IRS Insights, published by the Deloitte Tax LLP Tax Controversy Services group, provides a compact, reader-friendly perspective on the latest practices and procedures coming out of the Internal Revenue Service (IRS), as well as the potential impact of changes on taxpayers.

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May 2008
Release of Deficit Restoration Obligation is Partnership Item

• Release of Deficit Restoration Obligation is Partnership Item – In a recent decision, the Court of Federal Claims decided held that the release of the obligation to restore a partner’s negative capital account was a partnership item in order to determine whether the partner was barred from filing a refund suit pursuant to I.R.C. § 7422(h).
• Common-law Mailbox Rule not Preempted by Section 7502 – The U.S. Court of Appeals for the Third Circuit recently determined whether I.R.C. § 7502, which treats documents as timely filed when postmarked prior to the due date, preempts the common-law mailbox rule, which presumes physical delivery of a document when properly mailed.
• Tax Controversy Updates: Supreme Court Denies Refunds without Timely Claim – The U.S. Supreme Court in a recent unanimous decision held that a taxpayer cannot seek a refund without filing a timely claim for refund even if the government collected the taxes pursuant to a law that was found to be unconstitutional.
• Tax Controversy Updates: Audits of Large Corporations Decrease – A recent study issued by the Transactional Records Access Clearinghouse found that the IRS’ audit rate of companies with $250 million or more in assets dropped to 26 percent in fiscal 2007 from 34 percent in fiscal 2006. The report called the development “a historic collapse in audits.”
• Recent Guidance: IRS Provides Supplemental Guidance on Preparer Penalty – On April 16th the IRS issued Notice 2008-46 to provide supplemental guidance to prior guidance issued under Notice 2008-13 regarding the implementation of tax return preparer penalty under section 6694.
• Recent Guidance: IRS Provides Guidance on Determining if Reasonable Cause Exists to Avoid Understatement Penalty – In an email dated April 3, 2006, which was recently released to the public pursuant to a court order, the IRS provided guidance on determining whether reasonable cause exists to avoid the understatement penalty attributable to tax shelter items under Treas. Reg. § 1.6664-4(f).
• Recent Guidance: IRS Provides Guidance on Assessment Period for Reportable Transaction Penalty – In a recently released email dated January 18, 2006, the IRS discussed the statute of limitations period assessing penalties under § 6707A for failing to disclose a reportable transaction.

March 2008
Penalty Upheld for Failing to Deposit Taxes Electronically

January 2008
Overstatement of Basis is Omission of Gross Income

November 2007
IRS Memoranda Protected by Work Product Privilege

September 2007
District Court Denies IRS Summons Enforcement for Tax Accrual Workpapers

July 2007
Basis Overstatement Is Not “Omission of Gross Income”