Christopher Rizek Comments on More Qualified Improvement Property Fix Options

The IRS and Treasury could issue subregulatory guidance such as a safe harbor or directive to address the Tax Cuts and Jobs Act's qualified improvement property drafting glitch, according to practitioners.

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If All Else Fails

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Christopher S. Rizek of Caplin & Drysdale, Chtd. said that the civil penalty and ethical standards applicable to taxpayers, return preparers, and practitioners are the same across the board. Here, the relevant rules would be the substantial authority rules under reg. section 1.6662-4(d)(3) and the reasonable basis rules under reg. section 1.6662-3(b)(3), he said.

Taxpayers may avoid the section 6662 accuracy penalty if there is substantial authority for the position or if there is reasonable basis for the adequately disclosed position. The same rules apply to tax return preparers and the section 6694 return preparer penalty.

Rizek noted that even if the committee report doesn't provide substantial authority for the position that QIP is eligible for bonus depreciation in light of the statutory language, there is a hook in the penalty regulations to argue reasonable basis with a robust disclosure to avoid penalties for the taxpayer, the return preparer, and the tax practitioner.

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Excerpt taken from the article “Practitioners See More Qualified Improvement Property Fix Options” by Nathan J. Richman for Tax Notes.