The IRS has recently published proposed regulations in late January of this year, REG-140649-11; 2013-12 IRB 666; that would revise existing rules pertaining to the consequences that U.S. persons face for failing to file GRAs and related documents , or to satisfy other reporting obligations, in connection with making transfers of property to foreign… Continue Reading
On May 15, 2013 the Service and the Treasury issued final regulations with respect to the election available under Section 336(e) which allows certain sales, exchanges, and distributions by a domestic corporation of another corporation’s stock as taxable sales of that corporation’s assets. (emphasis added). The final regulations, effective on May 15, 2013, adopt,… Continue Reading
Section 367(a)(1) provides, in general, that a taxable realization event occurs with respect to transfers of appreciated property by a U.S. person to a foreign corporation in connection with any exchange described in Sections 332, 351, 354, 355, or 361. Moreover, Section 367(e) applies similar principles to outbound liquidation distributions under Section 337 and distributions under Section 355(c). There are certain exceptions from this rule of broad application. Section 367(a)(3)(A) allows nonrecognition treatment for assets used in the active conduct of a trade or business transferred outside of the United States (subject to expansion or contraction by regulations). See Treas. Regs. § 1.367(a)-2T (1986). Med Chem (P.R.) v. Comm’r, 116 TC 308 (2001), aff’d 295 F.3d 118 (1st Cir. 2002) . Assets that are ineligible for the active foreign business exception (i.e., tainted assets) are listed in Section 367(a)(3)(B) and include: (i) inventory and copyrights not otherwise taxed under Section 367(d); (ii) installment obligations and receivables; (iii) foreign currency or property denominated in foreign currency; (iv) other intangibles not subject to Section 367(d); and (v) property that is presently leased (other than to the transferee).
In T.D. 9600, which was issued last Fall, the Service issued final regulations modifying the new markets tax credit (“NMTC”) program to promote investments in non-real-estate businesses in low-income communities. The final regulations became effective on September 28, 2012 and adopt, with two modifications, the proposed regulations (REG 101826-11) which were published in June,… Continue Reading
While the final regulations have thoughtfully responded to comments and criticism lobbied at the 2003 proposed regulations, the characterization rule as well as the corrective allocation rule as set forth in the final regulations, will be burdensome for lawyers and tax advisors to properly interpret and guide clients through. Consider what the tax opinion to the issuance of an economically sizeable NCO or set of NCOs will have to consider or evaluate. What about the annual tax compliance burdens associated with making sure a characterization (“measurement event”) has not resulted in one or more NCOs to be treated as partners. And, in the same vein, what must be done from a compliance standpoint if a change in NCO status has occurred?
The Treasury and the Service have long been aware that for many FFIs operating in certain foreign jurisdictions, the domestic law of such jursidction would prevent an FFI from reporting directly to the IRS the information required by the FATCA and underlying regulations. In response, the Treasury worked with various foreign countries in developing two alternative model intergovernmental agreements that facilitate the implementation of FATCA in a manner that avoids foreign law hurdles and yet fosters Congress’ intent in enacting FACTA. At present there are seven countries that have signed as parties to an IGA, under one of two “model” agreements.
Last Winter the Service issued guidance in Notice 2012-15 under Sections 367(a) and (b) for certain transfers of stock to foreign corporations in exchange for property described under Section 304(a)(1). In the Notice, the Treasury and the IRS announced it would later amend the Section 367 rules to incorporate the guidance. The Notice completely reversed the prior regulations treatment of Section 304(a)(1) as overriding, for the most part, application of Section 367(a) or Section 367(b).
In place of the proposed of the covered opinion rules under Section 10.35, the IRS proposed a new competence standard for all practitioners that requires each individual practicing before the Service to have “the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.”
Effective April 19, 2012, the Treasury and IRS published final regulations (T.D. 9584) on the information reporting by financial institutions of interest paid to nonresident alien individuals on deposits held on U.S. offices of certain financial institutions. Proposed regulations had been issued on the subject in January, 2011. The 2011 proposed regulations withdrew… Continue Reading
In TD 9558, issued late last year, Temporary Regulations were promulgated on the determination of the basis of stock or securities in a reorganization where no stock or securities of the issuing corporation are issued and distributed in the transaction, and, in particular, the treatment of “all cash D reorganizations”. Where no stock or securities… Continue Reading
At a recent tax ALI-ABA corporate taxation conference held in Washington on March 30, Brenda Zent, a lawyer from the Office of International Tax Counsel, U. S. Treasury, was quoted as stating that many decisions remain to be answered under the corporate inversion regulations under Section 7874, including points raised in IRS Notice… Continue Reading
Last November 17th, the Treasury and the Service issued final regulations (TD 9557) concerning the tax impact of a contribution of partnership indebtedness to a partnership in exchange for an interest in the partnership. These Regulations, effective for debt-for-equity exchanges occurring after 11/16/11, implement changes in Section 108(e)(8) that were adopted by Congress in… Continue Reading
Congress, in 2010, enacted a new set of rules on the required reporting and withholding with respect to foreign financial accounts and nonfinancial foreign entities in Pub. L. No. 111-147, §501 (2010)(the “HIRE ACT”). This legislation added Chapter 4 of Subtitle A of the Code which was originally introduced as part of… Continue Reading
In December, 2011, the Treasury promulgated final, temporary, and proposed regulations to cost-sharing agreements (CSAs) which are effective on December 16, 2011. The final regulations adopt the effective date and transaction date rules under the 2009 temporary regulations (T.D. 9441) so that they are generally applicable for all CSAs, with transition rules for… Continue Reading
The Internal Revenue Service has just published a first set of temporary regulations (T.D. 9567) under section 6038D requiring foreign financial assets of U.S. persons to be reported to the IRS for federal income tax purposes for tax years beginning after March 18, 2010. The text of the temporary regulations also serves as the… Continue Reading
On December 19, 2011, the Service issued final regulations (T.D. 9563) with respect to foreign base company sales income under §954(d) for situations involving the sale of personal property by a corporation foreign corporation (CFC) which is purchased, sold, manufactured, produced, grown, extracted, or constructed by one or more branches of the CFC. The… Continue Reading
Several years ago, the Service published Temp. Reg. §1.1502-13T along with Proposed Regulations which addressed the tax consequences with respect to intercompany gains of subsidiary stock that was part of a consolidated group of corporations. The final regulations adopt the Proposed Regulations with some changes and further revises the Temporary Regulations. Treas. Reg. 1.1502-13(c) provides general rules and principles by… Continue Reading
In May, 2008, temporary and proposed regulations were issued under §367(b) to address the Service’s concern about the tax impacts arising from certain triangular reorganizations involving foreign corporations, a/k/a “Killer B” transactions, in which a subsidiary purchases, in connection with the reorganization, stock of its parent corporation in exchange for property, and exchanges the parent corporation’s stock for… Continue Reading
On March 4, 2011, the Treasury issued T.D.9515, containing final regulations on the treatment of certain intercompany gains with respect to stock owned by members of a consolidated group. The regulations provide for the redetermination of intercompany gain excluded from gross income in certain transactions involving stock transfers between members of a consolidated group…. Continue Reading
On January 6, 2011, the Treasury and the Internal Revenue Service proposed regulations (REG-146097-09) that would require U.S. banks to file annual reports of interest income paid to nonresident alien individuals. Current regulations, set forth in §6049, only require U.S. banks to report bank deposit interest paid to a U.S. person or to a non-resident… Continue Reading
On September 13, 2010, the Service, in REG-119921-09, issued somewhat landmark proposed regulations concerning the classification for Federal tax purposes of a series of a domestic series limited liability company (LLC), a cell of a domestic cell company, or a foreign series or cell that conducts an insurance business. The proposed regulations provide that, whether or… Continue Reading
On August 11, 2010, the Service issued temporary regulations (T.D. 9498) under §108(i)’s election to defer cancellation of indebtedness income for corporations, partnerships and S corporations. The provision was enacted as part of the American Recovery and Reinvestment Act of 2009 and was intended by Congress to allow business to defer COD income ratably over… Continue Reading
On June 8, 2010, the Service issued final regulations providing that the section 704(c) anti-abuse rule takes into account the tax liabilities of both the partners in the partnership as well as certain direct and indirect owners of the partnership. T.D. 9485 (Treas. Reg. §1.704-3). The regulations apply to tax years commencing after June 9,… Continue Reading
When the terms of a debt instrument (e.g., mortgage, note or bond) are modified by agreement, the modification may be significant enough to result in a deemed taxable exchange of the original debt instrument for a “new” debt instrument. This outcome, which has tax impacts on both the lender and the borrower, was announced in… Continue Reading