The IRS issued proposed regulations governing the availability of NOL deductions that are attributable to corporate equity reduction transactions.
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TOPICS / CORPORATIONS
Deductions
Deductibility of LEED Certification Costs
Tax professionals may be in the best position to support their clients or company in identifying LEED certification costs and determining the appropriate tax treatment as either a current-period expense or a capital expenditure.
A Cautious Approach to Sec. 163(l) in Common Private-Equity Lending
Fund financing can carry with it the potential for unintended tax consequences under Sec. 163(l)’s “disqualified debt” rules.
Investors’ Dilemma on Purchasing Distressed Obligations
This article discusses the purchaser’s perspective of an investment in distressed obligations that are secured by leases on tangible property.
Proposed Regs. Would Clarify Who Is Subject to Sec. 274(n) Limit on Meal Expenses
The IRS released proposed regulations clarifying which party is subject to the rule that limits the deduction for meals to 50% of the expenses incurred.
Regulations Finalize Rules on Entertainment Use of Business Aircraft
The IRS issued final regulations relating to the disallowance under Sec. 274 of deductions for the use of business aircraft for entertainment.
Guidance Clarifies When Dividends Are Qualified Performance-Based Compensation
The IRS ruled on whether dividends paid on restricted stock were qualified performance-based compensation excluded from the applicable employee remuneration to which the $1 million limitation on the deduction for compensation by publicly held corporations applies.
Golden Parachute Calculations: 10 Misunderstood Aspects of Secs. 280G and 4999
When a company experiences a change in control, the golden parachute rules are intended to discourage excessive compensation for “disqualified individuals” by imposing adverse tax consequences on both the company and the disqualified individuals.
LB&I Guidance on Benefits-and-Burdens-of-Ownership Analysis Under Sec. 199
The IRS LB&I Division issued guidance to field examiners in determining whether a taxpayer conducting production activities under a contract manufacturing arrangement with an unrelated third party meets the benefits-and-burdens-of-ownership requirement outlined in the domestic production activities deduction rules under Sec. 199.
Timing of Deduction for Bonus Accruals Under Pooled Arrangements
Rev. Rul. 2011-29 favorably upholds the current deductibility of a bonus pool that is determined based on a formula or board-approved amount by year end with employment required on a payment date within 2½ months of year end.
Increased Focus on and Potential Ramifications of R&E Expenditures
Many taxpayers may have noticed a recent increased IRS focus on R&E expenditures. As a result of this increased focus, it is time for taxpayers to increase their focus as well.
Exercise of Stock Options Results in Taxable Income and Compensation Deduction
The IRS held that a taxpayer’s cashless exercise of stock options resulted in taxable income to the taxpayer and a compensation deduction for the company that issued the options.
Guidance on Characterizing Gross Receipts from Telecommunications Services
In Rev. Rul. 2011-24, the IRS provided guidance for determining whether a taxpayer that provides telecommunications services derives gross receipts from services, leasing or renting property, or a combination of the two, for purposes of the domestic production activities deduction under Sec. 199.
Final Regs. Govern Election to Deduct Business Start-up Expenses
The IRS issued final regulations (T.D. 9542) governing elections by individual taxpayers, corporations, and partnerships to deduct start-up expenses or organizational expenditures.
Transaction Cost Considerations: Rev. Proc. 2011-29 and Other Related Matters
To eliminate the controversy over the allocation of success-based fees and corresponding documentation requirements, Rev. Proc. 2011-29 povides a safe-harbor election for allocating 70% of success-based fees paid or incurred in a covered transaction to activities that do not facilitate the transaction.
Election to Deduct Business Startup Expenses Gets Final Rules
The IRS issued final regulations governing elections by individual taxpayers, corporations and partnerships to deduct startup expenses or organizational expenditures.
Ordinary Worthless Stock Deductions: Characterizing Subsidiary Receipts
An ordinary loss deduction for worthless stock of an affiliated operating subsidiary generally is permitted as long as more than 90% of the subsidiary’s gross receipts are from active operating income. This item discusses the difficulty of determining whether a subsidiary’s gross receipts qualify as active operating income for this purpose under various circumstances.
Bank Allowed to Deduct Lawsuit Settlement Payments
In a private letter ruling, the IRS allowed a private bank catering to high-wealth individuals to deduct payments it made to settle lawsuits arising from criminally fraudulent activities by one of the bank’s fund managers.
Engagement Letter Fairness Opinion Fee Language May Affect Fees’ Taxation
Language used in investment banker (IB) engagement letters to implement fee payment arrangements can significantly affect the federal income tax treatment of such payments.
Tax Consequences of Transaction Costs
This article discusses the tax consequences of transaction costs in four settings: in general, when acquiring or producing tangible assets, when acquiring or creating intangible assets, and when acquiring a business.
employee benefits & pensions
Profits interests: The most tax-efficient equity grant to employees
By granting them a profits interest, entities taxed as partnerships can reward employees with equity. Mistakes, however, could cause challenges from taxing authorities.
