Line items


IRA distribution to pay spousal support is taxable

The Offshore Voluntary Disclosure Program (OVDP) is set to end on Sept. 28, 2018, the IRS announced (News Release IR-2018-52). Since the program was launched in its original version in 2009, more than 56,000 taxpayers have participated, paying $11.1 billion in back taxes, penalties, and interest, the IRS said. However, the number of taxpayers using the program has declined from a peak of 18,000 coming forward in 2011 to only 600 in 2017. The current program began in 2014. The IRS said it will continue to seek taxpayers who fail to disclose foreign accounts, through taxpayer education, criminal prosecution, civil examinations, and whistleblowers. Taxpayers who were unaware of their filing obligations can continue to use the Streamlined Filing Compliance Procedures, although the IRS said it may also end that program.
 

Longer carried interest holding period includes S corporations

Like partnerships, S corporations are subject to the new extended three-year holding period applicable to carried interests, the IRS announced in Notice 2018-18, adding that it will issue regulations soon.

Carried interests (called "applicable interests" in Sec. 1061) are ownership interests in a partnership that share in the partnership's net profits. They are defined in Sec. 1061(c)(1) as partnership interests transferred or carried by an individual in connection with the performance of substantial services by the taxpayer or a related person for an applicable trade or business. Proceeds from that individual's partnership interest are often taxed as capital gain rather than ordinary income.

P.L. 115-97, known as the Tax Cuts and Jobs Act, extended the holding period with respect to certain carried interests (applicable partnership interests) to three years to be eligible for capital gain treatment. Under existing Sec. 1061(c)(4)(A), an "applicable partnership interest" does not include any interest in a partnership that is directly or indirectly held by a corporation. However, in the notice, the IRS stated that regulations will provide that the provision's use of the term "corporation" does not include an S corporation. The regulations, when finalized, will be effective for tax years beginning after Dec. 31, 2017 — the date the three-year rule took effect.


Coinbase notifies customers of IRS summons compliance

Virtual currency exchange Coinbase on Feb. 23 notified about 13,000 customers that it would provide the IRS information about their accounts within the next 21 days in response to the Service's "John Doe" summons, according to Coinbase's website (support.coinbase.com). The information includes name, taxpayer identification number, birthdate, address, and account transaction records for 2013—2015 — less information and on fewer customers than the IRS originally sought, due to a federal district court ruling in December (see "Tax Matters: Court Grants IRS Summons of Coinbase Records," JofA, March 2018). Coinbase also noted that as a result of the litigation, the periods of limitation under Secs. 6501 (civil) and 6531 (criminal) were suspended from June 8, 2017, until final resolution of its response to the summons, which could affect whether customers' tax years remain open for assessment.

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