Converting a C Corporation into an LLC

Article:  Converting a C corporation into a limited liability company (LLC) allows the C corporation shareholders to continue to have limited liability while acquiring the advantages of passthrough taxation, but the heavy tax cost of the conversion normally will be prohibitive.
Published on January 28, 2011

Debt or Equity Financing Analyzing Relevant Factors

Article:  Debt or equity reclassification can significantly alter the intended tax consequences of financial instruments. Unfortunately, the absence of a quantitative method of weighing relevant factors within legislative and administrative authority sources has resulted in an extensive amount of litigation regarding debt-equity classifications.
Published on January 28, 2011

The Story of Basis

Article:  Basis is a beneficial concept for a taxpayer—it shields the taxpayer from tax on the sale of an asset and can produce losses that reduce tax liability. It has been described as a “summary of the tax impact of [past] events” that have affected an asset. Nevertheless, basis can be
Published on January 28, 2011

Applying the Material Participation Standards to Nongrantor Trusts

Article:  A taxpayer may deduct losses generated from passive activities only to the extent of the income from such activities. For this purpose, any trade or business or other income-producing activity is passive with respect to a taxpayer if the taxpayer does not materially participate in the activity.
Published on January 28, 2011

Penalty for Failing to Meet EIC Due Diligence Requirements Can Be Assessed Against Employer or Employee

Article:  The Office of Chief Counsel (OCC) advised that after the amendments to the regulations in T.D. 9436 in December 2008, the IRS continues to have the authority to assert the penalty against either the employee-preparer of a return or his or her employer for failing to meet the earned income
Published on January 28, 2011

Energy Star Rebates Reduce Basis

Article:  The Office of Chief Counsel (OCC) advised that a taxpayer should treat a rebate for purchasing an Energy Star product as a reduction of the basis of the product purchased and not as income.
Published on January 28, 2011

State Tax Considerations of Passthrough Entities

Article:  This column highlights areas of concern regarding state taxation of passthrough entities, including entity classification, conformity to federal tax conduit treatment, and tax reporting obligations.
Published on January 28, 2011

Overpayment Interest Accrues on First-Time Homebuyer Credit

Article:  The Office of Chief Counsel (OCC) advised that the Sec. 6111 general interest rules applicable to overpayments of tax apply to the first-time homebuyer credit.
Published on January 28, 2011

IRS Issues Prop. Regs. on Use of PTINs After 2010

Article:  Tthe IRS issued proposed regulations that would require paid return preparers to use a preparer tax identification number (PTIN) on all tax returns after December 31, 2010.
Published on January 28, 2011

Final Regs. Govern Deductibility of State Legislators Deemed Living Expenses

Article:  The IRS and Treasury released final regulations on the availability of a special deduction for deemed living expenses of state legislators (T.D. 9481).
Published on January 28, 2011

U.S.-Switzerland Protocol Will Allow Handover of UBS Account Holder Information

Article:  The United States and Switzerland announced a new protocol to allow the Swiss government to provide information to the IRS on U.S. account holders of Swiss bank UBS.
Published on January 28, 2011

IRS Publishes FAQs on Small Business Health Care Credit

Article:  On April 1, the IRS published on its website 22 questions and answers about the new small business health care tax credit.
Published on January 28, 2011

IRS Issues Fifth Directive on the Allocation of Mixed Service Costs

Article:  The IRS has been scrutinizing how taxpayers have allocated mixed service costs to self-constructed assets under Sec. 263A.
Published on January 28, 2011

IRS Releases HIRE Act Employee Affidavit Form

Article:  The IRS released new Form W-11 for certifying that employees are qualified employees for purposes of tax benefits under the Hiring Incentives to Restore Employment (HIRE) Act.
Published on January 28, 2011

Treatment of Defective Merchandise Allowances May Provide Guidance for Other Trade Discounts

Article:  CCA 200945034 provides guidance on the proper tax accounting for defective merchandise vendor allowances.
Published on January 28, 2011