Recognizing when the IRS can reallocate income
The IRS can take advantage of several rules to ensure related-party transactions do not result in tax evasion or an improper reflection on income.
Gross Income
Federal tax reform: Not so encouraging for state and local incentives
Some incentives used by state and local governments to attract corporations will now likely be income to the recipient corporation.
IRS cannot recharacterize DISC commissions paid to Roth IRA
The IRS could not recharacterize, under the substance-over-form doctrine, commissions paid by a DISC to two Roth IRAs as dividends..
Rev. Rul. 2016-15 and the Uniform Application of Sec. 108 to QRPBI
Real property developed and held by a taxpayer for lease in its leasing business is “real property used in a trade or business.”
Clarification of the Fair Market Value Calculation for the Discharged QRPBI Exclusion
Recently issued advice clarifies some of the rules regarding the limitations on the amount of the exclusion.
IRS Updates Safe Harbor on Contributions to Capital for Transfers to Public Utilities
These transfers are considered a nontaxable contribution of capital by a nonshareholder to the utility.
Debt Restructurings and Contingencies
This item addresses the tax consequences when a nonpublic, financially healthy company renegotiates a debt that was incurred to purchase the company’s assets, and the resulting new debt is contingent on the occurrence of future events.
Sec. 108(i): Considerations for Electing Consolidated Groups
The regulations under Sec. 108(i) provide special rules for consolidated groups.
Cancellation of Debt Income for Debtor Subsidiary Corporations
This item addresses the U.S. corporate income tax effects of cancellation of debt (COD) income; the contribution-to-capital exception to COD income; partial cancellation of COD income; the impact of insolvency; and, finally, some COD income issues to consider in the international corporate context.
Foreign Corporations: Procedures and Pitfalls in Adopting and Changing Methods of Accounting for Purposes of Determining E&P
This item provides a high-level discussion of the general timing for certain foreign corporations’ adoption of methods of accounting for purposes of determining E&P, the procedural rules regarding how such foreign corporations change their method of accounting, and the importance of understanding when and how a method is adopted in light of the increased limitations such foreign corporations may face in changing methods.
Final Regs. Issued on Deferral of COD Income and OID Deductions
The IRS issued final regulations on the application of Sec. 108(i), providing guidance to C corporations regarding the accelerated inclusion of deferred cancellation of debt income and accelerated deduction of deferred original issue discount.
Deferral of Income From Sales of Gift Cards
The IRS issued Rev. Proc. 2013-29, which allows taxpayers to defer income from the sale of gift cards or gift certificates redeemable by an unrelated entity until the cards or certificates are redeemed for goods and services by that entity.
CFC’s Software Leasing Income Determined to Be Foreign Personal Holding Company Income
The IRS addressed whether rental income from software leasing to third parties outside the country of a controlled foreign corporation is foreign personal holding company income.
Earnings and Profits Computation Case Study
It is important for businesses organized and taxed as regular corporations to maintain a current, accurate accounting of their earnings and profits (E&P).
Final Regs. on Acceleration of COD Income Deferral
The IRS issued final regulations on the rules to accelerate COD income that taxpayers elected to defer over a five-year period when an applicable debt instrument was reacquired by the issuer or a related party in 2009 or 2010.
IRS Clarifies When Debt Instruments Are Publicly Traded
The IRS issued final regulations clarifying the circumstances in which property is traded on an established market (i.e., publicly traded) for purposes of determining the issue price of a debt instrument.
Crop Insurance Proceeds: Appropriate Tax Planning Strategies
The severe drought experienced by much of the United States this year, especially in agricultural regions, is expected to produce a record number of crop insurance claims.
IC-DISC Offers Tax Advantages for Closely Held Export Companies
For a closely held U.S. company engaged in export sales, an IC-DISC offers opportunities to both reduce the amount of revenue subject to the ordinary income tax rate and provide financial compensation to employees, shareholders, or other stakeholders.
Excessive Energy Property Grant Is Includible in Gross Income
An IRS memorandum advises that grant applicants must include in gross income any amounts they received but were not entitled to under a grant program of Section 1603 of the American Recovery and Reinvestment Act of 2009.
REIT May Exclude Interest-Rate Swap Income from Gross Income Tests
The IRS ruled that income a REIT receives from an interest-rate swap agreement that hedges indebtedness of the REIT’s lower-tier partnership is not includible in the REIT’s gross income for purposes of applying the 95% and 75% gross income tests.
