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The IRS has issued Revenue Procedure 2026-25, offering welcome relief to individuals who contribute to “Trump accounts,” the new tax-favored savings vehicles for minors created under Section 530A of the Internal Revenue Code by the One, Big, Beautiful Bill Act. The guidance addresses an open question that had created uncertainty for millions of donors: whether contributions to these accounts must be reported on a federal gift tax return.

Trump accounts are a form of traditional IRA established for the benefit of an eligible individual under age 18 at the time of the initial account election. During the “growth period” (before the beneficiary turns 18), the account is subject to significant distribution restrictions, and contributions from individuals are generally capped at $5,000 annually.

Because the beneficiary cannot freely access funds during the growth period, questions arose as to whether contributions should be treated as gifts of a “future interest” in property. Under longstanding gift tax rules, future-interest gifts do not qualify for the annual per-donee gift tax exclusion and must be reported on Form 709, regardless of amount. With nearly six million Trump account elections already on file as of June 2026, treating contributions as future interests could have required several million new gift tax filings annually, a substantial compliance burden for donors and a significant administrative strain on the IRS, given that the agency currently processes only about 300,000 gift tax returns per year.

The Safe Harbor

Rev. Proc. 2026-25 resolves this issue by creating a safe harbor. If a taxpayer meets all of the following conditions for a given calendar year, contributions to Trump accounts will be treated as completed gifts that are not future interests, qualifying for the annual exclusion and relieving the donor of any obligation to file a gift tax return for those contributions:

1. The taxpayer is an individual;
2. The only taxable gifts made during the year are cash contributions to one or more Trump accounts, made before the beneficiary turns 18;
3. Total gifts to each beneficiary (including Trump account contributions) do not exceed the annual exclusion amount ($19,000 for 2026);
4. The contributions do not generate gift or GST tax liability after applying the donor’s remaining lifetime exclusion or GST exemption; and
5. No gift tax return is otherwise required or filed for that year for any other reason (e.g., portability elections or GST allocations).

If any requirement is not met, the safe harbor does not apply, and the donor must file a gift tax return reporting all gifts for the year, including the Trump account contributions as future-interest gifts.

For the vast majority of donors, this guidance eliminates an unnecessary filing burden. However, clients making larger gifts, multiple Trump account contributions to the same beneficiary, or gifts that otherwise trigger a filing obligation should be advised that the safe harbor may not apply, and careful tracking of cumulative gifts per beneficiary remains essential. For more information about this update, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page.

In Private Letter Ruling 202625012, released June 18, 2026, the IRS addressed the application of the private foundation self-dealing rules under Internal Revenue Code § 4941 to a family-owned corporation, related revocable trusts, and a private foundation that was a potential charitable beneficiary. The ruling involved several related individuals who owned a majority interest in a closely held corporation. 

Each individual had established a revocable trust that would become irrevocable at death. The trusts authorized trustees to direct a portion of trust assets, including corporate stock, to charitable organizations, including a private foundation, through an irrevocable post-death designation. The corporation also held options allowing it to purchase stock from the trusts or estates following the death of a shareholder. The purchase price was required to equal fair market value as determined by an independent appraisal and could be paid in cash, a promissory note, or a combination of both.

The principal issue was whether the corporation’s exercise of the option and purchase of stock that might ultimately pass to the private foundation would constitute an act of self-dealing. Because the corporation, the trusts, and the foundation were all treated as disqualified persons under § 4941, the transaction could have triggered significant excise taxes absent an exception.

The IRS concluded that once a trustee makes an irrevocable determination directing charitable assets to the foundation, the estate administration exception under Treasury Regulation § 53.4941(d)-1(b)(3) can apply, provided the regulatory requirements are satisfied. As a result, the corporation’s purchase of stock from the trust at fair market value during the applicable administration period would not constitute indirect self-dealing. The ruling further provides that if part of the consideration consists of a promissory note, the foundation’s receipt and holding of that note will not be treated as a prohibited extension of credit, and future payments of principal and interest under the note likewise will not constitute self-dealing.

The IRS also ruled that, before a trustee makes the irrevocable charitable designation, sales of stock by the estate or revocable trust to family members, related trusts, or the corporation for cash generally will not constitute direct or indirect self-dealing. According to the IRS, the foundation does not possess a sufficient interest or expectancy in the stock before the charitable designation is made because the trustee retains discretion over whether the foundation will receive any portion of the charitable assets.

Although private letter rulings apply only to the requesting taxpayer, PLR 202625012 provides useful guidance for estate planners and owners of closely held businesses. The ruling confirms that carefully structured redemption arrangements may be implemented without violating the private foundation self-dealing rules, particularly when transactions occur during estate administration. For more information about this update, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page.

The IRS has announced its intent to issue proposed regulations and transitional guidance on qualified opportunity zones (QOZs) as revised by the One, Big, Beautiful Bill Act (OBBBA), the Republicans’ 2025 tax and spending law. Notice 2026-40 provides important guidance for fund sponsors and investors navigating the shift to OBBBA’s new designation system.

Under prior law, no more than 25% of a state’s low-income community census tracts could be designated as QOZs, with designations running through 2028 (2027 for Puerto Rico). OBBBA replaces this one-time designation with a recurring process, raising the question of whether previously designated tracts would count against a state’s 25% cap going forward.

Previously designated QOZs will not reduce the number of census tracts a state’s chief executive may nominate for the designation period beginning January 1, 2027. Each designation period is evaluated independently. For zones certified during 2026, the designation period runs January 1, 2027 through December 31, 2036, a 10-year window starting on the “applicable start date” (the January 1 following certification).

The notice also clarifies gain deferral mechanics. Gains realized on or before December 31, 2026, and invested in a qualified opportunity fund (QOF) by that date remain governed by prior rules, generally requiring recognition by the earlier of an inclusion event or December 31, 2026. Taxpayers still holding a qualifying investment on that date must recognize “deemed included gain,” but their original deferral election remains in effect, preserving eligibility for a future basis step-up.

For gains invested in a QOF on or after January 1, 2027, the OBBBA’s new five-year inclusion timeline and revised basis adjustments apply. Inclusion event gain, defined as gain triggered by an event other than the original sale, can still qualify for deferral if reinvested within 180 days.

A key transitional issue involves tangible property acquired by QOFs and QOZBs after 2026 for use in zones designated under prior law. Because such “previously designated” zones lack an OBBBA “applicable start date,” such property generally cannot qualify as qualified opportunity zone business property unless it falls within one of two exceptions. Those exceptions consist of: (1) property acquired under a pre-2027 written working capital plan meeting existing safe harbor requirements, or (2) property acquired as an ordinary-course replacement of existing business property, rather than a business expansion.

Notice 2026-40 offers welcome certainty for the 2027 designation cycle and a roadmap for funds managing pre-OBBBA investments through the transition. Sponsors and investors should review existing working capital plans and acquisition timelines now to confirm they fit within the notice’s safe harbors before year-end. For more information about this update, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page.

A recent Tax Court decision underscores that even a thriving, mission-driven business cannot outrun basic tax compliance. In Branch v. Commissioner, the court sustained the bulk of a multi-million-dollar deficiency and significant additions to tax against the owner of a Louisiana home care company who failed to file returns for three straight years.

Colette Branch has owned A-1 Absolute Best Care, LLC since 1998, caring for roughly 100 adults with intellectual and physical disabilities in the New Orleans area. A-1’s gross receipts exceeded $6.5 million annually, almost entirely from Medicaid. Despite this, Branch did not file individual returns for 2015–2017. The IRS prepared substitute returns and assessed deficiencies exceeding $8.3 million plus additions to tax topping $2 million. Branch petitioned the Tax Court, arguing the IRS failed to account for offsetting business expenses and itemized deductions.

Branch sought hundreds of thousands in additional Schedule C deductions for rent, utilities, contractors, and miscellaneous expenses. Citing Cohan v. Commissioner, the court reaffirmed it may estimate deductions a taxpayer cannot fully substantiate, but only where there is “some basis on which an estimate may be made.”

The court allowed full deductions for a Houston apartment Branch credibly testified was kept as a hurricane evacuation site, and estimated partial deductions (20%–80%) for utilities, contractors, and client expenses with some documentary support. But where records gave the court nothing to work with, such as two years of American Express statements mixing personal and business charges with no separation attempted, deductions were denied entirely. A six-figure depreciation deduction also failed, due to an internally inconsistent depreciation schedule.

Vehicle and travel expenses face strict substantiation under Section 274(d), requiring contemporaneous records of amount, time, place, and business purpose, a gap the Cohan rule cannot fill. Branch lost every vehicle and travel deduction claimed across all three years for lack of such records, regardless of plausibility.

Branch claimed her bookkeeper advised her to delay filing during a prior audit. The court rejected this: advice to delay filing, unlike advice that no filing was required, does not excuse nonfiling, especially since Branch admitted she knew she had a filing obligation. All failure-to-file, failure-to-pay, and estimated tax penalties were sustained. For business owners facing multi-year nonfiling exposure, Branch is a reminder that the path back into compliance is far less costly when it starts with timely returns and disciplined recordkeeping. For more information about this update, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page. 

The Investment Company Institute, the trade association representing more than $45 trillion in assets across mutual funds, ETFs, and other fund structures, has filed a comment letter with the United States Treasury Department requesting formal guidance on so-called Section 351 ETF conversions, a fast-growing tax planning strategy that allows investors to contribute appreciated securities to an exchange-traded fund without immediately recognizing capital gains. The request for guidance comes at a moment of regulatory uncertainty, as Treasury has been actively assessing the practice and has internally discussed a range of potential responses, including the possibility of curtailing the strategy or designating certain conversions as transactions of interest subject to heightened IRS scrutiny.

A Section 351 conversion allows an investor holding a concentrated stock position or a broader portfolio of appreciated securities to contribute those assets to an ETF in exchange for shares of the fund, without triggering the capital gains tax that would ordinarily apply to a sale of those securities. Once inside the ETF structure, the fund can use the exchange-traded fund industry’s well-established in-kind redemption mechanism, which allows ETFs to distribute appreciated securities to authorized participants in exchange for ETF shares without generating a taxable gain at the fund level, to gradually swap out the contributed securities for different holdings. The practical result is that an investor can rebalance a portfolio of highly appreciated assets and effectively reset its composition over time without ever paying tax on the built-in gains at the time of the initial conversion. 

Treasury’s internal deliberations reflect the tension between the strategy’s legitimate uses and its potential for abuse. The ICI has met with Treasury officials on at least two occasions to discuss the practice, and those discussions have included consideration of whether certain conversions should be designated as transactions of interest. Transaction of interest is a formal designation that signals the IRS and Treasury view a transaction as having tax-avoidance potential and that triggers enhanced disclosure and reporting requirements for participants. While that designation remains a possibility, the ICI has advocated against a broad-based curtailment of the practice, emphasizing that Section 351 conversions serve genuine non-tax purposes, including portfolio diversification, access to the operational and cost efficiencies of the ETF structure, and competitive fee arrangements that benefit investors. 

The regulatory risk associated with seeking formal guidance is one that the industry is navigating carefully. Submitting a comment letter and requesting clarity creates a formal record and invites a response that could take a less favorable form than the current ambiguity. However, the absence of clear rules has created operational uncertainty for fund managers who are offering or considering offering Section 351 conversion vehicles. Treasury has not indicated a timeline for action, and it remains possible that no formal guidance will be issued in the near term. For more information about this update, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page. 

A common theme we see today in family-owned businesses is the ownership of several lines of business either through a parent corporation with the original business and one or more subsidiaries holding other newer business lines or through a parent holding company and several subsidiaries holding the various business lines. At some point along the ownership journey, whether it be in a single multi-generational family or in a multi-family investment, certain owners may favor one or more of the business lines while other shareholders favor other business lines. A recent IRS private letter ruling provides a roadmap for separating and dividing those business lines among interested shareholders without incurring US federal income tax.

Private Letter Ruling 202622007, issued by the IRS Office of Associate Chief Counsel (Corporate) on May 29, 2026, confirms that a proposed corporate separation transaction qualifies for tax-free treatment under IRC Sections 355 and 368(a)(1)(D) (as a split-up). The ruling addressed a privately held corporation that conducted two distinct businesses through a single corporate structure: one directly and through disregarded entities, and a second through a wholly-owned limited liability company also treated as a disregarded entity. 

For valid business purposes, the company proposed to separate the two businesses into independent corporate entities, allowing certain shareholders to exit the original corporation and become owners of the newly independent company while the remaining shareholders retained their interests in the original. The proposed transaction involved converting a disregarded LLC into a corporation under state law or by federal tax election, followed by the distributing entity (“Distributing”) distributing the newly formed corporation’s stock to three of its five shareholders in exchange for some or all of their Distributing shares, leaving the remaining two shareholders holding interests only in Distributing. Following the distribution, the two businesses would be held and operated by entirely separate shareholder groups going forward.

The IRS confirmed that the entire transaction, including both the initial conversion of the LLC to corporate status and the subsequent distribution of shares to the departing shareholders, qualifies as a reorganization under Section 368(a)(1)(D) and a distribution under Section 355, with no gain or loss recognized at either the corporate or shareholder level. The IRS issued ten specific rulings covering the tax consequences of the proposed transaction. At the corporate level, neither the Distributing nor the controlled entity (“Controlled”) recognized gain or loss on the conversion, the distribution of Controlled stock, or the exchange of Distributing shares. Controlled took a carryover basis in all assets received from Distributing, and Controlled’s holding period for each asset tacked on to Distributing’s prior holding period. 

At the shareholder level, the shareholders who received Controlled stock recognized no gain or loss on the exchange, and their basis in the Controlled shares equaled the basis of the Distributing shares they surrendered, with holding periods carrying over from the surrendered shares. The ruling also confirmed that Distributing’s earnings and profits, if any, would be allocated between Distributing and Controlled in accordance with Section 312(h) and the applicable Treasury Regulations. Notably, the IRS expressly declined to rule on whether the distribution satisfied the business purpose requirement of Treasury Regulation Section 1.355-2(b), which remains a factual determination outside the scope of a PLR on structural tax consequences.

PLR 202622007 is a useful illustration of the planning flexibility available to privately held corporations seeking to separate distinct business operations among shareholders with divergent interests. Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, John Rouchell, John Bradford, and Kevin Naccari can help your family business optimize the tax results of these family business separations. 

The Louisiana Department of Revenue has issued a revised version of Revenue Information Bulletin No. 25-023, originally published in August 2025, to provide additional procedural guidance on how general contractors and subcontractors must register for a Louisiana Taxpayer Access Point (LaTAP) account before they can apply for the sales and use tax exemption available for purchases made in connection with public construction projects. Act 384 of the 2025 Regular Session extended the governmental sales tax exemption under Louisiana Revised Statute 47:305.7(A) to cover purchases of materials and equipment rentals made by general contractors and their subcontractors performing work under construction contracts with the state, local governments, and their agencies and instrumentalities, effective July 1, 2025. Access to that exemption requires electronic submission of Form R-85012, Public Projects Contractor/Subcontractor Certification and Exemption Application, through LaTAP. The revised bulletin provides step-by-step guidance for contractors who do not yet have a LaTAP account:

Taxpayers must have a sales tax account in LaTAP to use the electronic application and access their exemption certificate. To register for a LaTAP account, visit www.revenue.louisiana.gov/latap and click the LaTAP link to access the homepage. From there, select “Sign Up” in the Log In box and follow the prompts to create a business account. For additional help with registering your business, setting up a LaTAP account, or adding a tax type, visit www.revenue.louisiana.gov/FAQ and select LaTAP.

 Contractors who have been performing public project work since July 1, 2025, and have not yet applied for the exemption because of uncertainty about the registration process should note that applications may be submitted retroactively for contracts executed prior to July 1, 2025, though the exemption itself does not apply to any purchases made before that date. For more information, contact Liskow attorneys Bob Angelico, Caroline Lafourcade, and Kevin Naccari, and visit Liskow’s Tax Practice page.