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.
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TOPICS
C Corporation Income Taxation
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.
IRS Revises Interim Guidance on Production Tax Credit for Refined Coal
In Notice 2010-54, the IRS modifies the definition of refined coal, allows certain processing of utility-grade coal to be taken into account for determining emissions reductions, and revises testing protocols.
IRS Releases Some Annual Inflation Adjustments, Many Unchanged for 2011
The IRS released its annual revenue procedure making inflation adjustments for various credits and other tax items.
IRS Updates Guidance on Adequate Disclosure of Positions
The IRS has released updated guidance identifying when a taxpayer’s disclosure of an item or position in an income tax return is adequate for purposes of reducing the understatement of tax penalty and the tax return preparer penalty for understatement due to unreasonable positions.
Final Regs Issued Requiring Uncertain Tax Position Disclosure Statement
The IRS issued final regulations requiring some corporations to file a Schedule UTP, disclosing their uncertain tax positions when filing a return.
Reorganizations and Tax Attribute Survival
Whether tax attributes will survive corporate tax reorganizations often becomes a critical consideration in assessing the ramifications of a proposed transaction. This item discusses issues surrounding these reorganizations and emphasizes the need for practitioners to have a good foundational understanding of the relevant rules.
Payments Under Forbearance Agreements Held Partially Deductible
The Tax Court held that payments by a company to investors for agreeing to temporarily forgo making an election to redeem stock were not interest payments; however, it further held that some of the payments were deductible ordinary and necessary business expenses.
Deepwater Horizon and Sec. 162
This item examines the deductibility of fines and penalties incurred by BP in the Deepwater Horizon explosion.
Deferral of Loss from Sale or Exchange Between Members
The IRS rejected a parent corporation’s argument that it was entitled to take into account a loss arising from its sale of domestic subsidiary (Sub1) stock to a foreign subsidiary (Sub2) as a result of the domestic subsidiary’s later liquidation.
Unrealized Built-in Gains and Losses Under Sec. 382 and the Tax Accounting Rules
Do not forget to consider the tax accounting method rules (for accrued income or expense items) when dealing with Sec. 382.
Hypothetical Independent Investor Test Tips the Scale in a Reasonable Compensation Case
This item examines the Tax Court’s focus on five factors in determining the reasonableness of a company’s sole shareholder’s compensation in the recent Multi-Pak Corp. decision.
IRS Set to Roll Out Uncertain Tax Positions Schedule
This column examines the concerns about the scope and direction of the IRS’s quest to roll out Schedule UTP, Uncertain Tax Position Statement, for tax year 2010.
Congress Votes to Limit Use of Foreign Tax Credits
P.L. 111-226 makes changes to how corporations can use the foreign tax credit and also terminates the advance refundability of the earned income credit (under Sec. 3507), effective for tax years beginning after December 31, 2010.
IRS Releases Final Schedule UTP, Incorporates Changes
In two announcements, the IRS unveiled a number of significant changes to its plan to require certain business taxpayers to report uncertain tax positions on their tax returns and issued a final version of Schedule UTP.
IRS Issues Proposed Regs Requiring Disclosure of Uncertain Tax Positions
The IRS issued proposed regulations that would require certain business taxpayers to report uncertain tax positions on their tax returns.
Extended NOL Carrybacks and the AMT
The addition and expansion of the Sec. 172(b)(1)(H) election has created numerous tax planning opportunities for corporations that have sustained NOLs; the ability to change the character of election-year ATNOLs creates an additional benefit of making this election.
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.
