Lein Withdrawal

A federal tax lien, sometimes called a “statutory lien,” is the government’s legal claim against a taxpayer’s property when the taxpayer neglects or fails to pay a tax debt. To provide notice to creditors, the IRS files a public document, Form 668(Y), Notice of Federal Tax Lien.

Internal Revenue Code (IRC) § 6323(j) provides the Internal Revenue Service (IRS) with the authority to withdraw a Notice of Federal Tax Lien (NFTL) under certain circumstances. A withdrawal removes the public NFTL, which assures creditors that the government is not competing with them for a taxpayer’s property. However, a withdrawal does not extinguish the taxpayer’s outstanding tax liability.

A taxpayer’s request for a withdrawal must be made in writing. Generally, a taxpayer requests the withdrawal using Form 12277, Application for Withdrawal of Filed Form 668(Y), and Notice of Federal Tax Lien.

The various scenarios in which the IRS may withdraw an NFTL are briefly discussed below.

Premature or Non-Compliant Filing

If the IRS’s filing of the NFTL was premature or in violation of IRS administrative procedures, it may be withdrawn. [1] Examples of such instances include but are not limited to:

(i) the filing of a NFTL in violation of the automatic stay in bankruptcy;

(ii) the filing of a NFTL while the taxpayer is in a Combat Zone; or

(iii) the filing of an NFTL by an IRS representative who knows or should have known about available credits.

Taxpayer Entered Into Installment Agreement

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Bankruptcy Schedules: Schedule A/B

This will be the first in a series of blog posts that will focus on completing bankruptcy schedules. We’ll start in this blog with the first schedule – Schedule A/B.

Bankruptcy can be a complex and overwhelming process, but it’s important to accurately complete the required forms and schedules to ensure that your case proceeds smoothly. One of the key schedules that must be completed is Schedule A/B, which lists all of the debtor’s personal property and assets. In this blog post, we’ll go over the basics of completing Schedule A/B in a bankruptcy case.

Step 1: Gather Information

Before you can start filling out Schedule A/B, you’ll need to gather all the necessary information about your personal property and assets. This can include things like your home, car, furniture, electronics, jewelry, and other items of value. Make sure to be thorough in your inventory, and don’t leave anything out.

Step 2: Determine the Value of Your Property

Once you’ve compiled a list of all your personal property and assets, the next step is to determine the value of each item. The value should be based on the fair market value, which is the price that a willing buyer would pay to a willing seller in an arm’s length transaction.

There are several ways to determine the value of your property. You can use online resources like Zillow or Redfin to estimate the value of your home, or use sites like Kelley Blue Book or NADA to estimate the value of your car. For other items like jewelry or electronics, you may need to get an appraisal from a qualified appraiser.

Step 3: Classify Your Property

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Deficiency For Disallowed Mortgage Interest Deduction; Qualified Residence Interest

Shilgevorkyan v. Comm’r, T.C. Memo. 2023-12| January 23, 2023 | Ashford, J. | Dkt. No. 9247-15

Summary: This is a deficiency case involving taxpayer Hrach Shilgevorkyan (Petitioner) and the IRS’s disallowance of a mortgage interest deduction for tax year 2012. In 2005 Edvard, Petitioner’s brother, purchased the property in issue in Paradise Valley, Arizona for $1,525,000, making a $392,896 down-payment and obtaining a $1,143,750 bank loan from Wells Fargo. Edvard and his wife, Lusine, were the borrowers. Edvard, Lusine, and Artur (Petitioner’s other brother) took out a $1,200,000 construction loan. Both loans were secured by the Paradise Valley property. The construction loan funds were used to construct a house and a separate guest house on the property. In 2006 and again in 2008, Edvard, Lusine, and Artur refinanced with Wells Fargo. The disclosures and deed of trust contained representations and prohibitions of transfers made without Wells Fargo’s consent, and the deed of trust further stated that the Paradise Valley property would be the borrower’s principal residence for at least one year unless the lender agreed. Artur executed a quitclaim deed in 2010, which conveyed all his interest in the property to Petitioner. No request was made to Wells Fargo to approve the conveyance. Petitioner did not pay Artur in exchange for the quitclaim deed. During 2012 Petitioner made no payments to Wells Fargo related to the loan secured by the property. Wells Fargo did not issue Petitioner a Form 1098, Mortgage Interest Statement, for 2012. With limited exceptions, Petitioner did not reference the Paradise Valley property as being his place of residence or address, even though he lived in the guest house for a time. On his 2012 federal income tax return Petitioner deducted $66,354 for mortgage interest paid related to the Paradise Valley property. This deduction was for one-half the total mortgage interest paid in 2012 on the Paradise Valley loan as reported by Wells Fargo on the Form 1098 that was issued to Edvard and Lusine.

Key Issues: Whether the IRS’s disallowance of the mortgage interest deduction was appropriate?

Primary Holdings: Yes. Petitioner did not prove that the indebtedness on the Paradise Valley property was his obligation (even though the Tax Court made an assumption that it was), (2) Petitioner did not show ownership (legal or equitable) in the property, and the quitclaim deed did not, under state law, convey title to Petitioner, and (3) the residence is the taxpayer’s qualified residence, and (3) Petitioner failed to show that the property was his “qualified residence.”

Key Points of Law:

Burden of Proof. In general, the IRS’s determinations set forth in a notice of deficiency are presumed correct, and the taxpayer bears the burden of proving otherwise. Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). If the taxpayer produces credible evidence with respect to any factual issue relevant to ascertaining his federal income tax liability and meets certain other requirements, the burden of proof shifts from the taxpayer to the IRS as to that factual issue. § 7491(a)(1) and (2). That burden-shifting mechanism is not applicable in this case.
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Florida Sales Tax On Ticket Sales For The Sunshine State’s Nonprofits

Sales tax . . . A (if not the most) commonly overlooked tax for nonprofit organizations. This Freeman Law Insights blog focuses on sales tax regime applicable to “admissions” collected by or for nonprofit organizations in the State of Florida.

General Rule. The state of Florida imposes a tax on “admissions,” which is defined as the net sum of money for admitting a person to any place of amusement, sport, or recreation, including theaters, outdoor theaters, shows, exhibitions, games, races, or any place where charge is made by way of sale of tickets. See Fla. Stat. §§ 212.02(1), 212.04(1)(b). The tax is required to be collected by every person who exercises the privilege of selling or receiving anything of value by way of admissions. Id. § 212.04(1)(a), (b).

Exception for 501(c)(3) Organizations. No tax is levied on dues, membership fees, and admission charges solely imposed by a not-for-profit sponsoring organization. See id. § 212.04(2)(a)(2); Fla. Admin. Code Ann. § 12A-1.005(2)(f). To receive this exemption, the sponsoring organization must qualify as a not-for-profit entity under I.R.C. § 501(c)(3). Fla. Stat. § 212.04(2)(a)2.; Fla. Admin. Code Ann. § 12A-1.005(2)(f).

Co-Promotion of Events. In Fla. Tech. Assistance Advisement No. 09A-051 (Oct. 8, 2009) the Florida agency held that an event co-promoted by a governmental body and a non-profit organization did not qualify for exemption because the governmental body is not a qualified organization under section 501(c)(3) of the Internal Revenue Code. The agency noted:

[T]he event was not solely sponsored by the Foundation, and the admissions were not solely imposed by the Foundation. Rather, as expressed in the agreement . . . , both parties were responsible for imposing and collecting the ticket charges regarding this issue. Therefore, since the exemption must be narrowly construed against the taxpayer seeking the exemption, the event in question does not qualify for the exemption found in Section 212.04(2)(a)2.a., F.S.

Agency Liability for Tax on Admissions. Under the Florida Administrative Code:

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Innocent Spouse Relief, Equitable Factors Under Section 6015(f)

Parker v. Commissioner, T.C. Memo. 2022-110 | November 15, 2022 |Paris, J.| Dkt. No. 6054-19

Short Summary: This case involves whether a taxpayer is entitled to relief from joint and several liability regarding a deficiency in federal income tax under 26 U.S.C. § 6015(f).  Haywood Earl Parker Jr. (Parker) and Jaqueline Ann Parker (Ann Parker) married in 1988 and divorced in April 2018. Parker has severe health problems and his only income as of 2012 arises from Social Security (SS) disability payments. Ann Parker received a ­settlement award in relation to a discrimination claim she asserted against her employer. The Parkers filed their joint tax return for 2016, where they excluded the attorney’s fees or noneconomic and compensatory damages from the settlement amount. They considered those amounts were non-taxable from a call held with the IRS.

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IRS Automated Underreporter Program, Gifts From Employer, Accuracy-Related Penalty

Freeman Law Tax Court In Brief

Fields v. Comm’r, T.C. Summary Opinion 2022-22 | November 10, 2022 | Panuthos, Special Trial J. | Dkt. No. 2925-20S (IRS Automated Underreporter, gifts from employer, unreported gross income, and accuracy-related penalty)

Summary: Pursuant to 26 U.S.C. § 7463(b), this decision is not reviewable by any other court, and the opinion shall not be treated as precedent for any other case. The case regards a deficiency determination and a 26 U.S.C. § 6662(a) accuracy-related penalty assessed against petitioners, Jennifer Fields (“Jennifer”) and Walter Fields (with Jennifer, the “Fields”). Jennifer worked for Paragon Canada ULC. Paragon Canada ULC operated in Canada, and it operated in the U.S. as Paragon Gaming (collectively, Paragon). She had a personal relationship with the CEO of Paragon, Scott Menke. On a few occasions, Paragon wired funds to or for Jennifer’s personal benefit, such as for use as a down payment to purchase a residence or other unspecified.

In January 2017, she separated from Paragon. In a severance agreement, the respective parties agreed to a write-off of certain employee advances totaling $79,581.50. A revised draft severance agreement modified the consideration but was never signed. Jennifer executed a Form W–9, Request for Taxpayer Identification Number and Certification, which was provided to Paragon. Paragon issued to Jennifer and filed with the IRS a Form 1099–MISC, reporting $79,581 in other income for the year in issue.

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The Methods (And Madness) Of Transfer Pricing For Tangible And Intangible Property

Transfer pricing has to do with the allocation of income among parties controlled by the same persons (controlled parties) that engage in transactions with each other (controlled transactions).[1] In the international context where controlled parties may operate in different countries with different tax burdens, the concern is that the controlled parties may shift income from a higher-taxed country from a lower-taxed country. Here’s a simple example:

The Example

Here ProdCo and WidgCo are controlled parties because they are both 100% owned by Owner. And they’re engaged in a controlled transaction, because ProdCo is purchasing Widgets from WidgCo, which ProdCo then incorporates into Product which it sells to consumers for $100 a pop. ProdCo is based out of Country A, which has a 20% income tax rate, while WidgCo is based out Country B with a 10% income tax rate.

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Section 245A Overview And Requirements: Tax Efficient Repatriation Of A Foreign Subsidiary's Earnings

Section 245A: Tax Efficient Repatriation of a Foreign Subsidiary’s Earnings

United States-based international businesses are subject to complex reporting and compliance and anti-deferral regimes such as subpart F, global intangible low taxed income (“GILTI”), passive foreign investment company (“PFIC”), and the new corporate minimum tax that was enacted as part of the Inflation Reduction Act, Pub. L. 117-169 (2022).  These regimes are enforcement mechanisms to ensure that foreign earnings are taxed on a current basis in the United States at a minimum corporate tax rate. As part of Tax Reform, the United States introduced a new dividends received deduction (“DRD”) in section 245A for the foreign-source portion of dividends received by certain domestic corporations (the “Section 245A DRD”). The “participation exemption” in section 245A is the cornerstone of the new quasi-territorial tax system. Section 245A can be a powerful taxpayer favorable provision to exempt dividends and deemed dividends received from certain foreign corporations if the statutory requirements are met. Since Tax Reform the IRS and Treasury Department issued several regulation packages that clarify and limit the scope of these rules. This post is an update to our prior post on the Section 245A DRD, and explains some of the tax planning opportunities where a domestic corporate taxpayer may be able to benefit from the Section 245A DRD.

Overview of the Section 245A DRD

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Crypto John Doe Summons

On September 21, 2022, the U.S. District Court for the Southern District of New York granted the IRS’s ex-parte motion for leave to serve a John Doe summons to M.Y. Safra Bank after the IRS’s investigation into digital asset trading platform SFOX. The court’s order requires M.Y. Safra Bank to produce records on U.S. customers of SFOX who may owe tax on unreported cryptocurrency transactions. This follows similar IRS’s John Doe summonses against Coinbase, Inc., Circle Internet Financial, and Payward Ventures, Inc. d/b/a Kraken.

John Doe summonses are a powerful tool for the government to find unreported and underreported income from digital asset transactions. After the United States District Court for the Northern District of California permitted the IRS to serve a John Doe summons on Coinbase, Inc. the IRS sent notification letters to more than 10,000 taxpayers, advising them to file amended returns and pay back taxes. The IRS said those notifications resulted in nearly $17.6 million in assessments against taxpayers. The M.Y. Safra Bank John Doe summons is the latest attack by the IRS to find taxpayers that have unreported or underreported income from cryptocurrency transactions.

M.Y. Safra Bank John Doe Summons

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TL FAHRING - International Tax Withholding: Chapter 3 Of The Internal Revenue Code

One of the more confusing areas of international tax law is determining when withholding is required. Getting it wrong can have dire consequences.

Currently, U.S. international withholding provisions can be found in Chapters 3 and 4 of the Internal Revenue Code.  Chapter 3 contains the withholding provisions that are intended to approximate a foreign person’s U.S. federal income tax liability. Chapter 4, on the other hand, deals with withholding provisions put in place by the Foreign Accounts Tax Compliance Act of 2010 and is primarily aimed at obtaining information regarding account holders of foreign financial institutions and owners of certain foreign entities.

In this post, we’ll focus on Chapter 3 withholding, setting aside Chapter 4 for another time.

But first . . .

Why International Tax Withholding?

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Schedule A And Schedule C Itemized Deductions And Documentation Requirements


Short Summary: This case involves taxpayers’ entitlement to Schedule A itemized deductions and Schedule C deductions and the taxpayers’ obligation to substantiate those expenses to which the deductions were related were paid or incurred for the 2015 and 2016 tax years. Petitioners were husband and wife that jointly filed their tax return for the years at issue. Mrs. Patitz was an account executive with a copying company and she also operated her own insurance business selling supplemental insurance policies. Mrs. Patitz’s job responsibilities for the copying company required her to travel to client sites in Central Florida. Her employer reimbursed her for travel expenses incurred outside of her home base in Jacksonville, FL. Her weekly mileage expenses only accounted for her local trips in Jacksonville. In 2015 and for part of 2016 Mr. Moody was employed as an area manager for a courier service. His service area spanned from Vero Beach, FL to Key West, FL and his job duties required him to deliver “on demand” packages to clients in the service area. He had to travel to the employer’s warehouses weekly and occasionally had to stay overnight in hotels. For the second half of 2016, Mr. Moody began a new career as a teacher in Jacksonville, FL.

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Section 965 Tax Installment Payments Are Not Guaranteed

The Section 965 transition tax. Taxpayers with international earnings are still grappling with their reporting and payment obligations under the “deemed repatriation” tax after its enactment by the Tax Cuts and Jobs Act of 2017. For a general primer on the Section 965 transition tax, see Freeman Law’s previous articles: The Section 965 Transition Tax and The Section 965 Transition Tax And IRS Audits. Section 965 provides that a taxpayer may make an election to pay its tax liability in installment payments. However, as a recent Chief Counsel Advice noted, a domestic corporation that fails to report its Section 965 tax liability is not entitled to prorate its deficiency under Section 965(h)(4) of the Internal Revenue Code.

Section 965 Tax and Installment Payments, Generally

Generally, Section 965 requires that U.S. shareholders pay a tax on their pro rata share of the untaxed foreign earnings of certain “specified foreign corporations.”[1] That is, a specified foreign corporation’s subpart F income is increased for its last tax year beginning before January 1, 2018.[2] The income is subject to an effective tax rate of 15.5 percent or 8 percent.

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