PENSIONS GET FUNDING RELIEF President Barack Obama signed HR 3962, the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, on June 25. The act allows single-employer plans to elect to amortize over a longer period pension shortfalls caused by losses in asset value they
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TOPICS / TAX
Business tax
Determining Ownership Changes When Stock Prices Fluctuate
In an effort to limit loss trafficking, Congress enacted IRC § 382 to limit the use of corporate net operating losses (NOLs) following an ownership change, which is defined generally as a greater than 50% change in stock ownership among certain 5% shareholders over a three-year period. In the event
Currency Option Not a Contract in “Major/Minor” Shelter
The Tax Court held that a foreign currency call option is not a foreign currency contract under the plain language of the IRC § 1256 contract mark-to-market rules. Thus an unrealized loss existing on the date that a foreign currency option was transferred to a charity was disallowed. Section 1256
Wider Material Participation Rules Could Increase Self-Employment Tax
In three recent cases, the Tax Court and Court of Federal Claims have held that a member of a limited liability company (LLC) or a limited liability partnership (LLP) should be treated as a general partner rather than presumptively as a limited partner for purposes of testing for material participation
Maximizing the Section 199 Deduction
Every business in the manufacturing sector, whether small or large, should consider the manufacturing deduction under IRC § 199. While section 199 comes with a complex set of rules, it nonetheless represents a valuable tax break for businesses that perform domestic manufacturing and certain other production activities. However, businesses should
IRS Finalizes Regs on Tentative Carryback Adjustments
The IRS on Monday released final regulations under IRC § 6411 providing guidance on the computation and allowance of tentative carryback adjustments (tentative refunds) (TD 9499). The final regulations finalize temporary regulations that were issued in 2007 (TD 9355) and are effective Aug. 24, 2010, the day they are scheduled
Final Regs Released for Payment Card and Third-Party Network Information Reporting
The IRS on Friday issued final regulations (TD 9496) regarding the new information reporting requirement under IRC § 6050W for payment card and third-party network transactions. Starting Jan. 1, 2011, banks and similar transaction settlement entities must file annual information returns for each participating merchant or other payee reporting aggregate
Rules Issued for Income Deferral of Canceled Debt
The IRS issued temporary and proposed regulations Wednesday relating to taxpayer elections to defer recognition of cancellation of debt (COD) income. The American Recovery and Reinvestment Act of 2009 (ARRA, PL 111-5) enacted IRC § 108(i), providing an election to defer COD income arising from the forgiveness or reacquisition of
Congress Votes to Limit Use of Foreign Tax Credits
The House of Representatives on Tuesday interrupted its August recess and passed H.R. 1586 by a vote of 247–161, sending the bill to President Barack Obama. The president signed the bill into law the same evening. The measure was passed by the Senate on Aug. 5. The bill is designed
IRS Changes Name of LMSB Division, Expands Focus
On Wednesday, the IRS announced that it is reorganizing and changing the name of its Large and Mid-Size Business (LMSB) division as part of its ongoing effort to focus more on international tax compliance (IR-2010-88). Starting Oct. 1, the division will be known as the Large Business and International (LB&I)
2010 Tax Software Survey: Individual Product Information and Responses
The JofA and The Tax Adviser surveyed our readers to determine what they liked and did not like about their tax preparation software. The survey was conducted in May 2010 and received 12,018 responses. Below are results showing how many respondents used each product. Then the detailed responses for each product are presented,
The Coming 1099 Revolution: Are You and Your Clients Ready?
Revenue-raising provisions in the Patient Protection and Affordable Care Act, PL 111-148, and the Health Care and Education Reconciliation Act of 2010, PL 111-152, like their health care provisions, have far-reaching implications. One could even fundamentally change the way we do business and keep records in the United States—by dramatically
Beware of State-Federal NOL Differences
State net operating loss (NOL) rules generally differ from federal NOL rules, and state NOL rules often differ from one another. This is especially true with respect to carrybacks of NOLs—which, unlike for federal returns, the majority of states do not allow—and carryforwards. This lack of consistency can lead to
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SUPREME COURT WON’T REVIEW TEXTRON The U.S. Supreme Court declined to review Textron Inc. v. U.S. (Sup. Ct. docket no. 09-750), letting stand a First Circuit Court of Appeals decision that the work product privilege did not protect the corporation’s tax accrual workpapers from an IRS summons. For the First
Step Transaction Doctrine Collapses LLC Interest Gifts
In a second decision (Pierre II) involving Suzanne Pierre’s transfer of a single-member limited liability company (LLC) interest to two trusts, the Tax Court applied the step transaction doctrine to the gift and sale transactions at issue in the case and slightly reduced the lack-of-control discount. Previously, the court had
AICPA, Others Ask IRS to Withdraw UTP Reporting Plan
The AICPA and other accounting, legal and business groups called upon the IRS to withdraw its proposed requirement that businesses above a $10 million asset threshold report their uncertain tax positions. The groups responded to the IRS’ request for comments on its three announcements earlier in the year (2010-9, 2010-17
Tax Court Refuses to Reconsider Overstatement of Basis Case
The Tax Court recently denied motions of the IRS to vacate and reconsider its prior decision in Intermountain Insurance Service of Vail LLC v. Commissioner, TC Memo 2009-195, in light of new Treasury regulations issued approximately one month after that case was decided. (For prior Tax Matters coverage, see “Application
EIN Retention When Converting a Corporation to an LLC
Most companies that convert a corporation to an LLC want the LLC to retain the historic employer identification number (EIN) of the corporation and may assume that the EIN carries over automatically to the LLC. In fact, the IRS will reassign the historic EIN of a corporation to a successor
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UNCERTAIN TAX POSITIONS DRAFT SCHEDULE RELEASED The IRS released a draft of new Schedule UTP, Uncertain Tax Position Statement, (tinyurl.com/27jmhm7) and instructions (tinyurl.com/25uorpf) as part of its initiative to require certain business taxpayers to report uncertain tax positions on their returns (Announcement 2010-30). (For previous JofA coverage of the initiative,
Royalty Payments Held Deductible
The U.S. Court of Appeals for the Second Circuit held that a company’s royalty payments for the right to use certain trademarks could be currently deducted, reversing a Tax Court decision. Since the royalty payments were calculated using a percentage of sales, the Second Circuit held, the royalty cost was
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