Gains & Losses

Taxing the Transfer of Debts Between Debtors and Creditors

Assumptions and other transfers of debt between corporations and shareholders or between partnerships and partners can often be tax free as part of a contribution, distribution, reorganization, or liquidation. This article analyzes several types of debt transfers and their potential for recognition of gain or loss and income from cancellation of debt.

Sidestepping Deferred Intercompany Gain

This item illustrates how transfers of items outside a U.S. consolidated group can trigger a deferred intercompany gain and suggests ways to avoid that result in certain situations.

Sec. 6045B Reporting Requirements

Sec. 6045B requires an issuer of a specified security to report certain information to the IRS and to its shareholders following an organizational action that affects the basis of a specified security.

Losses Related to an Insolvent Corporation

The IRS issued a general legal advice memorandum that addressed the tax consequences when an insolvent foreign subsidiary of a domestic U.S. corporation elected to be classified as a partnership.

Recognized Built-In Loss Is Subject to Sec. 382 Limitation

The IRS concluded that a taxpayer may include in its computation of taxable income or NOL only an amount of recognized built-in loss (RBIL) equal to its Sec. 382 limitation, whether or not the taxpayer has taxable income without regard to RBIL.

IRS Offers Another Mark-to-Market Valuation Safe Harbor

The IRS has released an Industry Issue Directive instructing its examining agents to offer a safe-harbor election to certain taxpayers under examination regarding the market values used in their mark-to-market calculations.

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.

Newsletter Articles

SPONSORED REPORT

States look to unclaimed property for revenue

State audits of abandoned and unclaimed property (AUP) have exploded in recent years. This report outlines the escheat process, common types of AUP, how different states are handling it and how companies can plan for potential audits and liabilities.

DEDUCTIONS

Understanding the new Sec. 199A business income deduction

The new deduction allows certain business owners to keep pace with the significant corporate tax cut provided by the Tax Cuts and Jobs Act.