The IRS issued final regulations providing rules for how to determine gain or loss when property subject to depreciation is disposed of, how to determine the asset disposed of, and how to account for partial dispositions of depreciated property.
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TOPICS
C Corporation Income Taxation
Schedule UTP: Comparative Statistics Through the First Transition Year
This item provides an overview of the IRS’s statistics on Schedule UTP through the first three tax years of filings.
FICA Taxation of Nonqualified Deferred Compensation Arrangements
With the passage of the Patient Protection and Affordable Care Act, which provided for an increase in the Medicare tax rate for certain high earners who are members of the ERISA “top hat” group, and recent discussions about the status of Social Security and Medicare funding, it is appropriate to review the rules in Sec. 3121(v)(2) governing FICA taxation.
The Orphan Drug and Research Tax Credits: The “Substantially All” Rule
The research credit under Sec. 41 (when in effect) and the orphan drug credit under Sec. 45C are sometimes available for the same expenses incurred during the development of pharmaceuticals. Understanding how the credits work and how to maximize the benefit from both of them when they are both available can reduce taxes for eligible companies.
Details of Proposed Anti-Inversion Rules Are Revealed
The IRS followed up on the Treasury Department’s announcement that it is cracking down on corporate tax inversions by providing more detail on how the crackdown will work.
Treasury Moves to Curb Tax Inversions
The Treasury Department announced that it will take steps to curb corporate tax inversions, a growing tax minimization strategy that has been the subject of many headlines recently.
IRS Explains Power-of-Attorney Requirements for Corporate Taxpayers
The IRS issued a bulletin clarifying when corporate officers or employees must have a valid power of attorney in order to represent the company before the IRS.
IRS Broadens 70% Safe-Harbor Deduction for Investment Advisory Milestone Payments
Recent guidance is favorable to taxpayers and simplifies the determination of which milestone payments qualify for the 70% elective safe harbor.
Beware of Sec. 382 When Issuing Stock Warrants or Convertible Debt
It is important for loss corporations to understand the rules surrounding the treatment of warrants and equity conversion features under Sec. 382.
Understanding How Corporate Dividends Are Taxed to Shareholders
Shareholders recognize a taxable dividend to the extent a distribution is paid out of corporate earnings and profits. If the distribution exceeds E&P, the excess reduces the shareholder’s stock basis. Any amount in excess of the shareholder’s stock basis is capital gain.
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.
Fifth Circuit Affirms Tax Court’s Valuation of Façade Easement
The Fifth Circuit affirmed the Tax Court’s determination of the value of a façade easement, finding that the Tax Court had properly followed its instructions on remand.
Alternative Simplified Research Credit Can Now Be Claimed on Amended Returns
The IRS issued temporary regulations permitting taxpayers to elect the Sec. 41(c)(5) alternative simplified credit on an amended return, as long as the taxpayer (or a member of its controlled group) did not elect to use any other method of calculating the research credit on an original or amended return for that year.
Definitions of R&E Expenditures Are Amended Under Final Rules
The IRS issued final regulations on which amounts paid or incurred in connection with the development of tangible property, including pilot models, qualify for the Sec. 174 deduction (or amortization) for research and experimental expenditures.
Sec. 199 “Benefits and Burdens” Analysis: Key Guidance
The IRS’s primary objective with respect to any contract manufacturing arrangement is ensuring that only one party to the contract can claim to have the benefits and burdens during any qualifying activity. This protects the IRS from being “whipsawed,” i.e., being subject to claims by both parties to have the benefits and burdens during a qualifying activity.
Sec. 351 Control Requirement: Opportunities and Pitfalls
Sec. 351 allows a tax-free incorporation transfer if certain requirements are met, including that the property must be transferred to a corporation by one or more persons in exchange for stock in the corporation, and, immediately after the exchange, the transferor(s) is (are) in control (as defined in Sec. 368(c)) of the corporation.
Caution: Sec. 1234A May Apply to an Abandonment Loss
Change the character of a loss from ordinary to capital, and a taxpayer runs the risk of deferring or even failing to realize a tax benefit. While the general rules regarding characterization of gains or losses are well-known, more obscure statutory provisions can change an otherwise ordinary gain or loss into a capital gain or loss.
Sec. 1059: Adjusting More Than Basis
Sec. 1059 requires a corporate shareholder to reduce the stock basis of its subsidiary when it receives an extraordinary dividend from the subsidiary within the first two years of owning the subsidiary’s stock. The procedures for recalculating basis in that scenario are clear, but the effect of these basis adjustments on the corporate shareholder’s earnings and profits (E&P) is not as clear.
Unexpected Consequences of Changes in Entity Classifications
When entities change their classification, several income tax issues that are not immediately apparent may come into play. When these issues are discovered, they may require amending tax returns and could result in tax penalties as well.
Sec. 956 and Subpart F Inclusions, Actual Distributions, and Previously Taxed Income
Previously taxed income rules were designed to prevent double taxation of a controlled foreign corporation’s earnings. Keeping track of a foreign corporation’s earings and profits under the rules can be complicated.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
