SCOTUS Considers Whether Shredding Receipts Constitutes Obstruction. Carlo Marinello operated his courier service, carrying parcels between the United States and Canada, on an all-cash basis. He also paid personal expenses such as his mortgage in cash, and he made a habit of shredding receipts and other records. He pleaded guilty to misdemeanor charges of failing to file tax returns for five years, but appealed when the government charged and convicted him of a felony of obstructing tax administration by destroying his records. Marinello’s lawyers argued that since he had no contact with tax examiners and no knowledge of any investigation, he committed no crime. The government took a broader view of what constitutes obstruction under the tax code, and prevailed in the trial court and at the 2nd U.S. Circuit Court of Appeals. The Supreme Court heard arguments in December and is expected to rule by mid-2018. Marinello v. United States, Susan B. Morse/SCOTUSblog, Nov. 28, 2017.
State Payments To Disabled Residents Don’t Require 1099 Forms. A program funded and operated by a state that provides cash to families of developmentally disabled residents does not need to provide tax reporting statements to the recipients or to the government, the Internal Revenue Service ruled. In a private ruling issued to an unidentified state agency, the IRS concluded that such payments fall under a longstanding “general welfare” exception and are not considered taxable income to the recipient. As a result, the annual statements usually made on the Form 1099 series are not required. In this situation, the state payments were to help cover the cost of at-home care and support to avoid requiring services in institutional settings. LTR 201743010.
IRS Approves Intrafamily Transfer Of Farm Interest. A family that took advantage of special valuation rules to save estate taxes on their farm property does not incur additional tax if a grandson sells his interest to his mother, the decedent’s daughter, the Internal Revenue Service ruled. The family, which was not identified in the private letter ruling released by the agency, valued the farm under the special rules of Internal Revenue Code Sec. 2032A. The section allows the taxable value of qualifying property to be reduced up to an inflation-adjusted amount (which is $1.14 million in 2018). But disqualifying dispositions within a 10-year period, or failure to continue using the property for qualifying business or farm purposes, can trigger recapture of the tax benefits. In this case, the grandson wanted to sell his remainder interest in the property to his mother, who held a life estate. Because they are both qualified recipients under Sec. 2032A, the IRS ruled, no recapture is triggered by the transaction. LTR 201743013.