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Ext. PublicationThe Tax Navigator – Key Treasury and IRS Updates Affecting Partnership Basis, Trump Accounts and Tax Compliance
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Join Sean Muller, host of The Tax Navigator, as he breaks down several recent federal tax developments, including limits on Treasury authority, the withdrawal of proposed partnership basis regulations and continued IRS enforcement activity. The discussion also covers a recent court case involving partnership basis adjustments, proposed regulations for Trump accounts and enforcement actions against a Texas tax firm tied to COVID-era credits.
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Detailed Description of The Tax Navigator – Key Treasury and IRS Updates Affecting Partnership Basis, Trump Accounts and Tax Compliance
00:00:00
Sean: Proposed regulations to withdraw partnership basis rules that were proposed by President Biden before, we’re actually going to overturn all those rules now.
00:00:10
Sean: The provision being President Biden put those rules in place because he thought he was going to raise $50 billion over 10 years by making taxpayers report onto different related-party basis adjustments. But they were deemed to be too onerous by the current administration, so we’ve overturned those regulations.
00:00:27
Sean: But the IRS has come out and said they’re still going to go after tax cheats. So this is not a license to go do whatever you want in that case.
00:00:34
Sean: And so there actually was a case that was settled last week about a partnership basis adjustment back in 2012 or 2013.
00:00:42
Sean: And the IRS successfully overturned $712 million of deductions due to some complicated restructuring and related-party rules, which is exactly what President Biden regulations were trying to uncover.
And so the court case uncovered it and argued economic substance and overturned the rules.
00:01:00
Sean: The taxpayer tried to argue that the economic substance rules did not apply to these basis adjustments under Section 743, which is a step-up transaction, but they were unsuccessful for that.
00:01:13
Sean: Also last week, proposed regulations on the Trump accounts were done. And so this is setting up your account so the government can contribute $1,000 for folks who were born 2025 through 2028.
00:01:28
Sean: Those accounts have to be formed and then a responsible person, be it a guardian, parent or grandparent, elects to be the responsible party for that. And that’s the way you set those accounts up, but those proposed regulations are going through there.
00:01:44
Sean: There was a Texas firm that was barred from ever doing any sort of tax services again, because they were creating tax deductions under the COVID rules about dependent care and sick leave. There were $40 million that they defrauded the government.
So they’ve been banned permanently from ever providing any sort of tax services, being affiliated with any firm providing tax services, even officing with a firm that provides tax services.
00:02:10
Sean: So that’s a little bit of what happened this past week. Thank you.
This episode of The Tax Navigator was recorded prior to publication. Some references or updates discussed may reflect information current as of the recording date.
