Recent events have drawn attention to the disallowance of deductions where allowing the deductions would violate public policy. This article discusses the disallowance of deductions under Sec. 162 and Sec. 165 for public policy reasons.
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TOPICS
C Corporation Income Taxation
Schedule UTP: IRS Mandates Disclosure of Uncertain Tax Positions
This article explores the requirements of Schedule UTP, discusses modifications to the IRS’s policy of restraint pertaining to tax reconciliation workpapers, and suggests how to avoid the inadvertent waiver of the work-product privilege for documents relating to uncertain tax positions.
Capitalizing a Corporation with Loans from Shareholders
This item discusses how best to design a corporation’s capital structure to allow corporate cash to be withdrawn without incurring double taxation, with a focus on how to capitalize the corporation with loans from shareholders.
IRS Allows Deduction for Payments for Preferred Stock Used to Settle Bank’s Lawsuits
In a private letter ruling, the IRS’ Office of Chief Counsel allowed a private bank catering to high-wealth individuals to deduct as ordinary and necessary trade or business expenses the payments it made to settle lawsuits arising from criminally fraudulent activities by one of the bank’s fund managers.
AICPA Recommends Ways IRS Could Reduce Schedule M-3 Burdens
The AICPA encouraged the IRS to collaborate with external stakeholders in revising Schedule M-3, Net Income (Loss) Reconciliation, and suggested some revisions to reduce taxpayers’ compliance burdens.
IRS Issues Proposed Regulations on Controlled Group Deferred Losses
The IRS issued proposed regulations on the time for taking into account deferred losses on the sale or exchange of property between members of a controlled group.
One-Year Extension of the ARRA Grant for Specified Energy Property
This item provides an overview of the Section 1603 renewable energy grant program, which was extended for one year by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
A Trap for the Unwary in the COI Regs.
Vagueness about how long the stock of the acquiring corporation had to be retained after the acquisition led to a significant change to the continuity of interest regulations in 1998, which eliminated the requirement that the stock of the acquiring corporation be retained post-acquisition.
Reporting Uncertain Tax Positions
This item explores the differences between financial statement reporting and federal income tax return disclosure in preparing for disclosure of uncertain tax positions on the Schedule UTP,
Noncompete Covenants in Mergers and Acquisitions: Compensation or Capital Gain?
This item discusses the tax rules surrounding the treatment of noncompete covenants and cautions against overreliance on financial accounting reporting in making tax determinations.
Uncertain Tax Position FAQs Posted
The IRS has posted a series of questions and answers (FAQs) about the new requirement for large corporations to report their uncertain tax positions.
Sec. 168(k)(4)—Credit in Lieu of Bonus Depreciation
The election under Sec. 168(k)(4) to claim a refundable tax credit in lieu of bonus depreciation has been extended again for certain property placed in service during 2011 and 2012 as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.
IRS Determines That Dual Purpose Photovoltaic Property Qualifies as Energy Property
Many taxpayers calculating the amount of the energy credit available under Sec. 48 face a hurdle in determining whether certain structural components that serve a dual purpose qualify as energy property. In Letter Ruling 201043023, the IRS addresses this issue in the context of a photovoltaic (PV) curtain wall and provides a valuable road map for taxpayers to analyze such issues.
Computing the Research Credit for Consolidated Groups
This item examines how to compute the research credit for consolidated groups. The credit is determined by a calculation that is dependent on not only current-year QREs but also prior years’ activity.
Final Regs. Issued Requiring Uncertain Tax Position Disclosure Statement
The IRS issued final regulations requiring some corporations to file a Schedule UTP, Uncertain Tax Position Statement, disclosing their uncertain tax positions when filing a return.
Deductibility of Forbearance Payments
In Media Space, Inc., the Tax Court held that a corporation’s payments to its shareholders to delay redemption of their preferred shares were generally deductible under Sec. 162. However, the court further held that a company would be required to capitalize forbearance agreement payments under the 12-month rule in Regs. Sec. 1.263(a)-4(f)(1) if there was a reasonable expectancy of the agreement’s renewal.
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.
Changing Corporations’ Accounting Methods
A corporation that has adopted an accounting method cannot change that method simply by amending prior-year income tax returns; IRS permission is required to change methods.
IRS Introduces Final Schedule UTP with Modifications
The issuance of a final schedule and instructions makes it important for companies with assets of $100 million or more that issue audited financial statements to prepare for filing the Schedule UTP with their 2010 tax returns.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
