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.
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TOPICS / CORPORATIONS
Gains & Losses
Intercompany Debt in a Deemed Asset Sale Election
This item discusses IRS guidance illustrating the impact of extinguishment of intercompany debt immediately preceding a Sec. 338(h)(10) election.
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.
Proposed Sec. 382 Regs. Simplify Small Shareholder Treatment
Sec. 382 and the regulations thereunder rank among some of the most complex, nonintuitive rules in federal tax law, all aimed at curbing the practice of trafficking in NOLs, or other loss attributes, in a corporation.
Prop. Regs. Require NUBIG and NUBIL Redetermination for Consolidated Sec. 382 Purposes
The IRS recently proposed revisions to the consolidated return regulations on the application of Sec. 382 and calculation of net unrealized built-in gains and losses.
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.
Net Operating Loss and Unrealized Investment Gain Tax Provision Benefit
This item reviews an anomalous situation that occurs in some cases under ASC ¶740-20-45-7 for entities generating NOLs with an investment portfolio.
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.
Special Limitation Periods for Carryback Assessments
By exercising its setoff authority, the IRS has been able to achieve the same limitation period in Form 1120X carryback situations as in tentative refund cases with Form 1139.
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.
FIRPTA and the Return of Capital Distributions
FIRPTA is quite complex and filled with traps for the unwary, especially in the area of return of capital distributions.
The Impact of Unified Loss Rules on Earnings and Profits
This item explores whether an adjustment is made for E&P purposes when a member of a consolidated group is required under the unified loss rules to reduce its basis in the stock of another member for regular tax purposes upon the first member’s disposition of the second member’s stock at a loss for regular tax purposes.
Prop. Regs. on Controlled Group Deferred Losses
The IRS issued proposed regulations on the time for taking into account deferred losses on the sale or exchange of property between members of a controlled group (REG-118761-09).
IRS Increases Focus on Tax Hedge Identification Rules
The IRS recently signaled its increasing interest in the tax treatment of hedging transactions, particularly with regard to proper taxpayer identification.
IRS Issues Proposed Regulations on Controlled Group Deferred Losses
The IRS issued proposed regulations on the time for taking into account deferred losses on the sale or exchange of property between members of a controlled group.
Unrealized Built-in Gains and Losses Under Sec. 382 and the Tax Accounting Rules
Do not forget to consider the tax accounting method rules (for accrued income or expense items) when dealing with Sec. 382.
Extended NOL Carrybacks and the AMT
The addition and expansion of the Sec. 172(b)(1)(H) election has created numerous tax planning opportunities for corporations that have sustained NOLs; the ability to change the character of election-year ATNOLs creates an additional benefit of making this election.
Tax Implications of the Five-Year NOL Carryback
An extended carryback period of up to 5 years is available for NOLs generated in 2008 or 2009. The author reviews some of the practical issues that should be considered when deciding whether to take advantage of the extended NOL carryback period.
IRS Releases Guidance on Expanded NOL Carryback Rules
The IRS has issued guidance on the expanded five-year net operating loss (NOL) carryback rules, which were amended by the Worker, Homeownership, and Business Assistance Act.
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.
