Sec. 163(I)’s “Substantial Certainty” Test and Related-Party Convertible Debt
This item summarizes the current law and discusses the facts and conclusion in Letter Ruling 201517003.
Income
Application of Interest Charge for Installment Sale Obligations
As the merger and acquisition business continues to prosper, practitioners should be aware of the tax implications and compliance requirements of the interest charge on deferred tax under Sec. 453A that applies to certain installment sale obligations.
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.
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.
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.
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.
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.
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.
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.
Corporation Is “Same Taxpayer” for Interest-Netting Purposes
The Court of Federal Claims held that, for purposes of interest netting under Sec. 6621(d), a taxpayer was the same taxpayer if it had the same identification number in the underpayment and overpayment years.
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.
Telecom Universal Service Fund Payments Not Excludible from Income Under Sec. 118
Governments sometimes make payments to telecommunications carriers for providing telephone and communication services to low-income users and those in remote or isolated areas. The courts have recently addressed the tax treatment of those payments.
IRS Will Not Challenge OID Treatment of Interchange Fees
The IRS announced that it will no longer challenge whether interchange fee income earned by credit card issuers creates or increases original issue discount (OID) on a pool of credit card loans.
Significant Recent Corporate Developments
This article summarizes selected recent developments in federal income taxation of corporations and shareholders.
Suspension of Applicable High-Yield Discount Obligation Regime for 2010
Congress suspended the applicable high-yield discount obligation (AHYDO) rules under Sec. 163(e)(5) for certain debt-for-debt exchanges occurring between September 1, 2008, and December 31, 2009. Notice 2010-11 extended the suspension of the AHYDO regime through December 31, 2010, but with additional requirements.
