Insights & News

Tax Insights, September 16, 2015
Tracking Tax News You Need to Know

September 16, 2015
Taxpayers Lose on Economic Substance, but Interest Is Deductible
In Bank of New York Mellon Corp. v. Commissioner and American International Group., Inc. v. United States, the Second Circuit, in a combined opinion, affirmed the Tax Court’s and the district court’s rulings, respectively, and held that the economic substance doctrine applies to transactions involving foreign tax credits. The court found that both the district court and the Tax Court properly determined the tax implications of the cross‐border transactions entered into by AIG and of the STARS transaction entered into by Bank of New York Mellon (including the deductibility of interest paid on the underlying loan).

REIT Dividend Treated as Distribution of Property
In Private Letter Ruling 201536016, the IRS ruled that cash and shares of common stock distributed by a real estate investment trust will be treated as a distribution of property by the REIT with respect to its stock to which Section 301 applies by reason of Section 305(b) (section references are to the Internal Revenue Code of 1986, as amended). The IRS further ruled that since the REIT regularly distributes its earnings and profits, the amount of the distribution of the stock to which Section 301 applies received by any shareholder of the REIT electing to receive stock will be considered to equal the amount of money that the shareholder could have received instead.

IRS Addresses Unearned Premium, Loss Reserves Determinations
In emailed advice, the IRS provided guidance on determining the amount of an insurance company’s unearned premium and loss reserves, noting that the guidance is based on advice that Section 265 does not allow a deduction for expenses incurred with respect to tax-exempt income.

IRS Says Tax Matters Partner Must Be General Partner
In emailed advice responding to an undisclosed question, the IRS explained that a tax matters partner must be a general partner/manager of the entity or otherwise have state law authority to act on the entity’s behalf.

Vendor Access to FATCA-Related Database Is Permissible
In emailed advice, the IRS advised that its disclosure of the foreign financial institutions database to a vendor for purposes of a demonstration to determine whether to enter into a contract with the vendor for the performance of technical services to identify noncompliance with the Foreign Account Tax Compliance Act would be permissible under Section 6103(k)(6). Section 6103 generally provides that tax returns and tax return information are confidential and are not subject to disclosure, except in limited situations where disclosure is warranted. The disclosures described in the emailed advice are appropriate and helpful to the IRS’s official duties, the IRS added.

IRS Publishes Final Regulations on Minimum Required Pension Contributions
The IRS has published final regulations providing guidance on the determination of minimum required contributions for single-employer defined benefit plans and on the excise tax for failure to satisfy the minimum funding requirements for defined benefit pension plans. The regulations apply to plan years beginning on or after Jan. 1, 2016. IRS Releases Audit Technique Guide on Structured Settlements
The IRS has released an audit techniques guide for examining cases involving the application of the Section 5891 excise tax on structured settlement factoring transactions.

St. Kitts and Nevis-U.S. FATCA Agreement Available
The FATCA agreement between St. Kitts and Nevis and the United States is now available.

Information on Amending Reports Added to FATCA Systems FAQs
The IRS has released a revised list of frequently asked questions on the systems that are used for FATCA data, including how to amend or void a FATCA Report in the XML Schema.

IRS Updates Rules for Substitutes of Revised Form 941
In Rev. Proc. 2015-38, 2015-36 IRB 295, the IRS has updated the rules and specifications for paper and computer-generated substitutes for Form 941, “Employer’s Quarterly Federal Tax Return”; Schedule B, “Report of Tax Liability for Semiweekly Schedule Depositors”; and Schedule R, “Allocation Schedule for Aggregate Form 941 Filers.” The revenue procedure will be reproduced as the next revision of IRS Publication 4436, General Rules and Specifications for Substitute Form 941, Schedule B (Form 941), Schedule D (Form 941) and Schedule R (Form 941).

IRS Releases Practice Units on Inbound Liquidations and Accounting for Intangibles, Services

The IRS made available two international practice units regarding (1) an overview of accounting for intangibles and services associated with the sale of tangible property-outbound and (2) an overview of an inbound liquidation of a controlled foreign corporation into a U.S. corporate shareholder. 

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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