Insights & News

Tax Insights, October 21, 2015
Tracking Tax News You Need to Know

October 21, 2015
Publications

IRS Extends Applicability Date on Embedded Loan Rule for Nonperiodic Payments
The IRS amended the recently issued temporary regulations under Section 446 relating to nonperiodic payments made or received pursuant to certain notional principal contracts to extend the applicability date of the embedded loan rule for the treatment of nonperiodic payments from Nov. 4 to the later of Jan. 1, 2017, or six months after the date of publication of final regulations adopting these rules.

Publicly Traded Partnership’s Income Will Be Qualifying Income
The IRS ruled, in Private Letter Ruling 201541008, that income earned by a publicly traded partnership from the transportation, storage and marketing of fuel will constitute qualifying income for purposes of Section 7704(d)(1)(E) (section references are to the Internal Revenue Code of 1986, as amended).

IRS Rules on Publicly Traded Partnership’s Status as Partnership
In Private Letter Ruling 201541009, the IRS ruled that the cancellation and reissuance of units of a limited partnership interest pursuant to an employee compensation program would not be treated as a transfer under Treasury Regulation Section 1.7704-1(a)(3) for purposes of determining whether the partnership should be taxed as a corporation under the publicly traded partnership rules. Under the facts of the ruling, Y contributed its assets to X in a transaction governed by Section 721 (a nonrecognition transaction upon a contribution of property to the partnership in exchange for an interest in it) and thereafter, the principal business activity of Y became owning units of a limited partnership interest in X. At the time of the transaction, Y offered its unit holders a one-time opportunity to exchange their Y units for X units on a 1-for-1 basis. X units are not publicly traded and are subject to substantial transfer restrictions.

Circuit Court Affirms Transactions Lacked Economic Substance
In Kearney Partners Fund LLC et al. v. United States, the Eleventh Circuit, in a per curiam opinion, affirmed a district court decision that upheld administrative adjustments against a group of related partnerships based on its determination that transactions engaged in by the partnerships lacked economic substance and should be disregarded for federal tax purposes.

IRS Finds Refund Allowed Due to Election to Deduct Foreign Income Taxes
In Chief Counsel Advice 20154010, the IRS concluded that a taxpayer’s claim for refund was timely because the taxpayer made a Section 901 election to deduct foreign taxes paid within the 10-year period under Section 6511(d)(3)(A), and the taxpayer filed its claim for refund based on a net operating loss carried from a year within the period extended by an agreement under Sections 6511(d)(2)(A) and 6511(c).

IRS to Update Its Procedures for Administrative Appeals of Tax Court Cases
In Notice 2015-72, 2015-44 IRB, the IRS provided a proposed revenue procedure which will update its published description of the IRS administrative appeals process in cases docketed in the Tax Court.

IRS Updates FATCA FAQ Providing Guidance on Foreign Partnership and Trust Agreements
The IRS updated its list of frequently asked questions to provide information on the effective date of an entity’s withholding foreign partnership (WP) or withholding foreign trust (WT) agreement, if the entity submits an application for WP or WT status on or after Apr. 1 and is approved for such status.

Competent Authority Arrangement to Gibraltar-U.S. IGA Available
The Gibraltar and U.S. competent authorities have signed an arrangement under the two countries’ 2014 intergovernmental agreement to implement the Foreign Account Tax Compliance Act.

California Passes Legislation Conforming Tax Law to Federal Tax Treatment of ABLE Accounts
California law (L. 2015, S324 (c. 796), effective 01/01/2016 and applicable to tax years beginning on or after 01/01/2016) generally conforms the California personal income tax law to the federal tax treatment of Achieving a Better Life Experience (ABLE) accounts as set forth in Section 529A. Contributions to ABLE accounts must be made in cash and are not deductible for California tax purposes, and the additional federal contribution, rollover and distribution rules generally apply except that any ABLE distribution includible in income is subject to an additional 2.5 percent tax for state tax purposes (in lieu of the 10 percent additional tax that is imposed for federal purposes), unless the distribution is made after the death of the designated beneficiary.

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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