Potpourri of Recent IRS Information Letters

The IRS Chief Counsel’s Office has issued several interesting Information Letters recently. Here’s a rundown of some of the most important ones, including one where the IRS tells the sitting Chair of the Senate Ag Committee to go read the Farmers’ Tax Guide.

In INFO 2009-0035 (Mar. 19, 2009), IRS said that the Code does not give IRS the authority to waive the recapture provision of the first-time homebuyer tax credit for taxpayers who purchased homes in 2008. Legislation enacted in 2009 expands the credit and waives the rule requiring repayment of the credit if the taxpayer uses the home as their principal residence for at least three years. IRS noted that the statute does not give them the authority to administratively expand the scope of the credit. Instead, Congressional action would be required.
In INFO 2009-0032 (Mar. 12, 2009), IRS said that a taxpayer is not eligible to claim the first-time homebuyer tax credit for the 2008 purchase of a home that was financed with tax-exempt mortgage revenue bonds. IRS noted that had the home been purchased in 2009, legislation expanding the credit allows the use of the credit for homes purchased with tax-exempt mortgage revenue bonds. IRS noted that the Code does not grant it the authority to administratively expand the scope of the credit.
In INFO 2009-0028 (Mar. 4, 2009), IRS noted that a taxpayer cannot claim the first-time homebuyer tax credit for a home purchased before April 9, 2008. The 2008 legislation creating the credit limits the credit to homes purchased on or after April 9, 2009.
In INFO 2009-0024 (Feb. 26, 2009), IRS noted that an income deferral election for crop insurance proceeds is available for payments that compensate a cash-basis taxpayer for damage or destruction to crops (I.R.C. Sec. 451(d)). However, deferral is not available for any revenue assurance component because such payments are not compensating the taxpayer for destruction or damage to the taxpayer's crops. Relatedly, INFO 2009-0048 (Feb. 4, 2009) was a response to a request of Senator Harkin (D-IA) for information about the tax treatment of crop insurance payments. IRS responded by telling the Senator to go read Chapter 3 of Pub. 225, the Farmer's Tax Guide, and enclosed the pertinent page for the Senator (no mention was made whether the IRS highlighted or underlined the particularly pertinent portions for the Senator). In INFO 2009-0047 (Jan. 29, 2009), IRS told Congressman Steve King (R-IA) the same thing.
In INFO 2009-0059 (Feb. 17, 2009), IRS said that taxpayers can make or revoke an expense method depreciation (Sec. 179) election on an amended return for a taxable year beginning after 2007 and before 2011 without the need for Treasury Regulations to be issued. IRS noted that taxpayers can rely on the guidance set forth in Rev. Proc. 2008-54, Section 7 for making and revoking such elections.
In INFO 2009-0060 (Oct. 21, 2008), IRS determined that I.R.C. Sec. 1031 (dealing with like-kind exchanges) contains a holding period requirement under which both the relinquished and replacement property must be held either for productive use in a trade or business or for investment. Accordingly, IRS said that an exchange of property is not eligible for deferral of gain or loss under I.R.C. Sec. 1031 if the replacement property is determined to be held by the taxpayer for immediate sale, disposition, or for some other non-qualifying reason. In addition, IRS noted that the determination of whether the taxpayer has acquired the replacement property for investment purposes is determined by examining the facts and circumstances at the time the property is acquired.