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Huffs had no occasional profits from LINE
the activity. ITEMS
But they did pursue the activity in a
businesslike manner, the court said. De-
spite an overly rosy outlook initially, they
made changes toward profitability. They For these full stories plus the latest tax news, visit
may have started with no expertise, but journalofaccountancy.com and thetaxadviser.com.
they developed it through deep research
and the use of a knowledgeable adviser. IRS offers further K-2/K-3 relief
Although their own time devoted to the The new-for-2021 schedules for passthroughs
donkey breeding may have been limited, with items of international tax relevance have
they engaged experts and a competent vexed many practitioners.
caretaker. And Huff clearly was success-
ful in other activities.
As for the sixth factor, a history of
income or losses with respect to the IRS identifies paused taxpayer notices
activity, the court noted that under Regs. Certain letters advising of unfiled returns and
Sec. 1.183-2(b)(6), a series of losses will unpaid taxes are suspended while the IRS works
not necessarily be held against a taxpayer through its backlog of unprocessed returns.
if the activity is in its startup stage. For
the years at issue, in the court’s view,
the donkey-breeding activity was still in
its startup stage because it had been in Tax pros share IRS service challenge
operation for less than five years. Thus, stories, solutions
it determined that despite Ecotone’s Representatives of organizations making up the
not having turned a profit in any year, Tax Professionals United for Taxpayer Relief
the losses did not indicate a lack of a Coalition, which includes the AICPA, provide
profit motive. background in an online forum for the coalition’s
Regarding the eighth factor, while taxpayer relief recommendations to the IRS.
the Huffs had more than ample other
income, the court also considered Huff’s
stated intention of establishing a busi-
ness for his daughter to run. As Huff IRS backs away from facial recognition
had testified, if he had simply intended Amid criticism, the Service scraps its plans for a
to provide for her financially, “there were third-party company to authenticate taxpayers’
TOP: IMAGE BY YURIY ALTUKHOV/ISTOCK; BOTTOM: IMAGE BY VLAD RACHUK/ISTOCK
other, significantly easier ways to do it.” identities with a “selfie” photo to create and log
Along those lines, in determining that in to online services.
the ninth factor, elements of personal
pleasure or recreation, favored the Huffs,
the court also accepted Huff’s testimony
he took “zero personal pleasure” from ‘Quick’ carryback tax refunds took
his donkeys. “These are not pets,” the nearly double the 90-day deadline
court quoted him as saying, also that Refunds mostly from loss carrybacks under
they were “quite ugly” and “look like a special pandemic relief provisions were required
‘gigantic hairball.’ ” by law to be paid within 90 days, but the IRS’s
■ Huff, T.C. Memo. 2021-140 average processing time at one point in 2021
was 165 days, a study by the U.S. Government
— Paul Bonner is a JofA news writer. Accountability Office found.

To comment on Tax Matters or to suggest an
idea for an item, contact Alistair M. Nevius
at Alistair.Nevius@aicpa-cima.com. ■

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