Tax Law

    • 2 May 2011

    The Elusive Basis Problem of the Foreign Tax Credit Limitation

    As we know, Congress tinkered with the foreign tax credit (FTC) rules in 2010 in a number of ways. One of those changes was to add Section 901(m) (" Denial of foreign tax credit with respect to foreign income not subject to United States taxation by reason of covered asset acquisitions ") to the Code. (Education, Jobs and Medicaid Assistance Act, P.L. 111-226, § 212, HR 1586 (2010). ... The new provision...
    • 29 Mar 2011

    Lease Accounting Standard Changes to Impact Financial Reporting

    By Barbara Apostolou, Nicholas Apostolou and Jack W. Dorminey - West Virginia University On August 17, 2010, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly released exposure drafts (ED) of proposed accounting standards that, as currently written, significantly change lease accounting. Under the proposed model, lessees have only one accounting treatment...
    • 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...
    • 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...
    • 9 Mar 2011

    Transfer Tax Planning for New York Married Couples In Light of the 2010 Tax Act

    The 2010 Tax Act changes the landscape of gift, estate and generation-skipping transfer tax planning, at least until the new law is due to sunset at the end of 2012. For New Yorkers, however, the application of state estate tax law has to be considered along with the federal transfer tax laws. As a result, for residents of New York, especially married couples, the 2010 Tax Act may be more complicated than first appears...
    • 15 Feb 2011

    Recent Guidance on Life Insurance Payments in the Form of Viaticals

    The Background A "viatical" is a contractual arrangement in which an investor buys a life insurance policy from an insured (or, perhaps, another) for a negotiated purchase price. The investor generally continues to pay the premiums on the policy and is paid the proceeds from the insurance company upon the death of the insured. The investor may be either domestic or foreign. The Problem When the insured...
    • 10 Feb 2011

    Procter & Gamble v. U.S. and the FTC Noncompulsory Payment Requirement

    One of tax life's significant attractions for U.S. multinationals is the capacity to claim a foreign tax credit (FTC) for taxes paid in foreign jurisdictions. Much like many attractions, however, the opportunity to avoid double taxation by having recourse to that unilateral U.S. credit mechanism comes with its own obstacles and hurdles to cross before one can avail oneself of that benefit. One of those hurdles, Treasury's...
    • 30 Jan 2011

    Implications of Canal Corp. v. Comm'r for U.S. Taxpayers and Their Advisors

    Canal Corp. v. Comm'r, 2010 U.S. Tax Ct. LEXIS 25 (T.C. Aug. 5, 2010), has serious implications for U.S. taxpayers and their advisors, especially regarding the issuance of tax opinions requiring a high degree of certainty. Fundamental points of the case as to advisor independence and economic substance are important for in-house counsel and external advisors to grasp in mitigating enterprise risk that often accompanies...
    • 3 Jan 2011

    Use of Extrinsic Evidence and Quantitative Analysis in PPL Corp. v. Comm'r

    Despite the quantity of ink spilled by the Tax Court in its lengthy review of the factors which govern a creditable foreign income tax, the key takeaway for corporate tax counsel and their advisors from PPL Corp. & Subsidiaries v. Comm'r , 2010 U.S. Tax Ct. LEXIS 31 (T.C. Sept. 9, 2010) is the extent to which the taxpayer was able to rely on extrinsic evidence and quantitative analysis in supporting their position...
    • 27 Dec 2010

    Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 - An Analysis

    On Friday, December 17 th , President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Pub Law 111-312). The Act contains numerous tax provisions meant to stimulate the American economy. It is vital for tax professionals to have a thorough understanding of how these tax provisions will affect the potential tax liability of their individual and corporate clients...
    • 8 Dec 2010

    Container Corp. v. Comm’r: Clarity on Guarantee Fee Sourcing?

    Editor's Note : The following is an excerpt from Rhoades & Langer U.S. International Taxation and Tax Treaties § 26.01[3][f] (Matthew Bender). ... The question of how to treat guarantee fees has long vexed both practitioners and the Internal Revenue Service. Those fees look like interest -- sort of -- and they look like services income -- sort of. When faced with the question of how to characterize...
    • 2 Dec 2010

    California's Current Sales Factor Landscape

    On November 2, 2010, by a margin of nearly 1.5 million votes, California voters rejected Proposition 24. In doing so, the voters decided to maintain three business tax provisions scheduled to take effect in 2011: (1) the single sales factor apportionment election; (2) net operating loss carrybacks; and (3) shared tax credits for "unitary" businesses. This Proposition, also known as the Repeal Corporate Tax Loopholes...
    • 4 Nov 2010

    Small Business Jobs Act of 2010

    By Mitchell R. Kops , Sanford J. Davis , and William J. Kambas President Obama recently signed into law the Small Business Jobs Act of 2010 (the "Act"). After stalling in Congress earlier this year, the Act progressed rapidly in the month of September as the Senate and House approved it on September 16 and 23, respectively. It was signed into law on September 27, 2010. The Act seeks to stimulate entrepreneurial...
    • 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...
    • 1 Nov 2010

    Amended France - U.S. Treaty in Effect

    By Mitchell R. Kops , Sanford J. Davis , and William J. Kambas A new France-U.S. income tax treaty protocol... O nce ratified by both countries, and after exchange of instruments and entry into force, the Protocol will become effective in three stages: (i) First, the new withholding tax provisions will apply as of January 1 of that year. (ii) Next, the mandatory arbitration provisions will apply beginning on the...
    • 27 Oct 2010

    Bilski v. Kappos: A New Chapter in Tax Strategy Patentabililty

    Bilski v. Kappos , 130 S. Ct. 3218 (U.S. 2010) has given significant clarity to the status of tax strategy patents. To understand why this is so, one must start with an analysis and clear understanding of State St. Bank & Trust Co. v. Signature Fin. Group , 149 F.3d 1368 (Fed. Cir. 1998) as well as cases leading up to the Bilski Supreme Court decision. ... Tax strategy patents are often described as patents...
    • 16 Sep 2010

    Taxation of Short Sales and Foreclosures

    Short sale and foreclosure tax inquiries focus on how much gain and cancellation of indebtedness (COD) to recognize. Gain is the amount realized over the amount invested. Net worth increase is income realized, unless statutory or case law allows exclusion from income. The maximum 15% federal tax on gain and 35% on COD income will be 20% and 39.6% in 2011, respectively. Look for gain and COD income exclusion downsides...
    • 25 Aug 2010

    Online Travel Companies and Hotel Occupancy Tax Litigation

    Over the past several years, a spate of litigation has arisen throughout the country concerning the application of hotel occupancy taxes to online bookings. The cases focus on whether online hotel reservation and travel companies are required to collect and remit transient occupancy tax ("occupancy tax") on the amount they charge a customer when reserving a hotel room. ... Many of the occupancy tax ordinances...
    • 19 Aug 2010

    Disposition of Less Than the Whole: The Need to Identify the Securities Sold

    Authored by Andrew W. Singer Beginning January 1, 2011, brokers previously required to report to the Internal Revenue Service the gross proceeds from sales of stock by their customers are also required to report the adjusted basis of the stock sold and whether gain or loss on the sale is long-term or short-term. The Energy Improvement and Extension Act of 2008, which amended 26 USCS § 6045 (IRC Section 6045) to...
    • 18 Aug 2010

    USC Gould School of Law 2010 Tax Institute: Tax Planning Strategies for Transferring Family Homes -- Dynasty Trusts by Nancy G. Henderson

    If a property owner intends for property to remain in trust for the use and enjoyment not only of the owner's children, but for future generations of descendants, a "dynasty trust" can be an excellent vehicle to accomplish this objective. Careful consideration must be made as to the effect of the generation-skipping transfer tax upon the donor, the trust, and the trust beneficiaries. In this Analysis, Nancy...
    • 16 Aug 2010

    Pension Funding Relief -- Temporary or Here to Stay?

    The Pension Protection Act of 2006 [PPA, Pub. L. No. 109-280] was enacted in part to strengthen the minimum funding rules for defined benefit (DB) pension plans. The subsequent financial crisis and recession led to vigorous lobbying by employers for relief from the new rules. On June 25, 2010, after lengthy partisan wrangling, President Obama signed into law the Preservation of Access to Care for Medicare Beneficiaries...
    • 12 Aug 2010

    QPRTs and PRTs: Planning Strategies for Transferring Family Homes

    As an alternative to gifting direct interests in a family home to children, a donor can establish an intervivos trust for the benefit of children or other family members and make gifts of interests in the property to such a trust during life. There are many different types of trusts that a donor should consider...[, including] a Qualified Personal Residence Trust (QPRT) and a Personal Residence Trust (PRT). ... ...
    • 11 Aug 2010

    When Assets Given to a GRAT Decline in Value

    Sometimes estate plans fail to address the possibility that assets will drop in value. [W]hat happens when this occurs in the context of a grantor retained income trust (GRAT)[?] ... How a GRAT is Supposed to Work A gift to a GRAT is structured as a gift of an asset to an irrevocable trust from which the settlor keeps the right to an annuity for a specified number of years. Each year, on the anniversary date...
    • 4 Aug 2010

    Defense Contract Audit Agency Tightens Audit and Auditor Independence Practices

    The Defense Contract Audit Agency (DCAA) has been the target of Government Accountability Office (GAO) criticism that has resulted in changes in the way they conduct business and interact with contractors. ... During 2008 and 2009, the Defense Contract Audit Agency (DCAA) was criticized by the Government Accountability Office (GAO) on many points. According to the GAO, DCAA audits and cost-related assignments selected...
    • 28 Jul 2010

    States Use Jeopardy Assessments as Effective Collection Mechanism

    There are situations in which state tax authorities determine that ordinary assessment and collection efforts will be ineffective. Although most practitioners do not experience application of the jeopardy assessment provisions often, it is important to maintain an awareness of the provisions, since the circumstances in which they are applied contain many pitfalls for practitioners ... Almost all of the states statutorily...