Treasury recently finalized regulations, effective for transactions occurring after December 12, 2008, for applying the continuity-of-interest (COI) requirement to insolvent corporations (T.D. 9434).
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TOPICS
C Corporation Income Taxation
IRS Issues Helpful Regs. on the Interplay of Active Trade and Hot Stock
In response to changes made to the active trade or business requirement in the Tax Increase Prevention and Reconciliation Act of 2005, the IRS issued temporary and proposed regulations harmonizing the Sec. 355 “hot stock” rule with the TIPRA changes
Personal Goodwill: Alive and Well?
A pair of recent decisions calls into question whether the sale of personal goodwill is still available as a tax planning strategy.
Proposed Regs. Provide Model for Stock Basis Recovery and Identification
On January 21, 2009, Treasury issued proposed regulations that provide shareholders with guidance on allocating and recovering stock basis in Sec. 301 distributions (REG- 143686-07). Their purpose is to present a single model for stock basis recovery when a shareholder receives a constructive or actual distribution to which Sec. 301
Transaction Analysis: Sponsored Spin
Sec. 355 allows a corporation to distribute to its shareholders or its security holders the stock or securities of one or more corporations that it controls without triggering income or gain to itself or its shareholders.
Notice 2008-111: Recent Guidance on Intermediary Transactions
On December 2, 2008, the IRS issued Notice 2008-111, which provides guidance on transactions it considers intermediary transaction tax shelters.
Update on Determinations of Target Stock Basis in B Reorgs.
In Notice 2009-4, the IRS has proposed to amplify the methods available to an acquiring corporation (Acquiring) to estimate basis in the stock of a target corporation (Target) received in tax-free reorganizations under Sec. 368(a)(1)(B) (a B reorganization), as well as to expand the use of such methods to certain other tax-free transactions.
Regulations Eliminate “Hot Stock” Rule for Certain Reorgs.
The IRS issued regulations that generally hold that the so-called hot stock rule is inapplicable in reorganizations where a subsidiary is a member of the distributing corporation’s separate affiliated group.
Sec. 168(k)(4) Credit in Lieu of Bonus Depreciation
As part of the Housing and Economic Recovery Act of 2008, Congress enacted a special tax benefit under Sec. 168(k)(4) that allows corporations to claim a refundable tax credit in lieu of 50% bonus depreciation for certain capital investments made during the period April 1–December 31, 2008
IRS Provides a Simplified Method for Late Filing Relief
The IRS has provided a simplified method to request relief for certain late filings under Secs. 897 and 1445.
IRS Crackdown on Form 5471: A Sign of Things to Come?
In August 2008, the IRS began sending “soft” letters to corporate taxpayers warning that beginning in 2009, the Service would automatically assert penalties on any late-filed Forms 1120 that include a Form 5471.
Final Unified Loss Rule Published
In final regulations, the IRS addressed the tax consequences of a member’s transfer of loss shares of subsidiary stock and adopted the unified loss rule contained in the proposed regulations
Understanding the Effects of Nonliquidating Distributions on Corporations
Nonliquidating corporate distributions are distributions of cash and/or property by a continuing corporation to its shareholders. At the shareholder level, a nonliquidating corporate distribution can produce a variety of tax consequences, including taxable dividend treatment, capital gain or loss, or a reduction in stock basis.
IRS Issues Guidance on Sec. 382 for Corporations in the Capital Purchase Program
The IRS has issued guidance (Notice 2008-100) on the application of Sec. 382 to loss corporations whose instruments Treasury acquires pursuant to the Capital Purchase Program.
Research Credit Extended
Emergency Economic Stabilization Act of 2008 retroactively extended the research credit to amounts paid or incurred after December 31, 2007, and before January 1, 2010.
Significant Recent Corporate Developments
This article summarizes selected U.S. federal income tax developments during 2008 affecting corporations, including those filing consolidated returns.
Lenders Allowed Nonrecognition Treatment for Certain Securities Loans Terminated Due to Bankruptcy
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.
IRS Provides Guidance on Pre-Ownership Change Capital Contributions
Sec. 382 provides limitations on the amount of a pre-ownership change loss that a taxpayer can use to reduce post-change taxable income. Sec. 383 limits the use of pre-change credits and capital losses using the ownership change rules found in Sec. 382.
Temp. Regs. Allow Deemed Election to Expense Startup, Organizational Costs
Effective July 8, 2008, the IRS issued new temporary regulations to amend the rules under Secs. 195, 248, and 709 regarding elections to deduct startup expenditures and organizational expenditures of corporations and partnerships (T.D. 9411).
IRS Issues Guidance on Energy Credit
The IRS issued Notice 2008-68 to provide taxpayers with guidance on the computation and availability of the energy credit.
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