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Per-diem rates issued for 2016–2017 travel

The IRS issued its annual update (Notice 2016-58) of per-diem rates for substantiating certain business expenses taxpayers incur when traveling away from home on or after Oct. 1, 2016.

The per-diem rate for the incidental-expenses-only deduction remains unchanged at $5 per day for any locality of travel. The special meals and incidental expenses rates for taxpayers in the transportation industry are $63 for localities of travel in the continental United States and $68 for those outside the continental United States. For purposes of the high-low substantiation method, the per-diem rates are $282 for travel to any high-cost locality and $189 for travel to any other locality within the continental United States. The amount of these rates that is treated as paid for meals for purposes of Sec. 274(n) is $68 for travel to a high-cost locality and $57 for travel to any other locality within the continental United States. The notice also provides a list of high-cost localities with a per-diem rate of $236 or more for all or part of the calendar year.

Special rule for QTIP elections is modified for spousal portability

In Rev. Proc. 2016-49, the IRS modified an earlier procedure to address the interaction of rules for a qualified terminable interest property (QTIP) election with those of the deceased spousal unused exclusion (DSUE), or "portability," election available for decedents dying in 2011 and after. Because a QTIP election may have adverse estate, gift, or generation-skipping transfer tax consequences for a surviving spouse, Rev. Proc. 2001-38 provided relief from "unnecessary" QTIP elections by treating them as null and void. QTIP elections are considered unnecessary where the value of the gross estate of the spouse making the election, before allowance of a marital deduction, is less than the applicable exclusion amount under Sec. 2010(c), or in certain circumstances where both a credit shelter trust election and QTIP election are made.

The earlier revenue procedure assumed that executors would never intentionally make an unnecessary QTIP election. However, with the DSUE, a QTIP election, while unnecessary to reduce a decedent's estate tax liability, could reduce the use of his or her exclusion amount and thus increase the DSUE amount available to the surviving spouse. Therefore, under Rev. Proc. 2016-49, the IRS will not treat as void QTIP elections where the executor also elected portability. However, under scope limitations and procedures specified in the revenue procedure, a taxpayer can elect to have an unnecessary QTIP election treated as void.

IRS designates private contractors to collect tax debts

In News Release IR-2016-125, the IRS identified four companies that will collect "outstanding inactive tax receivables" for the government starting next spring. They are CBE Group, of Cedar Falls, Iowa; Conserve, of Fairport, N.Y.; Performant, of Livermore, Calif.; and Pioneer, of Horseheads, N.Y. The Service will notify taxpayers and their representatives by letter when it transfers accounts to one of the companies. Private collection was authorized last year by the Fixing America's Surface Transportation Act, P.L. 114-94, for certain tax debts (1) that have been removed from the IRS's active inventory due to a lack of resources or an inability to find the taxpayer; (2) for which more than one-third of the applicable limitation period has passed and no IRS employee has been assigned to collect the debt; or (3) that have been assigned for collection but more than 365 days have passed without interaction with the taxpayer for collection purposes. The companies are permitted to identify themselves as IRS contractors collecting taxes.

IRS will not follow Giant Eagle's recognition of unredeemed retail discounts

In Action on Decision 2016-003, the IRS announced its nonacquiescence to the Third Circuit's holding in Giant Eagle, 822 F.3d 666 (3d Cir. 2016), rev'g T.C. Memo. 2014-146. The Third Circuit held that Giant Eagle Corp., an accrual-basis retailer, could currently deduct under the all-events test its estimated liability for customers' earned but unredeemed gasoline discount credits. See "Tax Matters: Deduction Allowed for Unredeemed 'Fuelperks!' " JofA, Oct. 2016.

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