The Senate Finance Committee issued a tax reform option paper on international competitiveness. This marks their fifth tax reform option paper. An outline of the reform options are as follows: REFORM OPTIONS I. BASE EROSION AND DEFERRAL 1. Tighten anti-base-erosion rules and reform the treatment of non-subpart F earnings 2. Strengthen the subpart F rules 3. Repeal… Continue Reading
Category Archives: General
Subscribe to General RSS FeedIRS Finds Non-Grantor Trust Passive Under Section 469 – Trustee Cannot Count Non-Fiduciary Activities
Posted in Deductions, GeneralIn TAM 201317010, the IRS held that a non-grantor trust can satisfy the passive activity material participation standard only through the activities of its trustees, acting in their fiduciary capacities as trustees of the trust. The IRS rejected Texas district court holding in The Mattie K. Carter Trust, which held that the activities of all… Continue Reading
Marketplace Fairness Sales Tax Passes Another Hurdle in Senate
Posted in General, Legislative, Real Estate, Sales TaxOn April 25, in a key 63-30 procedural vote, the Senate passed S. 743 (Marketplace Fairness Act of 2013). The final Senate vote is set for May 6. As currently drafted, the legislation will allow states to collect sales/use tax on internet retailers with gross sales over $1 million. The ICSC shopping center trade association… Continue Reading
Court Agrees Moving to USVI Was Acceptable Tax Planning
Posted in General, Tax SheltersIn a significant taxpayer win, the Third Circuit in the Vento case overturned the lower court decision and respected a taxpayer’s move to the U.S. Virgin Islands (USVI) for purposes of taxing income under the more favorable rules applicable to the USVI. A significant aspect of the case is that the Third Circuit distinguished between… Continue Reading
Senate Finance Issues Second Paper on Tax Reform – Business Investment and Innovation
Posted in General, Legislative, Tax reformThe Senate Finance Committee had quickly issued its second paper on tax reform called “Business Investment and Innovation.” This is part of a broader project being led by Sen. Baucus on tax reform and follows on the heels of the prior paper on simplification. The paper discusses options for reforming the rules regarding business investment,… Continue Reading
President Releases 2014 Greenbook Revenue Proposals
Posted in General, Legislative, Tax reformOn April 10 the President released his long-anticipated “Greenbook” containing his 2014 revenue proposals. The press release summarizes the various proposals including taxing Carried Interests profits as ordinary income and loosening up FIRPTA restrictions on foreign pension plan investment in US real estate. See U.S. Secretary of Treasury Jacob Lew testimony and Rep. Camp’s opening statement on… Continue Reading
S corporation Modernization Act of 2013 Re-Introduced
Posted in General, Legislative, S corporationRep. D. Reichert (R. Wash.) introduced H.R. 892, the S Corporation Modernization Act of 2013 (the Act). A significant provision in the Act is to permanently reduce the Section 1374 “built-in gains” period from 10 to 5 years, effective January 1, 2013. If enacted, C corporations that convert to S corporation (or REIT) status would… Continue Reading
IRS and Treasury update Priority Guidance Plan
Posted in GeneralThe IRS and Treasury updated their annual business plan. The February update reflects 11 additional projects that have become priorities and/or guidance the government published in the prior quarter. The February update also includes 7 additional projects that have become priorities in connection with the enactment of the American Taxpayer Relief Act of 2012, Pub…. Continue Reading
Final Regulations Issued on Non-Compensatory Partnership Options
Posted in General, Joint Venture, Partnership/LLC, Passthrough EntityThe IRS finalized the 10-year-old proposed regulations on the treatment of non-compensatory partnership options. The IRS also published some clean-up changes in Announcement 2013-28. In general the final regulations follow the taxpayer-favorable approach of the proposed regulations to treat the exercise of a non-compensatory option as tax-free to the partnership and the partners under section 721. … Continue Reading
Ways and Means Releases Discussion Draft of Financial Product Tax Reform
Posted in Financial Products, General, Legislative, Tax reformOn January 24 the chair of the House Ways & Means Committee released proposals to reform the taxation of financial products. The reforms include: Mark-to-market taxation for speculative financial investments. Specifically the draft would require taxpayers engaged in speculative financial activity—but not business hedging against common risks—to mark certain financial derivative products to fair… Continue Reading
IRS Updates Effective Date of Recent Repair Regulations
Posted in Deductions, GeneralThe IRS issued an effective date update to the temporary “repair regulations” for determining when to capitalize or expense tangible property costs. The new amendments change the applicability dates of the temporary regulations to taxable years beginning on or after January 1, 2014, while permitting taxpayers to choose to apply the temporary regulations for taxable… Continue Reading
Long-Awaited Regulations Issued on New 3.8% Net Investment Income Tax
Posted in Compensation, General, Partnership/LLC, Passthrough Entity, Real EstateThe IRS issued long-awaited proposed regulations and related FAQ guidance on the new Section 1411 3.8% tax on Net Investment Income. The 3.8% Medicare tax is part of the tax provisions in the Affordable Care Act to pay for health care reform. The IRS also issued proposed regulations and FAQs on the related Section 1401… Continue Reading
Final Repair Regs Expected in 2013 with 2014 Effective Date
Posted in Compliance, Deductions, GeneralThe IRS has announced a 2013 publication date and January 1, 2014 effective date for the final regulations relating to when to capitalize or expense payments relating to tangible property (the so-called “Repair Regs”). The IRS Notice contains details as to when taxpayers will be permitted to apply either the final regulations or the temporary regulations… Continue Reading
DC Re-Proposes Combined Reporting Regulations
Posted in General, State and Local TaxOn August 31, the District of Columbia (DC) issued new re-proposed regulations on the Combined Reporting legislation that applies to tax years beginning after December 31, 2010. The revised rules replace the January 2012 proposed regulations, and include a series of clarifications, clean up changes, and examples. The changes include (1) clarification as to the… Continue Reading
IRS Clarifies Contributions to Charity’s Single-Member LLC Are Deductible
Posted in General, Partnership/LLC, Passthrough Entity, Tax ExemptAfter much anticipation, the IRS clarified that donors can receive the same charitable deduction for gifts made either directly to a parent charity or to a domestic tax-disregarded entity held by the charity. Specifically, Notice 2012-52 addressed gifts made to a domestic single-member limited liability company (SMLLC) solely-owned by a U.S. charity. The Notice concludes… Continue Reading
IRS Issues New FBAR Guidance – Updated FAQs and New Streamlined Procedures for Low-Risk Cases
Posted in Compliance, General, InternationalThe IRS published the anticipated update to the Frequently Asked Questions relating to the Offshore Voluntary Compliance Initiative (OVDI) relating to reporting of foreign financial accounts (commonly referred to as the “FBAR” reporting). The guidance also includes favorable rules for (1) U.S. citizens living abroad and dual citizens with low compliance risks (generally less than… Continue Reading
Tax Court Respects Related-Party Loan
Posted in Debt vs. Equity, General, Litigation/Controversy, Partnership/LLCIn a significant taxpayer win, the Tax Court concluded in NA General Partnership v. Commissioner that related-party loans from a U.K. corporation to its controlled U.S. subsidiary were respected as debt, and the U.S. subsidiary was entitled to $932 million of interest deductions. The original loans were $4 billion in fixed-rate notes and $896 million in floating-rate… Continue Reading
Proposed Regulations Require Bona Fide Loan for S Corporation Shareholder Basis
Posted in General, S corporationThe IRS issued proposed regulations, allowing an S corporation shareholder stock basis for direct shareholder loans that represent “bona fide indebtedness”. This represents a move away from the highly litigated “actual economic outlay” test and instead looks to whether the direct loan is “bona fide” based on applying more general federal tax principles to the… Continue Reading
U.S. REIT Act Would Update REIT Statute
Posted in General, Legislative, Real EstateThe recently introduced US REIT Act of 2012 (H.R. 5746) would provide a series of helpful changes to the rules governing Real Estate Investment Trusts (REITs). REITs, which achieve a single level of taxation through a dividends-paid-deduction, have strict rules to ensure that they are focused on long term investment in real estate. The proposed legislation… Continue Reading
Proposed Regulations Address Section 83 Timing of Compensation
Posted in Compensation, GeneralThe IRS issued new proposed regulations on the timing of taxable compensation upon the transfer of property to a service provider (e.g., compensatory stock or partnership interest). In general, section 83 taxes the receipt of property in connection with the performance of services “in the first taxable year in which the rights of the person… Continue Reading
IRS Clarifies Partner Insolvency Computation for COD Exception
Posted in Bankruptcy, Cancellation of Debt Income, General, Partnership/LLC, Real EstateThe IRS issued new Rev. Rul. 2012-14 on applying the Section 108 insolvency exclusion to Cancellation Of Debt (COD) income from a partnership. The IRS clarified that discharged partnership nonrecourse debt should be allocated among the partners based on the way the partners share the COD income. Thus if a partner receives a disproportionate amount… Continue Reading
Supreme Court Rules Against IRS in Statute of Limitation Case
Posted in General, Litigation/Controversy, Procedure, Statute of LimitationsIn a much-anticipated decision, the U.S. Supreme Court voted 5-4 against the IRS and held that the three-year and not six-year statute of limitations applied to a so-called Son of BOSS tax shelter in U.S. vs. Home Concrete & Supply LLC. This is the culmination of a series of split appeals court decisions on… Continue Reading
Featured in the New York Times – The Advantages and Risks of Gingrich’s Tax Strategy
Posted in General, Partnership/LLC, Passthrough EntitySteven R. Schneider, a tax lawyer, said that not all companies were suited for the S corporation, a tax structure used by Newt Gingrich. Steven Schneider was recently featured in an article in the New York Times regarding New Gingrich’s tax planning strategy. “Steven R. Schneider, a partner at Goulston & Storrs,… Continue Reading
President Releases 2013 Budget Proposals
Posted in General, LegislativeToday the President announced the new 2013 Budget Proposals (the “greenbook”). The White House noted that the budget includes many short-term measures for job growth, tax incentives designed to stimulate jobs and innovation, and tax and spending measures designed to lower the deficit. In total there are over 100 different different revenue and spending proposals. Revenue… Continue Reading
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