Tax News

CCH (cch.taxgroup.com) reports:

 
In his January 7, 2009, State of the State address, New York Gov. David Paterson proposed imposing a surcharge on sales of sugared beverages to help curb childhood obesity and placing a cap on property taxes to promote economic development. Paterson also called for reforming the current Enterprise Zone program to increase corporate accountability for creating jobs and investing in their facilities.
 
State of the State Address , New York Gov. David Paterson, January 7, 2009

CCH (cch.taxgroup.com) reports:

 
The Massachusetts Department of Revenue has adopted a cigarette and tobacco amendment to the confidentiality of tax information regulation to allow an exception to the prohibition on disclosure with respect to information regarding licenses issued by the Commissioner, the minimum pricing of cigarettes, and other related non-tax information.
 

Details, which were outlined in an emergency regulation, were reported in a previous story. ( TAXDAY, 2008/10/08, S.6 )
 

Final Reg. 830 CMR 62C.21.1, Massachusetts Department of Revenue, effective December 26, 2008

CCH (cch.taxgroup.com) reports:

  Assets held by acquired subsidiaries in a consolidated group had to be depreciated under the Accelerated Cost Recovery System (ACRS) on the basis of the subsidiaries' short tax year, rather than the tax year of the acquiring parent, even though the parent elected to treat the acquisition of the stock of the subsidiaries as an acquisition of assets under Code Sec. 338. By electing to treat the acquisition as an asset purchase, the old target corporations disappeared, and new taxable entities, unrelated to the old target corporations, came into existence the following day. These entities had new tax attributes, including a new tax year (which was a short tax year) and a new tax basis for assets. The new subsidiaries were deemed to have directly acquired the assets of the old target corporations, at which point the assets were placed in service and subject to the half-year convention.

  For consolidated groups, the depreciation rules applicable to each member of a consolidated group, rather than the rules applicable to the parent, control the amount of the depreciation deduction the parent may take. Because the assets were placed in service and used by the subsidiaries, their short tax years, rather than the parent's tax year, were the relevant tax years for applying the half-year convention.

  Although an IRS Technical Advice Memorandum, a Field Service Advice, and a nondocketed advice review might have suggested a contrary result, such informal IRS documents are not authoritative.

Brunswick Corporation, DC Ill., 2009-1 USTC ¶50,131

Other References:

 
Code Sec. 167

  CCH Reference - 2009FED ¶11,025.21

 
Code Sec. 168

  CCH Reference - 2009FED ¶11,258.022

 
Code Sec. 338

  CCH Reference - 2009FED ¶16,288.35

 
Code Sec. 1502

  CCH Reference - 2009FED ¶33,168.03

 
Code Sec. 6110

  CCH Reference - 2009FED ¶39,988.51

  Tax Research Consultant

  CCH Reference - TRC DEPR: 3,050
CCH Reference - TRC CONSOL: 3,200
CCH Reference - TRC CCORP: 30,100
 

CCH (cch.taxgroup.com) reports:

  The IRS did not show by clear and convincing evidence that two attorneys filed their returns with the intent to evade tax with regard to contingency fees; consequently, the three-year period of limitations under Code Sec. 6501(a) applied, and the IRS was barred from assessing any deficiencies. As a result of their contingency fee agreement with their landowner clients, the taxpayers believed they had an ownership interest in land that was the subject of litigation. Pursuant to this interest, the attorneys, representing themselves as landowners, made an election to defer their contingency fee income under Code Sec. 1033(a). However, state law does not convert an attorney-client relationship into a partnership or joint venture for purposes of federal tax law; thus, the nonrecognition provisions of Code Sec. 1033(a) were not applicable to the attorneys.

  Although the taxpayers erroneously believed that the legal fees qualified for nonrecognition treatment and made an underpayment of tax based on that belief, their behavior with respect to the understatements did not demonstrate fraudulent intent. The attorneys did not understate their income, maintain inadequate records, present implausible or inconsistent explanations of their behavior or conceal income or assets. Furthermore, they filed tax returns, cooperated with tax authorities throughout the case and did not engage in illegal activities, file false documents or deal in cash. Because the statute of limitations was not extended due to fraud, the IRS could not assess deficiencies with respect to the tax year at issue.

D.C. Loeb, TC Memo. 2009-6, Dec. 57,707(M)

Other References:

 
Code Sec. 1033

  CCH Reference - 2009FED ¶29,650.71

 
Code Sec. 6501

  CCH Reference - 2009FED ¶38,967.28

  Tax Research Consultant

  CCH Reference - TRC SALES: 27,050
CCH Reference -
TRC IRS: 27,212
 

CCH (cch.taxgroup.com) reports:

  The IRS has released temporary guidance regarding stock distributions by publicly traded regulated investment companies (RICs). Previously issued guidance in Rev. Proc. 2008-68, I.R.B. 2008-52, 1373, applied only to distributions by publicly traded real estate investment trusts (REITs).

  A stock distribution by a RIC or a REIT is treated as a dividend under Code Sec. 301 provided:

  (1) the RIC or REIT makes the distribution to its shareholders with respect to its stock;

  (2) the RIC or REIT's stock is publicly traded on an established U.S. securities market;

  (3) the distribution is declared with respect to a tax year ending on or before December 31, 2009;

  (4) each shareholder may elect to receive the entire amount due under the declaration either in money or stock subject of equivalent value, subject to a limitation on the amount to be distributed in the aggregate to all shareholders (the cash limitation);

  (5) the number of shares to be received by any shareholder will be determined, as close as practicable to the payment date, using a formula that is designed to equalize the value of the shares with the amount of money that could be received instead; and

  (6) shareholders participating in a dividend reinvestment plan (DRIP) meet certain requirements.

 
Rev. Proc. 2008-68, I.R.B. 2008-52, 1373, is amplified and superseded.

Rev. Proc. 2009-15, 2009FED ¶46,236

Other References:

 
Code Sec. 305

  CCH Reference - 2009FED ¶15,402.026

  CCH Reference - 2009FED ¶15,402.1385

  Tax Research Consultant

  CCH Reference - TRC RIC: 3,000
CCH Reference -
TRC RIC: 6,150

CCH (cch.taxgroup.com) reports:

  Senate Democratic leaders on January 7 unveiled an ambitious agenda for the start of the 111th Congress that focuses on economic recovery and reinvestment through job creation, energy independence and middle-class tax relief. Instead of rolling out the first 10 bills of the new Congress, the leadership painted a broad picture of the areas they intend to address and some of the ways they plan to achieve benefits through legislative action. With a renewed focus on the middle-class, Senate Majority leader Harry Reid, D-Nev, said Democrats will push legislation to address stabilizing the housing market and investment firms, rising costs of higher education, health care and providing for elderly parents.

  Senate Majority Whip Richard Durbin, D-Ill., said additional middle-class tax relief would come in the form of increased college tuition tax credits and elder care credits, tax breaks for the purchase of college textbooks and, to enhance savings, an increase in the allowable IRA contributions. On the environmental front, Democrats plan to invest heavily in renewable energy and energy efficiency through tax credits aimed at business owners.

  There will also be a heavy emphasis on affordable health care, with promises to lower costs, protect existing coverage and extend coverage to the some 46 million Americans who have none. Democrats also promised to restore confidence in the economy by protecting consumers from Wall Street abuses and protecting homeowners from foreclosure. Leadership said it will address those issues by increasing transparency and accountability in those areas to prevent risky bets that threaten the whole system. They also promised to protect consumers by preventing predatory lending and stabilizing credit markets.

  By Jeff Carlson, CCH News Staff

Tax Analysts report: