by Joy S. MacIntyre , Morrison & Foerster LLP In an earlier post we described some of the tax benefits - and challenges - associated with donating corporate securities to a family foundation or other private foundation. On the right facts, the donor in such a case can claim a deduction equal to the full fair market value of the securities despite the fact that the donor will never be taxed on any gain built into...

by Genevieve M. Moore , Morrison & Foerster LLP ... Like many estate planners, we were kept very busy in the last quarter of last year, assisting clients who could take advantage of 2012's large per-person federal gift tax exemption and low gift tax rate. Therefore, this monthly posting will be a short one that alerts practitioners to certain issues regarding custodial accounts for minors. Custodial...

by Genevieve M. Moore - Morrison & Foerster LLP As the year winds down, many of our clients are taking advantage of the unprecedented opportunity to make gifts of up to $5,120,000, per donor, free of any federal gift tax. Since the federal generation-skipping transfer tax (GST) exemption is also $5,120,000, many of these gifts are being made to generation-skipping trusts. Generation-skipping trusts (often called...

By Jeffrey M. Holdvogt , Diane M. Morgenthaler and Adrienne Walker Porter The Internal Revenue Service recently announced cost-of-living adjustments (COLA) to the applicable dollar limits on various employer-sponsored retirement and welfare plans for 2013. Although many dollar limits currently in effect for 2012 will change, some limits will remain unchanged for 2013. McDermott Will & Emery has prepared a chart...

By Cym H. Lowell , Partner Japanese multinational entities with current or future operations in China must plan to address a series of issues. Many of the critical international taxation and transfer pricing issues framed by activities in China are only just emerging or remain in an ambiguous context. In the current context of international business, the role of China in the planning of all multinationals is critical...

By Bill Pauls and Michael Miles, Sutherland Asbill & Brennan LLP On July 30, 2012, the IRS Large Business & International (LB&I) Division issued guidelines intended to reduce the controversy associated with partial worthlessness deductions claimed by insurance companies. In brief, the guidelines, which were released as an industry director directive (the Directive), instruct IRS examiners not to challenge...

By Todd B. Reinstein , Partner, Pepper Hamilton LLP Section 382 limits a loss corporation's ability to use its tax net operating loss (NOLs) carryforward following an "ownership change."[1] An ownership change is triggered if one or more "5-percent shareholders" of the loss corporation increases their ownership in the aggregate by more than 50 percentage points during a testing period. Once...

By Genevieve M. Moore , Morrison & Foerster LLP It is more and more common for individuals to use a revocable trust instead of a Will as their primary estate planning document, particularly in California where we practice. Although there is an up-front cost to establishing the trust and transferring title to assets to the trustee, many clients feel this cost is worthwhile. Among other benefits, using a revocable...

By Robb Chase, Reggie Clark, Jeff Mace, Michael Miles, Carol Tello, Karl Zeswitz, Saren Goldner, and Bill Pauls, Sutherland Asbill & Brennan LLP On June 7, 2012, Treasury and the Internal Revenue Service (the IRS) issued much-anticipated final, temporary, and proposed regulations under section 7874 , which provides rules governing so-called "inversion transactions." In an effort to provide certainty...

The New Mexico Court of Appeals held that for purposes of imposing the state's gross receipts tax, Barnes & Noble Booksellers, Inc.'s (Booksellers) in-state activities may be imputed to an out-of-state retailer (Taxpayer) based on the use of common Barnes & Noble trademarks. New Mexico Tax. & Revenue Dep't v. Barnesandnoble. com LLC, No. 31, 231 (N.M. Ct. App. Apr. 18, 2012). Notably, Booksellers...

By Wendy M. Greenberg, Esq. , Morrison & Foerster LLP The interest rate used to determine actuarial valuations of certain retained or remainder interests for purposes of federal gift and estate tax, commonly referred to as the "7520 rate" and defined as 120% of the applicable federal midterm rate (compounded annually) for the relevant month, has fallen to a record low of 1.2% for transfers completed in...

By Genevieve M. Moore , Morrison & Foerster LLP As one year ends and a new year begins, many people take stock of their assets and consider whether changes or updates are needed. Our clients are used to evaluating their hard assets - real estate, bank accounts, tangible property, investments - and their sources of income when doing this kind of assessment. But as we live more and more of our lives online, it also...

By Madeline M. Chiampou , Amy E. Drake , Martha Groves Pugh and Philip Tingle The Treasury Department has issued guidance in the form of two new "Frequently Asked Questions" addressing when transferees or purchasers of renewable energy property will qualify for the 5 percent safe harbor for beginning construction under the grant in lieu of investment credit program. The U.S. Department of the Treasury...

By Beth Kaufman , Lucy Lee and Michael Pfeifer Effective January 1, 2012, the District of Columbia will no longer exempt the income on municipal bonds issued by all municipalities. Income from the following bonds will continue to be tax exempt for D.C. tax purposes: Bonds issued by the District of Columbia or the Metropolitan Washington Regional Airport Authority Bonds issued by possessions of the...

By David M. Watts, Jr. Year-end tax planning is especially challenging this year because of uncertainty over whether Congress will enact sweeping tax reform that could have a major impact in 2012 and beyond. Even if there is no major tax legislation in the immediate future, Congress still will have to grapple with a host of thorny issues next year, such as whether to once again "patch" the alternative...

In addition to extending the Bush administration tax cuts, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the "Act") signed into law by President Obama on December 17, 2010, implemented a number of changes to the federal estate, gift, and generation-skipping transfer taxes. For decedents dying in 2011 and 2012, the Act instituted a 35-percent maximum federal estate tax...

By Genevieve M. Moore , Morrison & Foerster LLP Since 2006, individuals age 70 ½ and older have had the ability to donate as much as $100,000 from their traditional individual retirement accounts (IRAs) and Roth IRAs to charity, annually, and exclude the donations from taxable income. The provisions governing the "Charitable IRA Rollover," 1 as it is known, are scheduled to expire at the end of...

In recent years, the number of partnerships struggling with debt obligations has sharply increased. In many cases, the debtor partnership would offer the creditor an equity interest in the partnership in full or partial satisfaction of the debt. Several U.S. federal income tax consequences of such an equity-for-debt exchange had to be clarified. The IRS issued proposed regulations in 2008 providing guidance on the determination...

By Steven M. Packer, CPA and Brian K. Adams, CPA Businesses employing Independent Contractors beware, the IRS is becoming more aggressive in enforcement of employment classification and is scrutinizing the distinctions between employees and independent contractors with an increasing level of focus. The question of whether a worker is an independent contractor or employee for federal income and employment tax purposes...

LEGAL ALERT By Carol Weiser The Internal Revenue Service (IRS) has issued an advance notice of proposed rulemaking to release rules being considered for determining governmental plan status for qualified retirement plans under Internal Revenue Code (Code) section 414(d). The guidance includes draft proposed regulations, a solicitation for comments, and detailed discussions of the history of governmental plans and...

BY: Charles B. Neely Jr. , Nancy S. Rendleman , Robert W.Shaw The Revenue Laws Study Committee met on November 2 to review the status of recent legislation dealing with the Department of Revenue's authority to require corporations to file combined corporate income tax returns ("forced combination") and make other discretionary adjustments. HB 619, passed by the General Assembly in June, comprehensively...

By Vanessa Albert Lowry and Carla A. Young On August 5, 2011, the IRS released new internal guidance for specialists working in its voluntary closing agreement program (VCAP). This guidance includes elements designed to promote IRS-wide efforts to encourage issuers to develop and adopt post-issuance compliance procedures as an, essentially, "best practices" standard. VCAP is the existing program pursuant...

Unless the executor of the estate of an individual who died in 2010 makes the Internal Revenue Code §1022 election, the estate is subject to the federal estate tax. If the executor makes the IRC §1022 election, neither the estate tax law nor IRC §1014 applies, and the basis of property acquired from the decedent is determined under the modified basis rules of §1022 and initially is the property's...

The proposals made by the EU Commission on 28 September 2011 regarding an EU directive on a common system of financial transaction taxation in the 27 Member States of the EU have been debated widely in the three weeks since they were presented. The presentation of the proposed Directive (the "Directive"), together with proposals to amend Directive 2008/7/EC concerning indirect taxes on the raising of capital...

By Philip H. Spector and Mary Katherine Houston After receiving numerous inquiries, the California Board of Equalization (BOE) recently issued proposed guidelines for administering a statutory exclusion from real property tax assessment for active solar energy systems constructed on building rooftops or on land. The guidelines should settle months of industry uncertainty over the availability of the exclusion for new...