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Ext. PublicationThe Tax Navigator – Navigating Tax Court Challenges Amidst Government Shutdown
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Join Sean Muller, The Tax Navigator, as he shares updates on the ongoing government shutdown concerning IRS audits and regulatory changes for investment trusts and companies.
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Detailed Description of The Tax Navigator – Navigating Tax Court Challenges Amidst Government Shutdown
00:00:00
Sean: All right. So, we’re still in week three now of the stoppage here. The government is going to be shut down for quite some time. The Democrats blocked a tenth vote this week, so no end in sight.
00:00:11
Sean: As a result of that, we’re in the courts right now battling because President Trump is continuing to try to lay off employees, and the courts are coming out and trying to block some of that.
Additionally, the Tax Court has come out and said they’re going to take a two-week break. So, there’s going to be no court in session this week, October 20th, or next week, October 27th, so we’re not going to have any movement on cases that are out there.
00:00:35
Sean: We’re going to go to a couple of other interesting cases that came out last week. We talked before about lack of records and documentation causing taxpayer issues.
00:00:45
Sean: There was another case where a hospice company was supposed to be on the accrual method of accounting. They were not keeping good books and records. The IRS came in and audited, asked for the books and records, didn’t get them, and so they went actually through a bank deposit method and actually went and verified all the deposits going in and out, and they turned around and disallowed a number of expenses that the taxpayer couldn’t prove were valid business expenses at all. And the IRS was successful in that case.
00:01:16
Sean: So once again, if you don’t have good books and records and the IRS comes knocking, you’re going to have some issues. So, really clean up your books and records to have the best case going forward.
00:01:26
Sean: Also, the Treasury proposed some new regulations to eliminate a look-through method for REITs and RICs. They were looking for some rules that had been passed several years ago, which allowed the IRS to look through corporations that owned interests in RICs and REITs for purposes of determining if they were foreign-held or not. And taxpayers came out and said, it’s too hard to look through a U.S. corporation to see who owns the corporation, so they were successful in doing away with those rules.
00:02:00
Sean: So no longer do you have to look through the corporations. Why does that matter? RICs and REITs distribute dividends and capital gains out to taxpayers. And if it’s a foreign person that owns the interest in the RIC or REIT, they have to withhold on that amount. And with real estate, you have these special rules on real property holding companies. And if you look through the corporation, you are going to have to do actually withholding on a dividend or capital gain to a U.S. corporation and just lots of paperwork to go through and do that.
00:02:33
Sean: So, they’ve eliminated that rule to ease the RICs and REITs and the reporting of that. Hopefully, we get some relief from this shutdown, but I don’t see anything happening here in the next 10 days or so.
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.
