Insights & News

Tax Insights, March 16, 2016
Tracking Tax News You Need to Know

March 16, 2016

IRS Issues Notice Relating to New Partnership Audit Rules
The IRS issued Notice 2016-23, 2016-12 IRB, asking for comments on the new partnership audit rules enacted as part of the Bipartisan Budget Act of 2015 (P.L. 114-74) (see our prior coverage here). The new partnership audit rules generally are effective for tax years beginning after Dec. 31, 2017, but parts of it can apply at the partnership’s election to tax years beginning after Nov. 2, 2015. The Notice states that the IRS intends to issue guidance for making the election in the near future and that partnerships should refrain from making the election until that time.

IRS Issues Final Regulations on Returns of Brokers Reporting Debt Instruments and Options
The IRS issued final regulations (T.D. 9750) relating to information reporting by brokers for transactions involving debt instruments and options, including the reporting of original issue discount on tax-exempt obligations, the treatment of certain holder elections for reporting a taxpayer’s adjusted basis in a debt instrument, and transfer reporting for Section 1256 options and debt instruments (section references are to the Internal Revenue Code of 1986, as amended). The proposed regulations issued in 2015 are adopted and the temporary regulations, also issued in 2015, are removed. (See our prior coverage here and here.)

IRS Updates and Expands Industry Issue Resolution Program — TE/GE Now Included
The IRS released Revenue Procedure 2016-19, 2016-17 IRB, which expands the scope of, and updates, revises and clarifies the procedures of its Industry Issue Resolution Program. The IIR Program is designed to identify frequently disputed or burdensome tax issues that are common to a significant number of business taxpayers and resolve them through published guidance. The Revenue Procedure expands the availability of the IIR Program to issues with respect to entities under the jurisdiction of the IRS’s Tax Exempt and Government Entities (TE/GE) Operating Division.

IRS Issues Ruling on Whether Interests in Disregarded Entity and Partnership Are Obligations in Registered Form
The IRS issued Private Letter Ruling 201610015, in which it ruled that interests held in a disregarded entity and a partnership are evidence of interests in a similar pooled fund within the meaning of Treasury Regulations Section 1.163-5T(d)(1) and that if the requirements of Treasury Regulation Section 5f.103-1(c)(1) are satisfied, the interests will be considered obligations in registered form.

IRS Releases International Practice Units, Including One Instructing Its Auditors on Outbound Transfer Pricing Documentation
The IRS released an International Practice Unit, Review of Transfer Pricing Documentation by Outbound Taxpayers, outlining the audit steps for its auditors to follow when reviewing the transfer pricing documentation of a U.S. taxpayer that provides tangible property, intangible property and/or services to foreign affiliates in exchange for payment. Other IPUs recently issued by the IRS cover the following topics:

Turkey-U.S. FATCA IGA Competent Authority Arrangement Available
The Turkish and U.S. competent authorities have signed an arrangement under the two nations’ 2014 intergovernmental agreement to implement the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act.

U.S. Supreme Court Will Not Review Decisions That STARS Transactions Lacked Economic Substance
The Supreme Court has decided not to review decisions of the Second and the Federal Circuit Courts of Appeal that structured trust-advantaged repackaged securities (STARS) transactions, which also are referred to as “foreign tax credit generators,” lack economic substance. The Bank of New York Mellon Corporation v. Comm. (see our prior coverage here), AIG v. U.S., (CA 2 9/9/2015) 116 AFTR 2d 2015-6014, cert denied 3/7/2016; Salem Financial Inc. v. U.S., (CA Fed Cir 5/14/2015) 115 AFTR 2d 2015-1835, cert denied 3/7/2016.

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 © 2016 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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