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IRS Insights Archive

IRS InsightsIRS 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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September 2014

  • IRS Memorandum Provides Implementation Guidance for Phase 2 of the AJAC Project
    - On July 2, 2014, the IRS issued a Memorandum for Appeals Employees, AP-08-0714-0004, which discusses the implementation of Phase 2 of the Appeals Judicial Approach and Culture (“AJAC”) Project (“Phase 2 Memo”). The changes outlined in Phase 2 of AJAC provide guidance for employees trying to resolve various Examination cases worked in Appeals. The guidance in the Phase 2 Memo is generally effective for all new Appeals case receipts on or after September 2, 2014, and will be incorporated into the IRM by September 2, 2016.
  • IRS Releases Final Regulations for Material Advisor Penalty for Failure to Furnish Information Regarding Reportable Transactions
    - On July 31, 2014, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued final regulations (T.D. 9686) relating to the assessment of penalties under Internal Revenue Code (“IRC” or “Code”) § 6707 against material advisors who fail to timely file a return required under IRC § 6111 to disclose a reportable transaction or who file a false or incomplete return (“Final Regulations”). The Final Regulations affect material advisors responsible for disclosing reportable transactions and are effective as of July 31, 2014.
  • SB/SE Issues Memo Outlining Changes to the Limitations Period for Cases Going to and Coming from IRS Appeals
    - On July 9, 2014, the IRS Small Business/Self-Employed division (“SB/SE”) issued interim guidance (SBSE-04-0714-0024) on changes to the required number of days that must remain on the assessment statute of limitations for cases being forwarded to and being returned from the IRS Office of Appeals. The guidance is effective September 2, 2014.
  • IRS Issues “Rules of Engagement” for International Business Compliance and Transfer Pricing Practice Employees
    - The IRS recently released a memorandum issued to International Business Compliance (“IBC”) employees and Transfer Pricing Operations/Practice (“TPO” or “TPP”) employees, providing general guidelines and rules of engagement for IBC and TPP (“Memo”). The Memo is jointly authored by the Director of IBC and the Director of TPO (“Directors”) and is currently in effect for cases having potential transfer pricing issues.
  • IRS Issues Directive with Respect to Insurance Company Guaranteed Minimum Benefits Hedges on Variable Annuity Contracts
    - On July 17, 2014, the IRS Large Business and International division (“LB&I”) issued a Directive (LB&l-04-0514-0050) which states that examiners are not to challenge the eligibility of an insurance company’s guaranteed minimum benefit hedge (“Eligible Hedges”) to qualify as hedging transactions under Treas. Reg. §1.1221-2(b). In addition, the Directive provides that LB&I examiners should not challenge an insurance company’s (A) mark-to-market (“MTM”) values of Eligible Hedges if they conform to the MTM values reported in the company’s Annual Statement; and (B) should not challenge the method of accounting described in this Directive for income, deductions, gains, and losses relating to Eligible Hedges for variable annuity.
  • IRS Releases Details on its Appeals Teleconferencing Program for IRS Campus Appeals
    - The IRS is offering taxpayers the opportunity to have virtual face-to-face appeals conferences with IRS Campus Appeals at designated sites through the IRS’s Virtual Service Delivery (“VSD”) program. IRS Campus Appeals typically hear cases involving examination adjustments determined by IRS Campus Compliance units, cases involving the denial of a taxpayer’s request for penalty abatement, collection due process cases and other matters.

July 2014
District Court Concludes that Attorney-Client/Tax Practitioner Privileges and Work Product Doctrine Did Not Protect Tax Memorandum from Disclosure in Summons Enforcement Case

May 2014
IRS Provides for Automatic Determination Under Treas. Reg. § 1.1502-75(b) to Treat a Subsidiary that Failed to File a Form 1122 as Joining in the Making of a Consolidated Return by the Affiliated Group

March 2014
Ninth Circuit Affirms in Part and Reverses in Part District Court Decision, Holding that IRS Timely Assessed Tax on Lower-Tier Partnership for Liability Attributable to Partnership Flow-Through Items of Upper-Tier Partnership where Extension Agreements Referred to Upper-Tier Partnership Only

January 2014
U.S. Supreme Court Holds Valuation Misstatement Penalty May Apply When Underlying Deduction or Credit is Disallowed for Reasons Not Specifically Attributable to a Valuation Overstatement

November 2013
Tax Controversy Updates: Large Business & International Directive on New Policy for Information Document Requests and Updated Enforcement Procedures

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