T&K Tax Knowledge

C-Stores - A Unique Opportunity for Tax Deferral

Posted by Todd Keator

Historically, real estate investors looking to defer federal income taxes have relied on Section 1031 exchanges to exchange one real estate investment for a different real estate investment in a tax-deferred manner. More recently, some investors have used the “qualified opportunity zone” rules to achieve a similar result by reinvesting capital gains (from any source) into qualified projects within a qualified opportunity zone in order to defer recognizing those gains.  But in addition to these two mainstream techniques, a third possibility for achieving significant tax deferral exists for investors who purchase gas stations or convenience stores that have significant retail gasoline operations (“C-Stores”). By purchasing a qualified C-Store, the investor generally is eligible for 100% bonus depreciation on the entire purchase price (excluding any portion allocable to land or goodwill). These bonus depreciation deductions then can be used to offset the investor’s income or gains from other sources, resulting in the desired tax deferral. 

Abbey Garber Quoted on Tax Court Backlog

Featuring Abbey Garber

The Tax Court was closed for several months due to the COVID-19 pandemic, but taxpayers continued to submit petitions as required by law.  As Abbey Garber explains in an article in Law360 Tax Authority (subscription required), this has caused a backlog of Tax Court filings that may lead to premature assessments by the IRS. 

Top Five Things Tax Matters Partners Should Do When Receiving an FPAA

Posted by Mary McNulty, Lee Meyercord, and Abbey Garber

     

The IRS is ramping up enforcement efforts and focusing on partnerships. As a result, partnerships may soon receive IRS notices adjusting the partnership’s return. Due to the time it takes to select a tax return for audit and conduct the audit, these upcoming notices are likely to be for pre-2018 tax years when the partnership was subject to the complex TEFRA procedural rules. Under those procedures, the notice is a notice of Final Partnership Administrative Adjustment (FPAA), and the partnership is generally represented by the Tax Matters Partner (TMP). The FPAA is the equivalent of a notice of deficiency for partnerships, but only partnership items are adjusted and no deficiency is proposed. Because the FPAA triggers the time period for filing suit to contest the partnership adjustments, our recent Client Alert highlights the top five things a TMP should do when receiving an FPAA.  Please contact the above authors or the TK tax attorney with whom you regularly work if you have any questions or need assistance.

Choose Your Partnership Representative Wisely

Posted by Abbey Garber and Jessica Kirk

The Bipartisan Budget Act of 2015 (“BBA”) introduced a centralized partnership audit regime which replaced the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”).  The BBA streamlined partnership audits (including audits of limited liability companies taxed as partnerships) by providing for the assessment and collection of tax at the partnership level.  

For tax years after 2017, the BBA replaced the “tax matters partner” with the “partnership representative.”  The partnership representative would represent the partnership in an audit or IRS examination and has the sole authority to act on the partnership’s behalf.  Unless a partnership is able to elect out of the BBA procedures, each year a partnership must designate a partnership representative and, if applicable, a designated individual, on its partnership tax return Form 1065, U.S. Return of Partnership Income. 

Because of the broad authority given to partnership representatives under the BBA and because of the limited circumstances under which such designation can be changed, partnerships should carefully consider who they will appoint as the partnership representative on their 2019 and subsequent tax returns.  The extended deadline for filing a 2019 partnership tax return is September 15, 2020.

Employers Beware: The IRS Is Ramping Up Employment Tax Enforcement

Posted by Abbey Garber, Mary McNulty, Lee Meyercord, Jessica Morrison, and Neely Munnerlyn

Approximately 72% of all revenue collected by the IRS is from withheld employment taxes.  As a result, the IRS has increased its focus on employment tax audits, recently reporting that there are 530,000 employment tax audits pending.  As explained in our recent client alert, employers should understand the potential consequences of an employment tax audit and take steps to ensure they are properly prepared for an audit.  If you have any questions, please contact the Thompson & Knight attorney with whom you regularly work or one of the authors listed above.

Proposed Legislation Would Increase Above-the-Line Charitable Contribution Deduction

Posted by David Rosenberg, Tyree Collier, Lee Meyercord, Katie Gerber, and Jana Wight

Proposed legislation with bipartisan support would increase the $300 above-the-line deduction to over $4,000 for individuals and $8,000 for married couples for charitable contributions made in 2020. As explained in a prior post, the CARES Act provided a new above-the-line deduction (i.e., reduces taxable income dollar-for-dollar) for up to $300 of charitable contributions beginning in 2020. This deduction is available to all individual donors, including those who utilize the standard deduction.

IRS Offers to Settle Tax Court Syndicated Conservation Easement Cases

Posted by Mary McNulty, Abbey Garber, Lee Meyercord, and Katie Gerber

 

The IRS recently announced a time-limited settlement offer to taxpayers with pending Tax Court cases involving syndicated conservation easements. The IRS encourages taxpayers who receive a settlement offer letter to consult with their own independent attorney (i.e., an attorney who was not involved in promoting the transaction or recommended by the promoter of the transaction) to evaluate the litigation risks and the settlement offer. Our recent client alert provides additional details on syndicated conservation easements and the settlement offer. Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

IRS Wealth Squad Targets High-Wealth Taxpayers and Their Entities

Posted by Mary McNulty, David Rosenberg, Bill Mureiko, Abbey Garber, Lee Meyercord, Meagan Horn, & Jessica Kirk

     

   

As IRS employees return to their offices and resume audits and collection enforcement efforts, the IRS’s Global High Wealth Industry Group (commonly referred to as the “Wealth Squad”) will embark on an aggressive enforcement campaign targeting high-wealth individuals and the pass-through entities and foundations they control. Targeted taxpayers should understand how the enforcement campaign can impact them and take steps to ensure they are properly prepared for an audit by the Wealth Squad. Our recent client alert provides additional details on the enforcement campaign and steps you can take now to prepare for a potential Wealth Squad audit. Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

IRS Expected to Agressively Target Non-Filers

Posted by Abbey Garber, Mary McNulty, Lee Meyercord, Meagan Horn, and Jessica Kirk

The Treasury Inspector General for Tax Administration (TIGTA) recently released a report finding nearly 880,000 high-income non-filers cost the U.S. government more than $45 billion in lost tax revenue over the years 2014-2016. Now, Congress is demanding answers and action and, in response, the IRS is expected to divert resources to aggressively pursue such noncompliance. A taxpayer who has failed to timely file past tax returns or pay past taxes should take steps now to correct past noncompliance.  More information is available in our recent client alert on this development.  Please contact one of the above authors or the Thompson & Knight attorney with whom you regularly work if you have any questions.

 

IRS Issues Updated Guidance on Employee Retention Credit

Posted by Neely Munnerlyn

    

The IRS has expanded its informal FAQ guidance on the employee retention credit (the “ERC”) which was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The ERC is a refundable payroll tax credit for employers equal to 50% of qualified wages (including allocable qualified health plan expenses) that eligible employers pay their employees after March 12, 2020 and before January 1, 2021. The maximum amount of qualified wages that may be taken into account with respect to each employee is $10,000 (for a maximum credit of $5,000 per employee).