Tax Law

    • 29 Aug 2011

    IRC Section 751 Treatment of Hot Assets

    By Matthew Cavitch, The Cavitch Law Firm, Memphis, TN The linchpin of taxing transfers of partnership interests is IRC Section 751. Under IRC Section 741, when a partner sells his interest, he is entitled to capital gain treatment, except as provided in IRC Section 751. Under IRC Section 731, when a partner receives a partnership distribution in liquidation of his interest, he is entitled to capital gain treatment...
    • 27 Jun 2011

    State Taxation of Multinationals: Combined Reporting

    by Suellen Wolfe * In many states, related entities with certain intercompany transactions must file a combined tax report to more accurately reflect their unitary business operations. Combined reporting is generally required only where there is a high degree of interdependence among related entities. Combined reporting can take one of two forms: worldwide, which includes income from all operations, and water's...
    • 2 Jul 2010

    Recognition of Accountant-Client Privilege for Federal and State Tax Purposes

    In light of recent cases, such as U.S. v. Textron, Inc. , 577 F. 3d 21 (1st Cir. 2009), cert. den. No. 09-750, May 24, 2010, and Comm. of Revenue v. Comcast Corporation & Continental Teleport, Inc., 453 Mass. 293; 901 N.E.2d 1185; 2009 Mass. LEXIS 31 (March 3, 2009), practitioners are faced with the reality of determining the extent to which privilege, whether attorney-client privilege or work product privilege or...
    • 31 Mar 2010

    The Even More Curious Case of Xilinx, Inc. v. Commissioner and the Future of Transfer Pricing

    Editor's Note : The Ninth Circuit's revised opinion of March 22, 2010 agrees with the Tax Court's finding that the cost of employee stock options should not be included as a shared cost in a transaction governed by arm's length principles. Previously, the court's decision of May 27, 2009 ( Xilinx, Inc. v. Comm'r, 567 F.3d 482 (9th Cir. 2009) ) had been withdrawn by the court without comment. Xilinx...
    • 9 Mar 2011

    Distinctions Between State and Federal Taxation of Foreign Source Income

    By Suellen M. Wolfe, LL.M., CPA The federal Internal Revenue Code provides that foreign corporations are subject to U.S. income tax on certain foreign source income that is "effectively connected" with a U.S. trade or business. Jurisdiction to subject the foreign corporation to U.S. income tax is premised on the derivation of income that is sourced to the United States. The sourcing rules are the first step...
    • 15 Oct 2009

    VAT in the USA

    The global economic crisis has two diametrically opposed aspects, as things stand today. The first of these has created the current focus on economic stimulus; of getting consumers to consume; of encouraging lenders to lend; and of reenergizing the banking, manufacturing, wholesaling and retailing sectors. In other words, the emphasis is on getting markets back to a reasonable level of their former functionality. These...
    • 12 Oct 2009

    Tax Considerations in Forming a Captive Insurance Company: The Deductibility of Premiums

    SUMMARY : The deductibility of premiums is a potential tax benefit in a corporation forming a captive insurer. The courts have limited the deductibility of premiums to those situations in which the insurance issued by the captive is actual insurance, not just reinsurance. A key factor is whether the economic substance of the transaction resembles actual insurance. This commentary explores how this issue has been resolved...
    • 25 Mar 2011

    Additional First-Year Depreciation for Certain Property

    An additional first-year depreciation deduction equal to 50 percent of the adjusted basis of qualified property is allowed for qualifying property that is acquired during calendar years 2008 through 2012. The additional first-year depreciation deduction is allowed for the taxable year in which the property is placed in service. The deduction is allowed for both regular tax and alternative minimum tax purposes, so no AMT...
    • 1 Jul 2009

    State Income Taxes Decoupled From IRC on Cancellation of Debt Income

    The recently enacted American Recovery and Reinvestment Act of 2009 amended IRC § 108 by adding a provision cancelling debt income. This provision allows taxpayers to elect to defer the recognition of income realized from the discharge of indebtedness until 2014, when they may then spread the deferred income ratably over five years or until 2018. Since most states conform their income tax laws to the federal tax...
    • 6 Apr 2009

    The Deduction for Energy Efficient Buildings Under IRC Section 179D

    A deduction is available for the cost of energy efficient commercial building property placed in service before January 1, 2014. A partial deduction is allowed for energy savings systems that are not part of a plan to reduce the building's energy consumption by 50 percent if the system reduces energy consumption by 16-2/3 percent or more. Author David Altman writes : The Internal Revenue Code allows a deduction...
    • 17 Jun 2011

    New Jersey Corporate Tax Planning and the Apportionment Sales Factor

    A State Tax Practice Insights Commentary by Irwin Mittelman INSIGHT In recent years, there have been major changes that have affected apportionment for corporations doing business in New Jersey. In 1995, the corporate apportionment factor was changed to double-weight the sales factor, thus making it fifty percent of the overall allocation factor. The most recent change, made by legislation enacted in 2011, will...
    • 1 Jun 2010

    "Disguised Sales" in Partnership Transactions: Precepts and Recent Cases

    Partners who contribute property to a partnership and receive a related distribution from the partnership may be treated as if the property was conveyed to the partnership in a "disguised sale." ... Recent case law complements a host of factors bearing on determining what kinds of partnership/partner transactions qualify as disguised sales. ... The economic effect of a property contribution followed by...
    • 6 Aug 2009

    A Business Planning Guide to Successor Liability Laws

    Before a purchaser buys either all or substantially all of the assets or stock of a business, the purchaser needs to ensure that it is not also acquiring that business's old tax troubles. Under the laws of most states, the purchaser can, in fact, be held personally liable for up to either the purchase price or sometimes the entire amount of the seller's unpaid state tax liabilities until those liabilities are...
    • 17 Nov 2008

    Calculating NOL Carryforward Income Offset Limitations Under Section 382

    Annette M. Ahlers on Had a Section 382 Ownership Change? Maybe the IRS Can Help Section 382 of the Internal Revenue Code will generally require a corporation to limit the amount of its income in future years that can be offset by historic losses (NOL carryforwards) once that corporation has undergone an ownership change. Annette M. Ahlers, a partner in Pepper Hamilton LLPs Tax Practice Group with extensive experience...
    • 13 Apr 2009

    The Confidentialilty Privilege for Federal Tax Practitioners

    Congress adopted IRC Section 7525, which specifically extends the common-law attorney-client privilege for communications to federal tax practitioners. The common law attorney-client privilege applied only to attorneys, and did not extend to other kinds of tax practitioners. Author David Altman writes : Courts have not generally accepted that communications between a taxpayer and his accountant regarding the taxpayers...
    • 9 Apr 2009

    Florida Documentary Stamp Tax: Deed Recordation and IRC Sec. 1031 Exchanges

    Florida applies documentary stamp taxes to deeds, mortgages or other lien obligations filed or recorded in the state. Because an Internal Revenue Code (IRC) Section 1031 like-kind exchange transaction includes a tax-free exchange of property and recordation of deeds to effect such exchange, IRC Section 1031 like-kind exchange transactions trigger application of Florida documentary stamp tax rules. Author Locksley Rhoden...
    • 15 Feb 2010

    Turkey / Italy and Turkey / Spain Prevention of Double Taxation Treaties and Their Impact on Cross-Border Transactions

    [The] author believes that the deemed (notional) foreign tax credit available under the Spain/Turkey and Italy/ Turkey tax treaties might offer (additional) benefits in relation to cross-border lending and investments in debt and equity issues, provided that local tax offices can be convinced to apply international tax treaty provisions. OECD Model Treaty and Tax Convention Recommendations . The 2003 OECD Model Treaty...
    • 20 Mar 2009

    Florida Decouples From Federal Bonus Depreciation and IRC Sec 179 Expense Election

    Florida Governor Charlie Christ signed Florida Senate Bill 1112 into law on March 17, 2009, providing a remedy to the shortfall in state corporate income tax collections when the state decoupled from Public Law 110-185 amendments to bonus depreciation and expensing of certain depreciable assets. Author Locksley Rhoden writes : Each year, the Florida legislature adopts the current Internal Revenue Code (IRC) as its starting...
    • 4 Nov 2010

    Italy-U.S. Income Tax Treaty Provisions in Effect

    By Mitchell R. Kops , Sanford J. Davis , and William J. Kambas On March 3, 2009, after nearly 10 years of deliberation, the Italian Parliament authorized ratification of the U.S.-Italy income tax treaty and protocol that were signed on August 25, 1999 (the "New Treaty"). The New Treaty then entered into force on December 16, 2009 and took effect generally for tax years starting on or after January 1, 2010...
    • 4 Jun 2008

    The Deductibility Of Capital Expenditures As Qualified Medical Expenses

    Gerald M. Levinson, a renowned pension and trust tax attorney and founder of Benefits Research & Communications in Escondido, California, discusses in his Expert Commentary how certain personal capital expenditures may be wholly or partially deductible as medical expenses if they are incurred primarily for the prevention or treatment of a specific illness or defect, including a pool, spa, or whirlpool bath that is...
    • 28 Mar 2016

    Recourse or Non-Recourse? The Limited Scope of Partnership Liability Regs

    by Marc T. Finer and Ryan M. LoRusso Albert Einstein once said “[t]he hardest thing in the world to understand is the income tax." Nowhere is this truer in the Internal Revenue Code than in the context of the recourse versus nonrecourse liability rules of Subchapter K (partnership tax). Unfortunately, for those of us who eventually do master these rules, a recent IRS Chief Counsel Advice (CCA) 201525010...
    • 1 Sep 2009

    Exclusion for Sale of Qualified Small Business Stock Increased

    IRC Section 1202(a)(3) was added by the American Recovery and Reinvestment Act of 2009 (“the Act”). It encourages individuals to make investments in corporations by allowing them to temporarily exclude a greater amount of the gain on the sale of qualified small business stock than they normally could under prior Section 1202, thereby further reducing the effective tax rate on the gain on the sale of such stock...
    • 26 Jul 2010

    Delaware Statutory Trusts: The Best Features of this New Form of Entity

    Delaware's law on statutory trusts recently became the model for the entire country to follow. Practitioners and investors increasingly use the unique features of this newest form of entity for tax deferral, asset protection and other advantages. ... Since 2000, practitioners and investors have increasingly used the form for tax deferral, asset protection and balance sheet advantages, in real estate, securitization...
    • 14 Dec 2009

    Family Limited Partnership Transfers, Taxation, and Estate Planning

    Family limited partnerships (FLP) are often proposed by estate planning advisors as a vehicle for making gifts to family members at a discount. Over the years, a substantial amount of litigation has established some limits for a valid family partnership entity. In Estate of Jorgensen v. Comm'r , T.C. Memo 2009-66 (T.C. 2009) , the Tax Court ruled that the value of transfers made to family members from two family limited...
    • 4 Sep 2009

    U.S. Citizens Abroad - IRC Section 911

    Rufus v. Rhoades reviews the rules which apply to U.S. citizens and residents who live abroad for one year or more, and it discusses eligibility for benefits under IRC Section 911, the amount that is excludable from gross income, the housing cost allowance, and the procedures that should be followed for individuals to elect IRC Section 911. His analysis covers: "Tax Home" and "Abode" Requirements...