Congress Pushes Forward on Tax Reform: What It Means for Business Owners, Investors, and Dealmakers.

Congress is moving closer to passing a sweeping tax bill that could have a substantial impact on federal tax law, mergers and acquisitions, and ongoing tax litigation. The Senate has passed the bill by a narrow 51–50 vote, with the House expected to follow. Key provisions are already drawing attention from tax professionals and business owners alike.

1. Senate Passes Major Tax Bill—With Hidden Trade-Offs

The so-called “One Big Beautiful Bill” includes back-room negotiations to secure critical votes. These deals brought in targeted benefits like:

• Raising the SALT (State and Local Tax) deduction cap to $40,000.

• Carve-outs for industries like whaling and clean energy.

• A last-minute break for vacation homeowners.

The legislation was passed through budget reconciliation, bypassing the 60-vote threshold in the Senate. As with the 2017 tax law, most provisions are designed to expire in 10 years, keeping the official cost lower while setting up a future policy showdown. A few items may be extended or made permanent later, but the uncertainty remains—especially for those planning long-term business structures or exit strategies.

2. Real Estate Investors and Vacation Homeowners Take Note

Short-term rentals—14 days or fewer per year—remain completely tax-free under current law. However, rental income beyond that threshold must be reported and is subject to complex deduction limits.

If you own a second home, rent it occasionally, or operate a rental business, you must distinguish between personal use and investment use. Losses on vacation rental activity are generally disallowed unless the property is held strictly for rental purposes, and even then, phaseouts apply if your adjusted gross income exceeds $100,000.

3. M&A Update: Breakup Fees Can Be Deducted

In a recent Tax Court ruling, a company that paid a $1.6 billion termination fee after backing out of a merger was allowed to deduct the payment as a business expense. The Court ruled that the fee stemmed from ordinary business conduct, not capital investment. This is a favorable shift for firms navigating merger transactions, making deal structuring—and fallback terms—even more critical from a tax perspective.

4. Tax Litigation Developments: Two Cases, Two Lessons

• In Cano v. IRS, the Tax Court threw out the IRS’s deficiency notice due to it being mailed to the wrong address—even though the address was off by only a few digits. Procedural accuracy matters.

• In Miller v. Comm’r, the Court ruled that a taxpayer’s guilty plea to fraud in an earlier tax year precluded him from litigating the same issue later, even if the IRS had made an error. Once criminal proceedings are in motion, civil litigation becomes extremely limited.

  
  

Bottom Line

The current tax environment is shifting fast—and the stakes are high. Whether you’re evaluating a merger, managing a rental property portfolio, or dealing with an IRS dispute, you need legal guidance that can anticipate changes, preserve your position, and mitigate risk. At Spizzirri Law LLC, we bring deep experience in federal tax law, mergers and acquisitions, and tax litigation. Contact us to discuss how these changes could affect your tax posture or transaction strategy.

Thanks for reading.

MD

Refernece: The Kiplinger Tax Letter: Vol. 100, No. 14, Pages 1-2