Category Archives: Federal – Corporate Tax Planning

Tax Change Planning

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With tax cuts likely coming, it might make sense to consider establishing a C corporation for some new businesses. Our Federal Tax Group offers tax planners several different ways of thinking. Tax Reform Act of 1986 Payment of dividends and stock buybacks Less advantageous structures Read the full advisory here. [...]Read more

Second Inversion Notice

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The Treasury issued the new Notice 2015-79 to beef up the anti-inversion section 7874. It contains three rules applicable to deals closing after the Notice and two rules that are retroactive to the 2014 Notice’s effective date. Those two rules increase the potential taxability of post-inversion restructurings. The three prospective rules are the most surprising and potentially harmful to taxpayers seeking to invert. They all relate to the use of holding company structures, which are common in cross border tax planning. Holding company structure rules: If the foreign acquiring corporation [...]Read more

Déjà Vu All Over Again – The Recurring Saga of Expiring Tax Provisions

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If you go by what Yogi Berra says, tax policy and baseball have a lot in common.  Just as we head toward the end of the regular season of baseball and hope we make it to play-offs, Congress is doing the same.  Having returned from the August recess, they are looking ahead at what they need to do to finish strong.  As for déjà vu, the atmosphere surrounding expired tax provisions is markedly similar to what it was last year around this time.  Will the result be different this year?  Maybe.  Let’s take a look at the issues and what’s happened so far. Discussions of tax reform have [...]Read more

“Nobody Loses All The Time”: Remembering Negative Precedents

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The IRS can have a long memory when it comes to rulings and decisions against taxpayers. Even with the seemingly all-purpose economic substance doctrine in its utility belt, the IRS sometimes dusts off old precedents to attack transactions. Revenue Ruling 80-239, 1980-2 C.B. 103, and Basic, Inc. v. United States, 549 F.2d 740 (Ct. Cl. 1977) are two anti-taxpayer authorities that targeted perceived abuses that are now largely obsolete. Nevertheless, the IRS may still invoke these precedents for support in totally different situations. Taxpayers should be aware of how the IRS might use [...]Read more

Tax Policy Update – Nov. 1 – What to Expect From the Lame Duck Session

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What does Congress NEED to get done in a lame duck session?  The continuing resolution (CR) Congress passed just before leaving for the campaign trail funds the federal government just through December 11, so Congress will need to extend funding.  That’s clearly a driving force in the lame duck. There are also tax provisions that many would like to see addressed – the CR extended the Internet Tax Freedom Act  just through December 11, and there are a whole host of business and individual tax provisions (including the very popular R&D credit) that expired at the end of 2013 or will expire [...]Read more

Federal Tax ADVISORY: Hook Stock Split Down

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LTR 201404002 Rev. Proc. 2014-3 provides that the IRS won’t issue rulings on “the treatment or effects of hook equity, including as a result of its issuance, ownership, or redemption.” It defines hook equity as “an ownership interest in a business entity (such as stock in a corporation) that is held by another business entity in which at least 50 percent of the interests (by vote or value) in such latter entity are held directly or indirectly by the former entity.” But a recent ruling involved hook stock and predated the no-rule. LTR 201404002 involved a surprising but somewhat common [...]Read more

Federal Tax ADVISORY: Last Granite Trust Ruling LTR 201419011

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This advisory discusses GraniteTrust Co. v. U.S., which ruled that a parent’s sale of more than 20 percent of the stock of a subsidiary to an unrelated person was a proper set up for a taxable liquidation of the subsidiary, and how even though the IRS announced it would no longer rule on Granite Trust -type liquidations, there are still several rulings in the pipeline—most recently, LTR 201419011. The advisory is provided on the Alston & Bird website: www.alston.com/advisories/fed-tax-june-2014 [...]Read more

Federal Tax ADVISORY: Important No-Rule Changes: Rev. Proc. 2014-3

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One of the most important bellwethers of what the IRS is thinking is the annual revenue procedure that announces the issues on which the IRS ordinarily will not rule, or never will rule, or will not rule because the issue is under study. The IRS always numbers the procedure “3” and issues it on New Year’s Day. This advisory discusses Rev. Proc. 2014-3. The full advisory is provided on the Alston & Bird website: www.alston.com/advisories/fed-tax-feb-2014 Written by Jack Cummings, Partner, Tax | Alston & Bird LLP [...]Read more

Federal Tax Advisory: Statutory Interpretation Still Lives

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This advisory discusses United States v. Woods, where the Supreme Court of the United States ruled that the substantial valuation misstatement penalty could be determined in a TEFRA audit and applied when the audited partnership was found to violate the economic substance doctrine. To the Fifth Circuit, that meant that the partnership was a sham that did not exist for federal income tax purposes. Because the partnership did not exist, the partners could not have any basis in their partnership interest. When they reported having any basis at all, that basis must have been more than 400 percent greater [...]Read more

Section 336(e) and S Corporations

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The regulations issued in 2013 putting Section 336(e) into effect allow a result like that of a Section 338(h)(10) election when the buyer is not a corporation. Like the Section 338(h)(10) election, the Section 336(e) election can be made by shareholders selling an S corporation, as well as when one corporation sells the stock of another corporation. Therefore, unlike Section 338(h)(10), a Section 336(e) election can be made in a case like this: Example 1: A and B each own 50 percent of the stock of S corporation. Partnership Private Equity Firm (PPEF) wants to buy the stock and have a Section [...]Read more