Alston & Bird Tax Blog

Corporate Tax Planning

Year-End Sellers Take Note: Planning Considerations with CARES Act Deferred Payroll Taxes

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The end of the year can bring new opportunities for tax planning. Our Federal Tax Group explains how 2021 year-end or 2022 sellers in M&A transactions can consider accelerating deductions for payroll taxes deferred under the CARES Act. The CARES Act does not prohibit early payments of deferred payroll taxesSellers may benefit from paying the deferred payroll tax liability before closing and accelerating the deductionsSellers should consider the overall tax impact of the additional deductions Read the full advisory here. [...]Read more

Proposed Sec. 367 Regs Say Goodbye to Goodwill Exception

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Citing aggressive taxpayer positions, recently proposed regulations do away with the foreign goodwill exception to gain or income recognition for outbound transfers under Section 367. The rules also restrict the type of property eligible for the active business exception.

Reasons for Change

Per the preamble, taxpayers interpret Section 367 and the regulations in one of two ways when claiming favorable treatment of foreign goodwill and going concern value. One interpretation argues that goodwill and going concern value are not IP within the meaning of Section 936(h)(3)(B) and thus not subject [...]Read more

Final Anti-Inversion Regulations Keep Strict 25 Percent Tests for Substantial Business Activities

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In June, the IRS and U.S. Treasury released final regulations under the anti-inversion provisions of Section 7874 (T.D. 9720). The final rules, effective for acquisitions completed on or after June 3, 2015, include a few changes from the regulations proposed in 2012. Most notably, the final rules retain the 25 percent bright-line tests for whether an expanded affiliated group (EAG) has “substantial business activities” in a foreign country for the purpose of determining whether the foreign parent of an inverted corporation will be treated as a “surrogate foreign corporation.” The controversial [...]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

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