The IRS issued final regulations on sales-based royalties and vendor allowance rules.
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TOPICS
C Corporation Income Taxation
Earnout Restriction Causes Substantial Risk of Forfeiture
The Tax Court held that sections of a restricted stock agreement and an employment agreement read together constituted an earnout restriction that might create a substantial risk of forfeiture for stock transferred to an employee.
2014 Car, Truck Depreciation Limits Issued
The IRS issued the 2014 inflation adjustments to the depreciation limitations and lease inclusion amounts for certain automobiles under Sec. 280F.
Cost Basis Denied Due to Failure to Meet the All-Events Test
The Court of Federal Claims denied approximately $1.6 billion in cost basis related to decommissioning liabilities assumed in connection with the purchase of three nuclear power plants.
Cloud Computing and the Credit for Increasing Research Activities
This item focuses on how a taxpayer’s rental expenses for cloud computing for purposes of research and development of new products and solutions should be treated under the Sec. 41 research tax credit.
Solving a Problem With Sec. 338 Purchase-Price Allocations
This item illustrates the surprising problem that can arise Sec. 338 purchase-price allocations and suggests a solution.
Sec. 382 Final Regs. for Small Shareholders
This item provides a brief background on the regulations under Sec. 382 and then discusses the two substantive changes and some planning opportunities.
Sec. 199 Contract Manufacturing Guidance May Encourage Taxpayers to Agree on Benefits and Burdens
Directives issued by the IRS Large Business & International Division describe circumstances in which the IRS will not challenge the taxpayer’s position that it has the benefits and burdens of ownership for purposes of the Sec. 199 deduction.
Hook Stock and Sec. 355: Did a Distribution Occur?
By invoking an exception to the requirement that a distributing corporation must distribute “all of the stock and securities in the controlled corporation,” the IRS implicitly held that a distribution on hook stock should not be respected.
Final and Reproposed Tangible Property Regs. Broadly Affect Taxpayers in Oil and Gas Industry
The final and reproposed tangible property regulations will significantly affect the oil and gas industry. Specifically, the unit-of-property determination has different implications for oil and gas companies, depending on which segment the companies operate in.
“Beginning of Construction” for the Renewable Electricity Production and Energy Investment Tax Credits
The IRS clarified Notice 2013-29 defining the beginning of construction for purposes of the Sec. 45 renewable electricity production tax credit and the Sec. 48 energy investment tax credit.
Proposed Regs. Clarify Research Expenditure Eligibility Under Sec. 174
The IRS in September issued proposed regulations clarifying the application of Sec. 174 to the costs to create “pilot models” or prototypes. The proposed rules state that the reason a taxpayer creates a prototype or other product, and not its subsequent sale or use, determines whether it qualifies under Sec. 174.
IRS Finalizes Regs. Addressing Limitations on Transfers of Built-In Losses
The IRS issued final regulations under Sec. 362(e)(2) that provide guidance on the determination of the bases of assets (including stock) transferred in certain nonrecognition transactions to which Sec. 362(e)(2) limitations on built-in losses apply.
Sec. 631(b) and the Taxation of Standing Timber Sales
Under Sec. 631(b), gains or losses from the sale of standing timber are considered gains and/or losses from the sale of business use property.
Heightened Emphasis on Worker Classification
Worker classification has been a major concern for many years. While it is clear that government agencies recognize that worker misclassification is a significant problem, how to classify workers remains unclear.
IRS Issues Repair/Tangible Property Regulations
The IRS issued long-awaited final and proposed regulations regarding the treatment of expenditures incurred in acquiring, producing, or improving tangible assets.
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.
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.
Proposed Regulations Change Definition of R&D Expenditures
The IRS provided guidance on the treatment under Sec. 174 of research and development expenditures incurred in connection with the development of tangible property, including pilot models.
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.
