Category Archives: Partnerships

Partnership Abuse of Entity Rule Invoked in Section 367(d) Outbound IP Transaction

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Our International Tax Group explores a recent, heavily redacted Chief Counsel Advice applying the partnership abuse of entity rule to a Section 367(d) outbound IP transaction. Outbound IP transfers and Section 367(d) The partnership abuse of entity rule Interaction between the partnership abuse of entity rule and Section 367(d) successor rules Read the full advisory here. [...]Read more

Tax Reform: Invitation to the Weekly Client Update from Alston & Bird

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With tax reform officially upon us, our subject matter experts will take a deeper dive into areas that are critical to your business, such as corporate taxes, international issues, executive compensation and employee benefits, and partnerships.   The 2018 call-in series will kick off on Tuesday, January 9. All seminars will start at 11am ET and last approximately 30 minutes. Click here to RSVP and receive the dial-in information.   [...]Read more

IRS Private Letter Ruling Holds that Pass-Through Interests in Mortgages Can Qualify as Registered Form Obligations

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In late January, the IRS issued a private letter ruling (P.L.R. 201504004) dealing with whether interests in a non-grantor trust and a partnership are considered to be in registered form, a precursor to qualification for payments thereon to the portfolio interest exemption. Although the ruling answers in the affirmative, it does not ultimately state whether the particular payments addressed in the ruling would be eligible for the portfolio interest exemption. To qualify for the portfolio interest exemption, and avoid U.S. withholding tax on payments of U.S.-source interest to a foreign person, [...]Read more

Bigco Acquires Small Partnership for Stock, Tax Free

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LTRs 20122014, 20122015, 20122016, and 20122017, are identical rulings showing how the “control immediately after” requirement of section 351 really doesn’t mean that. They also show how to resolve the classic problem of a Bigco Corp. acquiring the corner grocery store tax free for Bigco stock, despite the fact that the grocery owners do not control Bigco and the grocery was not incorporated. Facts: Three individuals owned LLC, a partnership. Bigco wanted to acquire LLC for Bigco stock in a tax free exchange. We know that the individuals could not incorporate the LLC and reorganize [...]Read more

Home Concrete Decided: Taxpayer Wins

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On April 25, 2012 the Supreme Court ruled that the overstatement of the basis of property sold, resulting in a substantial understatement of gain, is not an omission from gross income, and so the three year and not the six year statute of limitations applied to the taxpayer’s assessment, meaning the assessment came too late. United States v. Home Concrete & Supply, LLP, 2012 U.S. LEXIS 3274, affirming, 634 F.3d 249 (4th Cir. 2011). Stare Decisis. The plurality opinion of Justice Breyer relied squarely on Colony, Inc. v. Commissioner, 357 U.S. 28 (1958), which appeared to have, and the [...]Read more

Avoiding the Section 338 Consistency Rules

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LTRS 201213013 and 201214012 are the same ruling, evidently issued to a buyer and a seller, in the common scenario where the seller consolidated group wants to sell subsidiary stock and the buyer wants to buy assets and obtain a cost basis; both taxpayers got what they wanted, including placing the target corporation into the buying consolidated group, without having a qualified stock purchase and thereby avoiding the consistency rules. Facts. Seller and Buyer are both privately owned domestic consolidated groups. Seller has a domestic subsidiary, Seller 2, which holds the stock of Seller’s [...]Read more

Leveraged Partnership Fails and “Should” Opinion Did Not Prevent Penalty

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In Canal Corp. v. Commissioner, 135 T.C. No. 9 (Aug. 5, 2010) the Tax Court ruled that a corporation in effect “sold” the business of its subsidiary when the subsidiary contributed the business assets to a partnership with another company that effectively wanted to “buy” the assets, and which effectively assumed complete liability for partnership borrowing used to pay cash to taxpayer amounting to a substantial part of the value of the contributed assets. More importantly, the court upheld a $36M penalty by ruling that taxpayer could not rely on a legal opinion, largely [...]Read more