Insights & News

Tax Insights, November 11, 2015
Tracking Tax News You Need to Know

November 11, 2015

IRS Rules on Tax Consequences of Stock and Cash Distribution
In Private Letter Ruling 201544015, the IRS ruled that a distribution of stock and cash made by a publicly traded corporation intending to elect to be treated as a real estate investment trust will be treated as a distribution of property with respect to stock to which Section 301 applies (section references are to the Internal Revenue Code of 1986, as amended) and that the amount of stock received by a shareholder in the distribution will be considered to equal the amount of cash that the shareholder could have received instead.

Nonprofit’s Weekly Event Is Not Related to Exempt Purpose
In a Technical Advice Memorandum (TAM-T-105599-15), the taxpayer, which was a nonprofit public benefit corporation formed to develop and maintain an alumni association for a community college and to provide financial and civic support for the benefit of the college, derived most of its revenue from leasing spaces to vendors to sell products at an outside market held every weekend. The IRS concluded that the operation of the market is not substantially related to the taxpayer’s exempt purpose and is an unrelated trade or business. For the taxpayer’s conduct to be substantially related to its exempt purposes, it must contribute importantly to those purposes other than through the production of income. While the operation of the market produces income that enables the taxpayer to accomplish its exempt purposes, the taxpayer failed to show that the operation of the market otherwise contributes importantly to an exempt purpose.

IRS Clarifies Guidance on Basket Option Contracts and Basket Contracts
The IRS has clarified guidance (Notice 2015-73; 2015-46 IRB 1 and Notice 2015-74; 2015-46 IRB 1) that identifies basket option contracts, basket contracts and substantially similar transactions as listed transactions, amending sections 2.01 and 2.05 of each notice to replace the phrase “effective date of this notice” with Jan. 1, 2011.

S Corporation Partners in a Partnership Met the Shareholder Limit After Restructuring
In Private Letter Ruling 201544020, the IRS ruled that two S corporations would continue to qualify as S corporations following a restructuring in which the two corporations will enter into a partnership and the shareholders of the two corporations together may exceed 10, but neither corporation will separately have more than 100 shareholders.

2015 FATCA Agreements Between San Marino and the U.S. and Between Azerbaijan and the U.S. Are Available
The text is available of the agreements signed by San Marino and the United States and by Azerbaijan and the United States to improve international tax compliance and implement the information-reporting and withholding tax provisions of FATCA.

Competent Authority Arrangements to Guernsey and Luxembourg IGAs Available
The Guernsey and U.S. and the Luxembourg and U.S. competent authorities have each signed arrangements under the respective jurisdictions’ intergovernmental agreements to implement the information-reporting and withholding tax provisions of FATCA.

Treasury Releases Explanation of Japan-U.S. Treaty Protocol
The Treasury Department released its technical explanation of the protocol signed on Jan. 24, 2013, amending the Convention between the United States and Japan for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and the protocol, which forms an integral part of the Convention, signed Nov. 6, 2003.

IRS Releases Several International Practice Units
The IRS made available the following international practice units on:

Corrections Made to Final Regulations on Partner’s Distributive Share
The IRS made corrections to the final regulations (TD 9728), including errors in the preamble, on determining a partner’s distributive share of partnership items of income, gain, loss, deduction and credit when a partner’s interest varies during a partnership taxable year. Corrections to the regulations include correcting a table of contents, examples, section headings, some text of the regulations and dates in examples. The corrections to the regulations can be found here, and the corrections to the preamble (and some text) can be found here.

IRS Corrects Proposed Regulations on Treatment of Outbound Transfers
The IRS has corrected errors in the preamble to and in the text of proposed regulations (REG–139483–13) on the treatment of certain transfers of intangible property by U.S. persons to foreign corporations under Section 367.

IRS Announces Adjustments to Pension Plan Limitations for 2016
In Notice 2015-75, the IRS has announced the dollar limitations, as well as cost-of-living adjustments, for pension plans that become effective Jan. 1, 2016.

Treasury Launches myRA Retirement Savings Account
Taxpayers can now contribute all or part of their federal income tax refunds (or contribute from a checking or savings account) to a new tax-free myRA retirement savings vehicle available at

IRS Releases 2015 Form 5227 on Split-interest Trusts
The IRS has released a final version of the 2015 Form 5227 “Split-Interest Trust Information Return”; split-interest trusts make distributions to both charitable and noncharitable beneficiaries while providing tax benefits to their donors.

IRS Releases Draft Form 1042-S for 2016
The IRS has released for 2016 a draft Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding,” incorporating some changes including additions to the list of chapter 3 and chapter 4 status codes.

IRS Releases 2015 Form and Instructions for Foreign Financial Assets Reporting
The IRS has released for 2015 the final Form 8938, “Statement of Specified Foreign Financial Assets,” which is used to meet reporting requirements under FATCA. The instructions for the Form 8938 were also released, notifying Part IV filers of a new checkbox on the inclusion of forms that they report in Part IV of Form 8938.

Maryland Circuit Court Affirms Nexus Based on Lack of Economic Substance
The Maryland Court of Appeals in In re ConAgra Brands Inc.; Case No.: C-02-CV-15-993 has affirmed the decision of the Maryland Tax Court that concluded that the taxpayer, an intangible holding company, was entirely reliant upon the support services and income of its parent company and could not have functioned without its backing. Further, it ruled that the substantial activity of the holding company was intertwined with the acts of the parent. Therefore, the holding company lacked any economic substance separate from its parent and was assessed corporate income taxes.

Louisiana Tax Amnesty Program Open Nov. 16 to Dec. 15
The Louisiana Department of Revenue announced that Louisiana Tax Amnesty 2015 begins on Nov. 16, 2015, and will run through Dec. 15, 2015.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

Copyright © 2015 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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