TAX CONTROVERSY 360
TAX CONTROVERSY 360
McDermott’s Real-Time Tax Disputes Insights
TAX CONTROVERSY 360
McDermott’s Real-Time Tax Disputes Insights
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More Changes to IRS Appeals’ Practices?

by and | Mar 12, 2018 | , ,

We have previously commented on changes at the Internal Revenue Service (IRS) Appeals Division, including: (1) the allowance of Appeals to invite representatives from the IRS Examination Division (Exam) and IRS Office of Chief Counsel to the Appeals conference, (2) the limitations on in-person conferences, and (3) the use of “virtual” conferences.

IRS Appeals Chief Donna Hansberry discussed these changes at a recent tax law conference held by the Federal Bar Association. According to reports, Ms. Hansberry wants feedback from practitioners on the compliance attendance and virtual conferences. (more…)



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Statutes of Limitation and International Taxes

by and | Mar 8, 2018 | , , , ,

In late 2017, we provided a brief overview of statutes of limitation in the international tax context. At that time, we noted a forthcoming article on the subject.  We are pleased to report that our expanded article on the subject has been published in the January-February 2018 edition of the International Tax Journal.  The full article can be viewed here.



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A 360-Degree View: February and March 2018

by | Mar 6, 2018 | , ,

Wrapping Up February – and Looking Forward to March

Top February Tax Controversy 360 Blog Posts

Types of Tax Court Opinions and Their Precedential Effect

The Slow Death of the Section 385 Regulations

Court Rules That a Family Office Is a Business!

 Upcoming Tax Controversy Activities in March

Our lawyers appear are making the following Tax Controversy speeches in March:

March 7, 2018: Andrew Roberson will be presenting “Nuts & Bolts Collections Workshop: A Guide to Assisting Pro Bono Clients with Collection Matters” at the ABA Section of Taxation Webinar.

March 9, 2018: Jay Singer will be presenting “Section 355 Developments” at the at the Federal Bar Association’s 2018 Tax Law Conference in Washington DC.

March 15, 2018: Mary Kay Martire will be speaking at Tax in the City® in McDermott’s Chicago office about the upcoming oral argument before the US Supreme Court in the case challenging the Quill physical presence requirement for sales tax nexus.

March 27, 2018: Andrew Roberson will be presenting “Discovery & Stipulations Process” at the US Tax Court Judicial Conference at the Northwestern University Pritzker School of Law in Chicago, IL.



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White House Intends to Nominate Michael J. Desmond to High-Level Roles in the IRS and the Department of Treasury

by , and | Mar 5, 2018 | , , ,

The White House announced on March 2 that the president intends to nominate Michael J. Desmond, a prominent tax lawyer, to be the Chief Counsel for the Internal Revenue Service (IRS) and Assistant General Counsel in the Department of Treasury. Subject to approval by the Senate, Mr. Desmond’s new roles will entail providing legal guidance and interpretive advice to taxpayers, the IRS, and the Department of Treasury.

Mr. Desmond clerked for Judge Ronald S.W. Lew of the United States District Court from 1994 until 1995. Mr. Desmond went on to serve as a trial attorney for the Department of Justice Tax Division and as tax legislative counsel for the Department of Treasury’s Office of Tax Policy. After leaving the public sector, Mr. Desmond became a partner with Bingham McCutchen LLP in the Washington, DC office until he opened the Law Offices of Michael J. Desmond in 2012. While operating his own practice, Mr. Desmond has represented clients at every stage of the tax controversy process. He has been a frequent author and speaker on tax topics. More information about Mr. Desmond can be found at his firm’s website.

Mr. Desmond is a very well-known and respected tax practitioner. He is a fixture in the tax community. We congratulate him on his nomination.



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The IRS May Be Coming for Your Bitcoins

by and | Mar 1, 2018 | , , , ,

If you have traded Bitcoin or other crypto-currencies, you probably know that their taxation may be as uncertain as your potential for reward or loss. Since 2014, the Internal Revenue Service (IRS) has publicized how it believes these investments should be treated for US federal income tax purposes. If you have failed to report your virtual currency transaction, the result in Coinbase, a recent IRS “John Doe” summons enforcement case, should convince you that it is time to ensure you are compliant with tax laws. The IRS may be coming for your Bitcoins!

IRS Guidance – Bitcoins Are Property

In IRS Notice 2014-21, 2014-16 IRB 938, the IRS explained that so-called “virtual currencies” that can be exchanged for traditional currency are “property” for federal income tax purposes. As such, a taxpayer must report gain or loss on its sale or exchange, measured against the taxpayer’s cost to purchase the virtual currency. In the notice, the IRS also made clear that “virtual currencies” are not currency for Internal Revenue Code (IRC) section 988 purposes. (more…)



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New Chief Judge of US Tax Court

by and | Feb 27, 2018 | ,

On February 26, 2018, the US Tax Court announced that Judge Maurice B. Foley has been elected Chief Judge to serve a two-year term beginning June 1, 2018. Judge Foley will replace Chief Judge Paige Marvel.

Judge Foley was appointed to the US Tax Court by President Clinton on April 9, 1995. He was reappointed by President Obama on November 25, 2011, for a second term ending November 24, 2026. He received a bachelor of arts degree from Swarthmore College, a JD from Boalt Hall School of Law at the University of California, Berkeley, and a master of laws in taxation from Georgetown University Law Center. (more…)



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How Do You Interpret Terms Used in Statutes?

by | Feb 26, 2018 | ,

Statutes in the Internal Revenue Code (Code), like statutes in other areas of the law, are filled with terms that invite differing interpretations. As a general rule, a statutory term should be given its normal and customary meaning. This might entail resorting to common dictionary definitions from Webster’s or Black’s Law Dictionary. It might also entail looking to the established meaning of the term in the relevant industry. But what if the Code provides a specific definition of a term that varies from the ordinary meaning?

In Digital Realty Trust, Inc. v. Somers, S.Ct. No. 16-1276 (Feb. 21, 2018), the parties disputed the meaning of the term “whistleblower” as set forth in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The statute at issue specifically defined the term “whistleblower” to mean “any individual who provides … information relating to a violation of the securities laws to the [Securities and Exchange] Commission.” The question before the Court was whether the statute extended to an individual who had not reported a violation of the laws to the Commission fell within the definition of a whistleblower.

The Court answered the question in the negative: “‘When a statute includes an explicit definition, we must follow that definition,’ even if it varies from a term’s ordinary meaning. Burgess v. United States, 553 U.S. 124, 130 (2008) (internal quotation marks omitted).” Thus, because the specific definition of “whistleblower” in the relevant statute required providing information to the Commission, an individual who did not do so failed to meet the definitional requirements of the statute.

Practice Point: Taxpayers and their advisors must constantly review and interpret provisions of the Code, including the meaning of specific terms used by Congress. The Supreme Court’s holding in Digital Realty Trust confirms that if a specific definition is provided then it must be followed even if that definition is contrary to the normal and customary meaning or the established meaning in the relevant industry.



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Let’s Get Ready to Rumble – Coca Cola Concentrates on Trial Preparation

by | Feb 20, 2018 | , , , , ,

The main attraction in the US Tax Court (Tax Court) is just a few weeks away. On March 5, 2018, The Coca-Cola Company (TCCC) and the Internal Revenue Service (IRS) square-off for a much anticipated six-week trial before Judge Lauber. The parties recently filed their Pretrial Memoranda in the case, although the IRS’s memorandum was filed under seal. TCCC’s Pretrial Memorandum gives us deep insight into the issues and how the trial will be conducted. The primary issue in the $3 billion transfer pricing case is the proper amount of the arm’s length royalties payable by six foreign licensees to TCCC for the licenses of TCCC’s trademarks and certain other intangible property for exploitation in international markets. In its Pretrial Memorandum, TCCC contends that the IRS’s application of an approximately 45 percent royalty rate using a bottler-based Comparable Profit Margin (CPM) that allocates to TCCC more than 100 percent of the aggregate operating (after accounting for the amounts paid pursuant to the Royalty Closing Agreement) profits of the six foreign licensees is arbitrary and capricious. (more…)



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Treasury and IRS Throw Out 298 Regulations and Amend 79 Others

by | Feb 13, 2018 | ,

Following up on our prior posts here and here, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) have proposed to remove 298 regulations and amend 79 regulations. The Treasury’s and the IRS’s action is in response to Executive Order 13789 (April 21, 2017), which called on the Treasury and the IRS to identify and reduce tax regulatory burdens that impose undue financial burdens on US taxpayers or otherwise add undue complexity to federal tax laws.

The 298 regulations are proposed to be removed because they have no current or future applicability and, therefore, no longer provide useful guidance. However, the proposed removal is not intended to alter any non-regulatory guidance that cites or relies on these regulations. The regulations proposed to be removed fall into one of three categories:

  • Regulations interpreting provisions of the Internal Revenue Code (Code) that have been repealed;
  • Regulations interpreting Code provision that, while not repealed, have been significantly revised, and the existing regulations do not account for these statutory changes (note that to fall within this category, the statutory changes must have rendered the entire regulation inapplicable); and
  • Regulations that, by the terms of the relevant Code provisions or the regulations themselves, are no longer applicable (g., expired temporary regulations, certain transition rules)

The 79 regulations proposed to be amended are regulations that make reference to the 298 regulations proposed to be removed.

Before the proposed regulations removing and withdrawing regulations are adopted as final regulations, the Treasury and the IRS will give consideration to any written comments provided by the public. Comments must be received by May 14, 2018. A public hearing may be scheduled if requested in writing by any person that timely submits written comments.

Practice Point: Taxpayers and practitioners may want to review the list of regulations proposed to be removed to determine whether the regulations continue to serve a useful purpose and should be retained.



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Tax Court Addresses Statute of Limitations Issues in Rafizadeh v. Commissioner

by and | Feb 12, 2018 | ,

Andrew Roberson and Elizabeth Chao recently wrote an article for Law360 entitled, “A Recent Tax Court View Of Statute Of Limitations Provisions.” The article discusses the Tax Court’s recent opinion in Rafizadeh v. Commissioner on statute of limitations for amounts reportable under Internal Revenue Code Section 6038D.

Read the full coverage on Law360 here.



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