2020 NATIONAL INCOME TAX WORKBOOK · NATIONAL INCOME TAX WORKBOOK CHAPTER 14: NEW AND EXPIRING LEGISLATION: PART 1 COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020 1

2020 NATIONAL INCOME TAX WORKBOOK

CHAPTER 14: NEW AND EXPIRING LEGISLATION: PART 1

1COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020

After completing this session, participants will be able to do the following:

✔ Advise clients about the tax laws that were enacted or changed late in 2019 and in 2020

✔ Identify individual and business income tax exclusions, deductions, and credits that expire in 2020; and exclusions, deductions, and credits that are expiring in future years

2

LEARNING OBJECTIVES P. 457

COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020

Tax legislation enacted late in 2019 and in 2020 affects a variety of tax provisions.

This chapter addresses

◦ The Further Consolidated Appropriations Act, 2020 (P.L. 116-94)

◦ The Taxpayer Certainty and Disaster Tax Relief Act of 2019

◦ The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act)

◦ Selected Notices, Procedures and other Guidance as issued by IRS or Treasury.

The Chapter is organized by topics and sub-topics.

3

INTRODUCTION P. 457

COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020

Uniform Capitalization

◦ Rev. Proc. 2020-13 provides the exclusive procedures for a taxpayer that qualifies for the section 263A(i) small business taxpayer exemption to revoke its prior election under section 263A(d)(3) and apply the small business taxpayer exemption in the same tax year.

◦ Additionally, it provides the exclusive procedures for a taxpayer that becomes ineligible to use the small business taxpayer exemption and wishes to make an election under section 263A(d)(3) in the same tax year that it no longer qualifies for the exemption.

◦ Cross-reference with Chapter 7, Agricultural and Natural Resource Issues, for more detail.

COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020 4

AGRICULTURAL AND NATURAL RESOURCE P.458

Loss Corporation’s Built-In Gains: Reg – 125710-18, § 382

◦ Proposed regulations regarding the items of income and deduction that are included when calculating built-in gains and losses under I.R.C. § 382. Section 382(h) explains how to determine a loss corporation’s built-in gains and losses as of the date of the ownership change (the change date).

◦ In general, built-in gains recognized during the 5-year period beginning on the change date (the recognition period) allow a loss corporation to increase its section 382 limitation, whereas built-in losses recognized during the recognition period are subject to the loss corporation’s section 382 limitation.

Indebtedness Treated as Stock: T.D. 9897, § 385

◦ Final regulations regarding the treatment of certain indebtedness as stock if it is issued by a corporation to a controlling shareholder in a distribution or in another related-party transaction that achieves an economically similar result.


BUSINESS ENTITIES - C CORPORATIONS P. 458

Post S-Corp Termination Distributions: REG-131071-18, I.R.C. §§ 481, 1371, 1377

◦ Generally, a distribution by a C corporation to its shareholders with respect to their stock ownership is treated as a taxable dividend to the extent of the corporation’s earnings and profits.

◦ During the 1-year post-termination transition period (PTTP), after termination of an S-Corp a distribution of money by the C corporation is tax-free to the extent of the recipients basis in its stock.

◦ Proposed regulations provide rules regarding the definition of an eligible terminated S corporation (ETSC), distributions after the PTTP.


C CORPORATIONS P. 459

Allocation of Liabilities: T.D. 9877, I.R.C. §§ 704, 752

Allocation of Recourse & Non-Recourse Debt: T.D. 9876, I.R.C. § 707

Partners Not Employees: T.D. 9869, I.R.C. § 7701

◦ The final regulations clarify that partners in a partnership that owns a disregarded entity are not employees of the disregarded entity for employment tax purposes and are subject to self-employment tax.

Tax Basis Method: Notice 2019-66, 2019-52 I.R.B. 1509, I.R.C. § 6031

Capital Reporting Requirements: Notice 2020-43, 2020-27 I.R.B. 1, I.R.C. § 6031

Cross Reference: Business Entities Chapter has more discussion.


PARTNERSHIPS P. 459

Calculating UBTI: T.D. 9886, I.R.C. § 512

◦ Final regulations providing guidance on how voluntary employees’ beneficiary associations (VEBAs) and supplemental unemployment benefit trusts (SUBs) that provide employee benefits must calculate unrelated business taxable income (UBTI).

Repeal of UBTI for Qualified Transportation Fringe Benefits: I.R.C. § 512

Group Exemption: Notice 2020-36, 2020-21, I.R.B. 840, I.R.C. § 501

◦ Contains a proposed revenue procedure that sets forth updated procedures under which organizations can request exemption from federal income tax on a group basis for subordinate organizations affiliated with and under the general supervision or control of a central organization.


TAX-EXEMPT ORGANIZATIONS P. 460

Employer Provided Vehicles: T.D. 9893, I.R.C. § 61

◦ The IRS and Treasury issued final regulations regarding special valuation rules for employers and employees to use in determining the amount to include in an employee’s gross income for personal use of an employer-provided vehicle.

◦ Effective February 5, 2020

◦ The final regulations update the fleet-average and vehicle cents-per-mile valuation rules to align the limitations on the maximum vehicle FMVs with the increases made by the TCJA to the I.R.C. § 280 depreciation limitations.

◦ The maximum base FMV amount is $50,400 in 2020.


BUSINESS ISSUES - DEDUCTIONS PP. 461

Optional Standard Mileage Rates: Rev. Proc. 2019-46, 209-49 I.R.B. 1301, I.R.C. §§ 67, 217, 274

◦ Rev. Proc. 2019-46 updates rules for using the optional standard mileage rates to compute the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes to reflect these changes.

◦ The revenue procedure emphasizes that a taxpayer may not use the business standard mileage rate to claim a miscellaneous itemized deduction or to claim a miscellaneous itemized deduction for unreimbursed travel expenses during the suspension period.

◦ The revenue procedure provides that a member of the armed forces may still use the moving standard mileage rate to calculate the deduction for a qualified move.

◦ This revenue procedure also provides rules for substantiating the amount of an employee’s ordinary and necessary expenses for local travel or transportation away from home.


BUSINESS ISSUES - DEDUCTIONS P. 461

Fines & Penalties: REG-1104591-16, I.R.C. §§ 162, 6050X

◦ Proposed reliance regulations issued that describes how taxpayers and governments can meet these requirements to be able to take a deduction for expenses specified to be restitution, remediation, or paid to come into compliance with a law.

◦ Restitution and Remediation

◦Coming Into Compliance with the Law

◦Government Reporting


BUSINESS ISSUES – DEDUCTIONS P. 462

Bonus Depreciation: T.D. 9874, I.R.C. §§ 168, 179

o Final regulations explaining that the acquisition of used property is eligible for bonusdepreciation if it meets certain requirements.

Bonus Depreciation – Qualified Property: REG-106808-19 , I.R.C. § 168

oThe proposed regulations provide rules for the definition of qualified property for purposes of bonus depreciation and add special rules for consolidated groups.



Per Diem Rate Substantiation: Rev. Proc. 2019-48, 2019-51 I.R.B. 1392, I.R.C. § 274◦ Rev. Proc. 2019-48 updates rules for using a per diem rate to substantiate the amount of an employee’s expenses for lodging, meal, and incidental expenses, or for meal and incidental expenses only, that a payer (an employer, its agent, or a third party) reimburses.

◦ It provides that unreimbursed employee travel expenses that are miscellaneous itemized deductions subject to the 2%-of-AGI floor are not allowed for any tax year beginning after December 31, 2017, and before January 1, 2026, and a deduction for entertainment, amusement, or recreation expenses is generally disallowed.

◦ However, I.R.C. § 62(a)(2)(A) allows certain employees to deduct unreimbursed business expenses the employee pays or incurs in performing services under a reimbursement or other expense allowance arrangement with a payer and section 62(a)(1) allows self-employed persons to deduct business expenses paid or incurred.



Entertainment Expenses: REG-100814-19, I.R.C. § 274

◦ Specifically, the proposed regulations address the elimination of the deduction under section 274 for expenditures related to entertainment, amusement, or recreation activities, and provide guidance to determine whether an activity is of a type generally considered to be entertainment.

◦ The proposed regulations also address the limitations on the deduction of food and beverage expenses under section 274(k) (no lavish expenses, and taxpayer must be present) and (n) (the 50% limitation), and the exceptions to those limitations under section 274(e)(2), (3), (4), (7), (8), and (9).

Cross Reference: Agricultural and Natural Resources Chapter discusses this topic.



Qualified Transportation Fringe Benefits: REG-119307-19, I.R.C. § 274◦ The proposed regulations address the elimination of the deduction under section 274 for expenses related to certain transportation and commuting benefits provided by employers to their employees in tax years beginning after December 31, 2017.

◦ QTFs are defined to mean any of the following provided by an employer to an employee:

◦ Transportation in a commuter highway vehicle between the employee’s residence and place of employment

◦ Any transit pass, Qualified parking and Qualified bicycle commuting reimbursement

◦ The proposed regulations clarify three possible exceptions to the deduction disallowance under section 274(e)(2), (e)(7), and (e)(8).

◦ Included in Income

◦ Available to the Public

◦ Adequate Consideration



HRA’s: T.D. 9867, I.R.C. § 105

◦ The final rules also set forth conditions under which certain HRAs and other account-based group health plans will be recognized as limited excepted benefits.

HRA’s: REG-109755-19, I.R.C. § 213

◦ Proposed regulations would treat direct primary care arrangements, health care sharing ministries, and certain government-sponsored health plans as deductible under I.R.C. § 213.

◦ Cross Reference to Business Tax Issues chapter provides more detail.


HEALTH PLANS P. 466

Safe Harbor for Chronic Conditions: Notice 2019-45, 2019-32 I.R.B. 593, I.R.C. § 223

◦ Notice 2019-45 expands the list of preventive care benefits that a high deductible health plan (HDHP) can provide under I.R.C. § 223(c)(2) without a deductible, or with a deductible below the applicable minimum deductible (self-only or family) for an HDHP.

◦ The notice provides that certain specified medical care services received, and items purchased, including prescription drugs for certain chronic conditions, should be classified as preventive care for someone with that chronic condition.

◦ The specified services and items are treated as preventive care only when prescribed to prevent the exacerbation of the chronic condition or the development of a secondary condition.


HEALTH PLANS P. 466

Real Property Defined: REG-117589-18, I.R.C. § 1031

◦ Issued proposed regulations that would add a definition of real property for purposes of a section 1031 like-kind exchange.

◦ Real Property: Inherently Permanent Structures

◦ See list, p. 467

◦ Structural Components

◦ See list, p. 468

◦ Four factors

◦ Unsevered Products of Land

◦ Intangible Assets

◦ Incidental Personal Property


NONRECOGNITION (LIKE-KIND EXCHANGES) P.467

Which items would be considered Real Property for a § 1031 exchange per the proposed regs?

A. A 5-story parking garage

B. The elevators inside the garage

C. Affixed signs to direct traffic within the garage

D. All of the above, if within the same § 1031 transaction


CHAPTER 14 – QUESTION 1

Which items would be considered Real Property for a § 1031 exchange per the proposed regs?

A. A 5-story parking garage

B. The elevators inside the garage

C. Affixed signs to direct traffic within the garage

D. All of the above, if within the same § 1031 transaction

All of the above. The garage is real property. The elevators are a structural component. And the signs are incidental personal property.



Qualified Opportunity Fund Frequently Asked Questions, I.R.C. § 1400Z◦ Investors can defer tax on any prior gains invested in a QOF or QOZ business until the earlier of the date on which the investment is sold or exchanged, or December 31, 2026.

◦ If the investor holds the investment for longer than 5 years, there is a 10% exclusion of the deferred gain. If the investment is held for more than 7 years, the 10% exclusion increases to 15%.

Gross Income Deferral: T.D. 9889, I.R.C. § 1400Z◦ The final regulations provide additional guidance for taxpayers eligible to elect to temporarily defer the inclusion in gross income of certain gains if corresponding amounts are invested in certain equity interests in QOFs or a QOZ business, and guidance on the ability of such taxpayers to exclude from gross income additional gain recognized after holding those equity interests for at least 10 years.

Cross Reference to Business Tax Issues Chapter for further discussion


OPPORTUNITY ZONES P. 469

Gross Income Limitation: REG-118997-19, I.R.C. §§ 24, 152◦ The IRS and Treasury have issued proposed regulations that define a qualifying relative for tax years 2018 through 2025.

◦ The individual must receive more than one-half of his or her support from the taxpayer claiming the individual as a qualifying relative.

◦ The proposed regulations provide that the exemption amount for these other tax purposes is $4,150 for 2018, adjusted for inflation for 2019 through 2025 ($4,300 for 2020).


INDIVIDUAL ISSUES - DEDUCTIONS P. 470

A qualified relative must make less than $_________ in 2020 to meet the gross income test.

A. $4,150

B. $4,300

C. $4,250

D. $4,350



A qualified relative must make less than $_________ in 2020 to meet the gross income test.

A. $4,150

B. $4,300

C. $4,250

D. $4,350

$4,300 is the exemption amount as indexed for inflation for 2020.



State Charitable Deduction: T.D. 9864, I.R.C. §§ 162, 164,170

◦ Final regulations address contributions to a charity in return for a state and local tax credit or deduction. The final regulations retain the rule that a taxpayer generally is not required to reduce its charitable contribution deduction on account of its receipt of state or local tax deductions.

◦ The final regs clarify that a state or local tax credit will reduce the allowable federal contribution deduction by the amount that they exceed 15% of the contribution or FMV of the property.



PMI: Disaster Act § 102, I.R.C. § 163

◦ The Disaster Act extends the treatment of mortgage insurance premiums as qualified residence interest through December 30, 2020.

Medical Expense Floor: Disaster Act § 103, I.R.C. § 213

◦ The Disaster Act extends the 7.5% medical expense deduction floor for tax years beginning before January 1, 2021.

Qualified Tuition Deduction: Disaster Act § 104, I.R.C. § 222

◦ The Disaster Act extends the deduction for qualified tuition and related expenses to December 31, 2020.

Other Provisions: Disaster Act Title I Subtitle B Various Code Provisions



Qualified Principal Residence: Disaster Act § 101, I.R.C. § 108

◦ The Disaster Act extends the income exclusion for discharge of qualified principal residence indebtedness. The exclusion is effective for discharges after December 31, 2017, and before January 1, 2021.

Kiddie Tax: SECURE Act § 50, I.R.C. § 1

◦ The SECURE Act repeals the TCJA provisions that taxed unearned income of children at the trust and estate rates. The repeal is effective for tax years beginning after December 31, 2019, but taxpayers can elect to apply the amendment for tax years beginning in 2018 or 2019 (or both)


INDIVIDUAL ISSUES - EXCLUSIONS P. 471

Cross-Reference to Individual Issues: Part 1

Qualified Disaster Relief: Disaster Act Title II, I.R.C. §§ 38, 72t, 7508A

◦ The Disaster Act extends the term qualified disaster area to include areas in which a major disaster was declared between January 1, 2018, and 60 days after the enactment of the act (December 20, 2019).

◦ It allows penalty-free qualified disaster relief distributions (up to $100,000) from a retirement plan, and it allows the taxpayer to re-contribute certain distributions.

◦ The Disaster Act provides for plan loans.

◦ The act provides an automatic 60-day extension of filing deadlines for certain taxpayers affected by federally declared disasters.


INDIVIDUAL ISSUES - LOSSES P. 471

Casualty Loss Limitation: P.M.T.A. 2019-008, I.R.C. § 165

◦ For tax years 2018 through 2025, I.R.C. § 165(h) (5), as amended by the TCJA, limits personal casualty loss deductions to losses attributable to a federally declared disaster.

◦ The IRS has issued guidance stating that a personal non-federally declared disaster loss that occurred prior to December 31, 2017, but was not sustained until after December 31, 2017, is not deductible.

◦ The personal casualty loss does not have to occur in a disaster area to be deductible, but it must occur in the state receiving the federal disaster declaration.



Reporting on Prior Year Return: T.D. 9878, I.R.C. § 165

◦ An election under section 165(i) to deduct a disaster loss for the preceding year is made either on an original federal income tax return for the preceding year or an amended federal income tax return for the preceding year.

◦ The due date for making the election is 6 months after the due date for filing the taxpayer’s federal income tax return for the disaster year (determined without regard to any extension of time to file).

◦ The election may be revoked on or before the date that is 90 days after the due date for making the election.



Both of these are covered in the IRS Issue Chapter

Virtual Currency

Withholding Estimator


IRS ISSUES PP. 472- 473

IRS issued expanded FAQs to support Notice 2014-21

Hard Fork: Rev. Rul. 2019-24, 2019-44 I.R.B. 1004, I.R.C §§ 61, 1001

◦ A hard fork is unique to distributed ledger technology and occurs when virtual currency on a distributed ledger undergoes a protocol change resulting in a permanent diversion from the legacy or existing distributed ledger.

◦ Following a hard fork, transactions involving the new cryptocurrency are recorded on the new distributed ledger and transactions involving the legacy cryptocurrency continue to be recorded on the legacy distributed ledger.

◦ An airdrop is a means of distributing units of virtual currency to the distributed ledger addresses of multiple taxpayers.

◦ Rev. Rul. 2019-24 considers whether a taxpayer has gross income under I.R.C. § 61 as a result of a hard fork of virtual currency.

◦ Cross Reference to IRS Issues Chapter


VIRTUAL CURRENCY P. 472

Tax Withholding Estimator (TWE): I.R. 2019-139

◦ The IRS has replaced its Withholding Calculator with a Tax Withholding Estimator, which is an expanded online tool. The new Tax Withholding Estimator offers workers, retirees, self-employed individuals, and other taxpayers, a step-by-step tool to determine the amount of income tax they should have withheld from wages and pension payments.

◦ Cross Reference to IRS Issues Chapter


WITHHOLDING ESTIMATOR P. 473

Rental Real Estate: Rev. Proc. 2019-38, 2019-42, I.R.B. 942, I.R.C. § 199A

◦ Rev. Proc. 2019-38 finalizes a safe harbor for treating a rental real estate enterprise as a trade or business for purposes of the I.R.C. § 199A qualified business income (QBI) deduction. The determination to use this safe harbor must be made annually.

◦ Cross Reference to the QBID Chapter


QUALIFIED BUSINESS INCOME DEDUCTION P. 473

Previously Suspended Losses: T.D. 9899, I.R.C. § 199A

◦ Final regulations provide guidance on the treatment of previously suspended losses included in QBI. The regulations also provide guidance to determine the section 199A deduction for taxpayers that hold interests in regulated investment companies, and certain trusts and estates.

◦ The final regulations apply to tax years beginning after August 24, 2020. However, taxpayers may choose to apply the amendments to Treas. Reg. §§ 1.199A-3 and 1.199A-6 to tax years beginning on or before August 24, 2020.



Suspended Losses

◦ Treas. Reg. § 1.199A-3(b)(1)(iv) provides that previously disallowed losses or deductions [including under

sections 465, 469, 704(d), and 1366(d)] allowed in the tax year are generally taken into account for

purposes of computing QBI, except to the extent the losses or deductions were disallowed, suspended,

limited, or carried over from tax years ending before January 1, 2018. These losses are used, for purposes

of section 199A, in order from the oldest to the most recent on a first-in, first-out (FIFO) basis.

◦ The final regulations clarify that this list of loss disallowance and suspension provisions is not exhaustive.

◦ Example 14.1 Partial Loss Disallowance

◦ Example 14.2 Suspended Loss from an SSTB



Trusts or Estates with Separate Shares◦ Under the proposed regulations, a trust described in I.R.C. § 663(c) with substantially separate and independent shares for multiple beneficiaries will be treated as a single trust for purposes of determining whether the taxable income of the trust exceeds the threshold amount.

◦ The final regulations clarify that, in the case of a trust or estate described in section 663(c) with substantially separate and independent shares for multiple beneficiaries, the trust or estate is treated as a single trust or estate not only for purposes of determining whether the taxable income of the trust or estate exceeds the threshold amount but also in determining taxable income, net capital gain, net QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income for each trade or business of the trust or estate, and computing the W-2 wage and UBIA of qualified property limitations.



ABLE Accounts

Contributions

Distributions

Qualified Tuition Plan


RETIREMENT, SAVINGS AND INVESTMENT PP. 475 - 478

Beneficiary Overfunding: REG-128246-18, I.R.C. § 529A

◦ Proposed regulations confirm that the employed designated beneficiary, or the person acting on his or her behalf, is solely responsible for ensuring that the section 529A requirements are met and for maintaining adequate records for that purpose.

◦ The proposed regulations provide that a qualified ABLE program must return to the designated beneficiary any contributions of the designated beneficiary’s compensation in excess of the limit.

◦ Failure to return the excess funds by the due date of the beneficiary's return (including extensions) results in 6% excise tax.


ABLE ACCOUNTS P. 475

Gross Income: SECURE Act § 106, I.R.C. § 219

◦ Under the SECURE Act, for purposes of determining eligibility for IRA contributions, compensation includes any amount that is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study.

Maximum Age Repealed: SECURE Act § 107, I.R.C. § 219

◦ The SECURE Act repeals the maximum age for traditional IRA contributions, effective for tax years beginning after December 31, 2019. The repeal does not change the age for qualified charitable contributions, which can only be made on or after the date the taxpayer attains age 70½.


CONTRIBUTIONS P. 476

Birth or Adoption Expense Distributions: SECURE Act § 113, I.R.C. § 72t

◦ The SECURE Act adds a penalty-free withdrawal from a retirement plan for a qualified birth or adoption distribution made after December 31, 2019.

◦ The distribution to an individual for any birth or adoption cannot exceed $5,000.

◦ A qualified birth or adoption distribution means any distribution from an applicable eligible retirement plan to an individual if made during the 1-year period beginning on the date on which a child of the individual is born or on which the individual finalizes the legal adoption of an eligible adoptee.


RETIREMENT - DISTRIBUTIONS P. 476

Beginning in 2020, taxpayers can withdraw up to $5,000 from their IRA for expenses paid for the birth or adoption of their child without a 10% penalty.

A. True

B. False



Beginning in 2020, taxpayers can withdraw up to $5,000 from their IRA for expenses paid for the birth or adoption of their child without a 10% penalty.

A. True

B. False

True



Hardship Distributions: T. D. 9875, I.R.C. § 401

◦ Final regulations amend the rules for hardship distributions from section 401(k) plans.

◦ adding “primary beneficiary under the plan” as an individual for whom qualifying medical, educational, and funeral expenses may be incurred;

◦ modifying the expenses for damage to a principal residence to provide that for this purpose the limitations in section 165(h)(5) (which require that a personal casualty loss be attributable to a federally declared disaster) do not apply; and

◦ adding a new type of expense to the list, relating to expenses incurred as a result of certain disasters.


RETIREMENT DISTRIBUTIONS P. 476

RMD’s: REG- 132210-18, I.R.C. § 401

◦ Proposed regulation update the tables used to determine required minimum distribution amounts.

RMD Age: SECURE Act § 114, I.R.C. § 401

◦ The SECURE Act increases the required minimum distribution beginning date from 70½ to 72. With some exceptions, the required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains age 72, or the calendar year in which the employee retires.



Designated Beneficiary: SECURE Act § 401, I.R.C. § 401◦ Under the SECURE Act, the account must be distributed to the designated beneficiaries within 10 years of the date of death, regardless of whether the employee (or IRA owner) died before the required beginning date.

◦ An eligible designated beneficiary is:

◦ Surviving spouse

◦ Child of account owner under the age of majority

◦ Beneficiary who is disabled

◦ Beneficiary who is chronically ill with illness expected of be lengthy

◦ Beneficiary who is not more than 10 years younger than the account owner

Cross-Reference to Retirement and Investments Chapter



Qualified Higher-Education Expenses: SECURE Act § 302, I.R.C. § 529

◦ The SECURE Act expands the term qualified higher-education expenses to include expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor.

◦ Higher-education expenses also include principal and interest on any qualified education loan to the designated beneficiary or a sibling of the designated beneficiary, up to a maximum $10,000.


QUALIFIED TUITION PLAN P. 478

Income Inclusion

◦ T.D. 9870, I.R.C. § 451

◦ The TCJA added I.R.C. § 451(c), which generally requires an accrual method taxpayer that receives any advance payment described in section 451(c)(4) during the tax year to include the advance payment in income in the tax year of receipt.

◦ REG-104870-18, I.R.C. § 451

◦ The TCJA amended I.R.C. § 451(b) to provide that, for a taxpayer using an accrual method of accounting, the all-events test with respect to any item of gross income (or portion thereof) is not treated as met any later than when the item (or portion thereof) is included in revenue for financial accounting purposes

◦ REG-104554-18, I.R.C. § 451

◦ The proposed regulations explain the deferral method for a taxpayer with an AFS.


TAX ACCOUNTING PP. 478

Masking W-2’s: T.D. 9861, I.R.C. §§ 6051, 6052◦ To aid employers’ efforts to protect employees from identity theft, these regulations allow employers to voluntarily truncate employees’ social security numbers (SSNs) on copies of Forms W-2, Wage and Tax Statement, that are furnished to employees.

Form 1040-SR◦ For taxpayers 65 and older beginning in 2019 tax year

Electronic Form 1040-X◦ Available for electronic filing

Form 1099-NEC◦ Required to be used beginning with tax year 2020, for non-employee compensation

PTINs: T.D. 9903◦ (PTIN) fee to $21 per application; there is also a $14.95 fee to 3rd –party contract processor.


TAX PRACTICE P. 479

The total cost to renew a PTIN this year is $_______

A. $63.00

B. $21.00

C. $35.95

D. None of the above



The total cost to renew a PTIN this year is $_______

A. $63.00

B. $21.00

C. $35.95

D. None of the above

$35.95. Application fee of $21.00 and the processing fee of $14.95.



Gifts

Itemized Deductions


TRUSTS AND ESTATES P. 479

T.D. 9884, I.R.C. § 2010

◦ Final regulations ensure that a decedent’s estate is not inappropriately taxed on gifts that were sheltered from gift tax by the increased basic exclusion amount when the gifts were made. The final regulations are effective on and after November 26, 2019.

◦ Cross-Reference to Trusts and Estates Chapter


GIFTS P. 479

REG-113295-18, I.R.C. §§ 67, 642

◦ Four items not miscellaneous itemized deductions (See list)

◦ Provides guidance for trusts and estates relative to NOLs and Capital Loss Carryovers under I.R.C. § 642(h)


TRUST & ESTATE - ITEMIZING DEDUCTIONS P. 480

Anticipated Filing Status: REG-132741-17, I.R.C. §§ 3401, 3402

◦ Proposed regulations provide guidance for employers on the amount of federal income tax to withhold from an employee’s wages. The proposed regulations reflect that the TCJA replaced withholding exemptions with withholding allowances.

◦ The proposed regulations clarify that employers using the percentage method of withholding must compute the tax withholding amount based on the entry for the employee’s anticipated filing status or marital status.

◦ To select the MFJ status on Form W-4, the employee must meet four requirements; see list

◦ The proposed regulations define a withholding allowance but otherwise intend to use forms, instructions, and publications to provide computational details. There are seven factors that determine the withholding allowance; see list.


WITHHOLDING AND ESTIMATED TAXES P. 480

Figure 14.1 is based on a list prepared by the staff of the Joint Committee on Taxation. For purposes of compiling this list, the staff of the Joint Committee on Taxation considers a provision to be expiring if, at a statutorily specified date, the provision expires completely or reverts to the law in effect before the present-law version of the provision.

◦ The first column is the Internal Revenue Section for each provision, in numerical order.

◦ The middle column is a brief description of the provision.

◦ The last column is date of the provision’s expiration.


TABLE OF EXPIRATIONS DATES PP. 482 - 485


QUESTIONS ???

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2020 NATIONAL INCOME TAX WORKBOOK · NATIONAL INCOME TAX WORKBOOK CHAPTER 14: NEW AND EXPIRING LEGISLATION: PART 1 COPYRIGHT LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION 2020 1