US Tax Court Holds That Current-Year PFIC Gains are Included in Gross Income; Cannot be Offset by PFIC Losses: In Toso v. Commissioner of Internal Revenue, 151 T.C. No. 4, issued today, the US Tax Court addressed whether certain gains on the sales of stock of a passive foreign investment company (PFIC) are counted as gross income, and whether any deficiency should be reduced by offsetting PFIC gains with PFIC losses in applying section 1291. The court held that, under the express terms of section 1291(a)(1)(B), only current year PFIC gains are included in a taxpayer’s gross income and that non-current-year PFIC gains (gains allocated to other years in the taxpayer’s holding period of stock in the PFIC) are not included in gross income. It further held that taxpayers are not entitled to offset gains from sales of stock in PFICs with losses from sales of other PFICs because the use of the singular “any gain recognized on such disposition” indicates that section 1291 applies to each disposition of stock in a PFIC separately, rather than to an annual aggregation of sales of multiple stocks.
TIGTA Audit Report Finds IRS Can More Effectively Address Taxpayer Noncompliance: Today, the Treasury Inspector General for Tax Administration (TIGTA) released its 2018 audit report regarding the effectiveness of the IRS’s use of data and information received from state agencies to increase tax compliance. TIGTA found that the IRS can more effectively address filing noncompliance and underreporting by better using the State Audit Report Program and recommended expanding the program to other state agencies and coordination between the Office of Privacy, Governmental Liaison, and Disclosure and the Small Business/Self-Employed Division to ensure that all Federal/State agreements are accounted for in the IRS’s agreement database.
IRS’s Offshore Involuntary Compliance Program Ending September 28: The IRS today issued a reminder that taxpayers have until September 28 to apply for the Offshore Voluntary Disclosure Program. The program enables US taxpayers to voluntarily resolve past non-compliance issues related to unreported foreign financial assets and failure to file foreign information returns.