Income
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.
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.
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.
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.
This article summarizes selected recent developments in federal income taxation of corporations and shareholders.
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.
Letter Ruling 201003005 concludes that (1) nonreimbursable payments from the government to a corporate taxpayer to construct a plant are nonshareholder contributions to the capital of the taxpayer under Sec. 118(a) and are excluded from the taxpayer’s gross income under Sec. 61, and (2) the basis of the plant’s capital assets acquired by the taxpayer with the money contributed by the government is reduced according to Sec. 362(c).
Corporations are generally exempt from tax on contributions made to corporate capital.
Today’s volatile real estate environment presents interesting opportunities for investors and developers to alter the terms of their debts in ways that may pay off if they can retain control of their projects.
The American Recovery and Reinvestment Act of 2009 provides certain business debtors with a cancellation of debt (COD) income deferral election under new Sec. 108(i) for reacquisitions by the debtor or by certain related parties of applicable debt instruments after December 31, 2008, and before January 1, 2011.
In an effort to de-leverage, more and more creditors, particularly those also holding an equity position, are willing to accept repayment for less than the face amount of the debt. Apart from settling the debt in cash for less than its face value, there are other methods debtors and creditors may use to modify, reduce, or even eliminate debt.
Rev. Proc. 2008-63 permits securities lenders continued nonrecognition treatment under Sec. 1058(a) for certain securities loans terminated due to the bankruptcy of the securities borrower, provided the lender applies the collateral to the purchase of identical securities within 30 days of the default.
Editor: Frank J. O’Connell Jr., CPA, Esq. The recent economic downturn coupled with the tightening of the credit market has forced many financially distressed corporations to renegotiate the terms of their maturing debt obligations. As little as 12 months ago, these companies would have been able to refinance their maturing
Recapitalizations in which corporate debt is restructured or discharged are assuming a new prominence in the current economy.
The Service outlined its position on the treatment of the various types of payments under pharmaceutical collaboration agreements in a coordinated issue paper.
This article discusses conflicting court opinions and IRS guidance on advance trade discounts and the merits of treating them as purchase price adjustments instead of income or loans.
The IRS ruled that a regulated investment company’s receipt of cash and a note from its investment adviser are qualifying income under Sec. 851(b)(2).
Karns Prime & Fancy Food, Ltd. (Karns), is a Pennsylvania corporation that operates grocery stores in the Harrisburg, Pennsylvania,area. In 1998,Karns’s management determined that the company required $1.5 million for capital improvements to its stores. Karns approached its primary supplier, Super Rite, Inc., about borrowing funds from it to make
Editor: Frank J. O'Connell, Jr., CPA, Esq. For accrual-basis financial institutions, there has long been a debate on the taxability of interest for loans that are past due. This debate centers on the difference in treatment between federal banking and IRS rules. Bank regulatory guidance always requires that the interest
