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PTIN fee to go down

In proposed regulations issued in April (REG-117138-17), the IRS stated the government's user fee for obtaining or renewing a preparer tax identification number (PTIN) will be reduced by $12 to $21 once the fee, currently suspended, is reinstated. A $14.95 third-party processing fee will also apply, for a total payment of $35.95. The fee has not been charged since it was barred by injunction of a court that held that the IRS was not authorized to charge it (Steele, 260 F. Supp. 3d 52 (D.D.C. 2017)). The D.C. Circuit reversed that holding but remanded the case for the district court to determine whether the fee unreasonably exceeded the IRS's costs (Montrois, 916 F.3d 1056 (D.C. Cir. 2019)).

COD case holding affirmed

The Tenth Circuit affirmed the Tax Court's decision that a couple were liable for tax on cancellation-of-debt (COD) income because the inclusion in their assets of an amount held in their son's savings account caused them not to be insolvent under Sec. 108(a)(1)(B) (Hamilton, No. 19-9000 (10th Cir. 4/7/20), aff'g T.C. Memo. 2018-62; for prior coverage, see "Tax Matters: Taxpayers Denied Insolvency Exclusion of COD Income," JofA, Sept. 2018). Loans the taxpayer husband had obtained to finance the son's education were discharged in 2011. The same year, the couple transferred $323,000 to their son's bank account to which the wife had access, because of the husband's "erratic spending behavior." Both courts agreed with the IRS's position that although the son was the account's sole owner, the funds it held were properly included in the couple's assets under Sec. 108.

Payments for faulty foundations are excludable

In Announcement 2020-5, the IRS stated that payments to certain Connecticut homeowners for defective concrete foundations may not be includible in gross income. A program provided financial assistance to the homeowners to repair concrete foundations deteriorating due to pyrrhotite, a mineral that oxidizes in the presence of water and oxygen and that leads to the formation of "expansive" minerals. If a Connecticut homeowner has not claimed a federal income tax deduction for amounts paid to repair damage to a principal residence under the safe harbors in Rev. Proc. 2017-60 and Rev. Proc. 2018-14 or otherwise, or to the extent such a deduction did not result in a federal income tax benefit, then payments from the Connecticut Foundation Solutions Indemnity Co. Inc. (1) to contractors on behalf of the homeowner or (2) reimbursements paid to the homeowner will not be treated as includible in gross income of the homeowner in the year the payment or reimbursement is made. In addition, reimbursed repair costs cannot be deducted or included in the basis of a home.

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