or too late to claim it was a business in a year when she didn’t actually own a horse.

[Tax Notes Today, 8/27/2019, Article by Nathan Richman]  

     Settlement Was Income; No Deduction for Horseless Horse Activity  

The Tax Court held that an individual should have reported as income a settlement she received from her homeowners’ association, finding that it wasn’t excludable under section 104, and that she couldn’t claim deductions for her horseless horse breeding/showing activity; also, she wasn’t entitled to home office or legal expense deductions for her IT business.

     [Denise Celeste McMillan; No. 16203-13; T.C. Memo. 2019-108, 8/26/2019]

1. Passthrough Interest Expense Wasn’t Investment Interest

The Tax Court held that the interest expense passed through to an individual from partnership interests he received by gift or bequest from his father wasn’t investment interest subject to limited deductibility under section 163(d) but was allocable to the partnerships’ real estate assets to offset passthrough real estate income.

[William C. Lipnick; No. 1262-18; 153 T.C. No. 1, 8/28/2019]  

1. Photocopied Forms Aren’t Subject to Frivolous Return Penalties

The Tax Court held an individual liable for one instead of seven $5,000 frivolous return penalties, finding that copies of the frivolous return that she attached to six separate letters to the IRS did not constitute filing “what purports to be a return” under section 6702(a)(1); the court further held that the IRS complied with the written supervisory approval requirements.

[ Gwendolyn L. Kestin; No. 18254-17L; 153 T.C. No. 2, 8/30/2019]

1. Couple Can’t Claim Education Credit for Daughter for a Fifth Year

The Tax Court, in a summary opinion, held that a couple wasn’t eligible to claim the American opportunity tax credit for their daughter’s college education expenses because the credit is only allowed for the first four years of post-secondary education and they had claimed the credit for their daughter in the previous four tax years.

[ Milton H. Thomas II et ux.; No. 21655-17S; T.C. Summ. Op. 2019-24, 8/26/2019]

1. Couple Can’t Rely on Tax Code to Recoup Loan to Son’s Ex

A couple who loaned their son’s fiancé money to pay off her student loans can’t use the tax code’s definition of a qualified education loan to get their money back from her bankruptcy estate.  

[Tax Notes Today, 8/28/2019, Article by Stephanie Cumings]