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1. Regulations finalize rules on all-cash D reorganizations   WebExclusive

BY Sally P. Schreiber, J.D.
On Monday, the IRS finalized temporary regulations regarding the determination of the basis of stock or securities in all-cash D reorganizations where no stock or securities of the issuing corporation is issued and distributed in the transaction (T.D. 9702). The regulations clarify that in these transactions, only a shareholder that owns actual shares of the issuing corporation will be able to designate the issuing corporation’s share of stock to which the basis (if any) of the stock or securities surrendered will attach.

2. Final rules determine how E&P is treated in corporate reorganizations   WebExclusive

BY Sally P. Schreiber, J.D.
New rules under Sec. 381 will change which corporation succeeds to the tax attributes, including the earnings and profits (E&P), of the transferor or distributor corporation in certain acquisitions. T.D. 9700, issued on Friday by the IRS, also finalizes other related proposed regulations under Sec. 312 clarifying that, in certain corporate reorganizations, the “acquiring corporation” succeeds to the full E&P account of the transferor corporation.

3. Research and experimentation expenditures clarified  

BY Alistair M. Nevius
With enhanced definitions and numerous additional examples, final regulations issued in July (T.D. 9680) clarify research and experimentation (R&E) expenditures under Sec. 174 that may be deducted currently or capitalized and amortized. Under the final regulations, the ultimate success, failure, sale, or use of a product is not relevant to a determination of eligibility under Sec.

4. Guidance issued on markdown allowances and margin protection payments  

BY Paul Bonner
Final rules clarify retailers’ treatment of vendor discounts in inventory valuation. Final regulations restate and clarify retailers’ computation of ending inventory value, including the application of common vendor discounts. The amendments to Regs. Sec. 1.471-8 are intended to render that section’s provisions in plainer language and provide rules for how sales-based vendor allowances and vendor markdown allowances and margin protection payments are taken into account under the retail-inventory method.

5. Proposed rules would change partners’ treatment of unrealized receivables and inventory items   WebExclusive

BY Sally P. Schreiber, J.D.
On Friday, the IRS issued proposed regulations under Sec. 751 that would amend the rules governing how a partner measures its interest in a partnership’s unrealized receivables and inventory items and the tax consequences of a distribution to a partner reducing that interest (REG-151416-06). Sec. 751 was enacted to prevent taxpayers from using a partnership to convert what should be ordinary income into capital gain.

6. AICPA asks for raise in repair regulations’ de minimis safe harbor threshold   WebExclusive

BY Alistair M. Nevius, J.D.
Jeffery Porter, CPA, chair of the AICPA’s Tax Executive Committee, wrote to Andrew Keyso, IRS associate chief counsel, on Wednesday, raising the AICPA’s concerns about the low amount of the de minimis safe harbor threshold in the tangible property regulations (T.D. 9636) that were issued in September 2013, and about the retrospective application of the new rules.

7. Qualified lessee construction allowances  

BY Alistair M. Nevius
Under Sec. 110, certain businesses that are tenants of a retail space may exclude from gross income amounts received from the lessor of the space to construct or improve real property used in the taxpayer’s trade or business. This safe harbor applies where the lease is for 15 years or less (including options to renew) and the property improved or constructed is nonresidential real property that is not Sec.

8. Goodwill not distributed to sole shareholder  

BY Matthew Schippers, CPA, CGMA
The Tax Court finds that a family trucking business did not distribute appreciated intangible assets under Sec. 311(b).The Tax Court held that a trucking company’s alleged goodwill was personally owned by its sole shareholder, and therefore the trucking company had no goodwill asset to transfer. Because goodwill was not distributed to the shareholder, he did not transfer it to his sons and therefore was not required to have filed a gift tax return.Facts: Bross Trucking Inc.

9. Giant Eagle’s advance deductions grounded  

BY Karen M. Cooley, CPA, MBA and Darlene Pulliam, CPA, Ph.D.
No deduction or gross profit offset is allowed for discounts offered on future fuel purchases by customers under a customer loyalty program.The Tax Court held that a taxpayer was not entitled to deduct the estimated future cost of fuel discounts earned by its customers until those discounts were redeemed.

10. IRS signals PPACA compliance issues for 2015   WebExclusive

BY Andrew Phillips, J.D., Lindsey Buchholz, J.D., Jennifer Villarino, J.D. and Jim Buttonow, CPA/CITP
This month, the IRS made several updates to the Internal Revenue Manual (IRM) that provide insight on the notices and enforcement methods the Service will use next tax season to ensure taxpayers comply with the Patient Protection and Affordable Care Act (PPACA), P.L. 111-148. Most compliance efforts focus on the premium tax credit and the individual shared-responsibility payment.
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