May 23, 2017

Net Operating Losses: A Valuable Asset Worth Preserving

May 23, 2017/ Ruchelman P.L.L.C.

Troubled companies that incur significant net operating losses (“N.O.L.’s”) can carry back those losses for up to two years in order to obtain refunds of tax. In addition, the losses can be carried forward for up to 20 years to reduce future taxable income. However, the losses cannot be monetized through transfers to others. Code §§382 and 269 and separate return limitation year (“S.R.L.Y.”) provisions under the consolidated tax return regulations are designed to prevent taxpayers from selling the benefit of the N.O.L. directly or indirectly. Philip R. Hirschfeld explains how the loss limitation rules are applied when (i) a change occurs in the ownership of the loss corporation, (ii) a reshuffle of profitable and unprofitable businesses occurs to benefit from a “mixing bowl” effect, or (iii) companies with existing losses enter an affiliated group filing a consolidated Federal income tax return.

April 28, 2017

Tax Home v. Abode – Are They the Same for Code §911 Purposes?

April 28, 2017/ Ruchelman P.L.L.C.

Section 911 of U.S. tax law provides certain tax benefits to persons who report foreign earned income. To be entitled to the benefits, an individual must have a “tax home” abroad, provided that he or she does not have an “abode” in the U.S. A recent summary opinion by the Tax Court illustrates the difference between those two terms. Rusudan Shervashidze and Philip R. Hirschfeld explain.

April 28, 2017

Tax Concerns on Outbound I.P. Transfers: Pitfalls & Planning in Light of I.R.S. Defeat in Amazon Case

April 28, 2017/ Ruchelman P.L.L.C.

In the 21st century, the method of apportioning income from intangible property (“I.P.”), between the various jurisdictions in which the I.P. is developed, owned, and used or consumed, is contentious. This was evidenced in a recent Tax Court case, Amazon.com, Inc. & Subsidiaries v. Commr., which dealt with transfer pricing rules applicable to an outbound transfer of I.P. and a related cost sharing agreement. Philip R. Hirschfeld discusses the case in the context of Code §367(d), which relates to outbound transfers of I.P., and Treas. Reg. §1.482-7, which addresses qualified cost sharing agreements.

March 31, 2017

Good News for REITs Investing in Non-US Real Estate→

March 31, 2017/ Ruchelman P.L.L.C.

Published in the GGi Insider, No. 88, March 2017 (p. 44).

March 27, 2017

Implementing the Border Adjustment Tax: Winners & Losers

March 27, 2017/ Ruchelman P.L.L.C.

The border adjustment tax will harm certain companies and aid others. To be expected, exporters like the proposal and importers hate it. Philip R. Hirschfeld and Kenneth Lobo look at the industries that will be winners and those that will be losers if the border adjustment tax is adopted. Strangely, each side argues that employment will be increased if its position is adopted, an example of how voodoo economics support a politicized tax proposal.

February 21, 2017

I.R.S. Rules Subpart F & P.F.I.C. Income Inclusions Are R.E.I.T. Qualifying Income

February 21, 2017/ Ruchelman P.L.L.C.

A R.E.I.T. is a tax-favorable investment entity used for investment in real estate and real estate mortgages. R.E.I.T.’s that invest in non-U.S. real estate often make such investments through foreign corporate entities that may be classified as C.F.C.’s or P.F.I.C.’s. Qualification as a R.E.I.T. requires the entity to meet certain income and passive asset tests designed to ensure that a R.E.I.T.’s gross income is largely composed of passive income related to real estate or real estate mortgage investments. In a recent private letter ruling, income from a R.E.I.T.’s ownership of C.F.C.’s and P.F.I.C.’s was determined to be passive investment income, thereby providing favorable treatment for the R.E.I.T. Elizabeth V. Zanet and Philip R. Hirschfeld explain the R.E.I.T. rules and the private letter ruling.

January 26, 2017

Insights Vol. 4 No. 1: Updates & Other Tidbits

January 26, 2017/ Ruchelman P.L.L.C.

This month, we look briefly at several timely issues, including (i) the termination of foreign acceptance agent agreements used to confirm copies of passports outside the U.S. when a non-U.S. individual obtains an I.T.I.N., (ii) a court order in Canada upholding a demand for disclosure of client names and documentation relating to participation in a discredited tax shelter, (iii) E.U. steps that identify potentially blacklisted low-tax or no-tax countries, and (iv) worsening relations between the U.S. and the E.U. stemming from widening differences in tax policies.

January 26, 2017

Looking to the Future: European Efforts Against Tax Evasion Take Center Stage – Where Will It Take Us?

January 26, 2017/ Ruchelman P.L.L.C.

A globalized economy has been the driving force behind cross-border tax transparency and increased dissemination of tax information in recent years. The importance of F.A.T.C.A. reporting has paled as the O.E.C.D. Common Reporting Standard has taken effect in the E.U., State Aid cases are progressing, and country-by-country reports may be publicly available. Europe and the U.S. are moving in different directions. Philip R. Hirschfeld and Stanley C. Ruchelman explain.

December 22, 2016

The Resurrection of Code §385: Treasury Department Revises Regulations on Related-Party Debt

December 22, 2016/ Ruchelman P.L.L.C.

In 2016, the U.S. Treasury Department resurrected an area of the tax law that lay dormant for almost 40 years – the debt-equity regulations under Code §385. As we reminisce on the best of 2016, we offer detailed analysis of the new tax treatment adopted under Code §385. These comprehensive and detailed regulations address whether a debt instrument will be treated as true debt for U.S. income tax purposes or re-characterized, in whole or in part, as equity.

December 22, 2016

The 2016 U.S. Model Income Tax Treaty

December 22, 2016/ Ruchelman P.L.L.C.

On February 17, 2016, the U.S. Treasury Department released its 2016 Model Treaty. This month, as we reminisce on the best of 2016, we review significant revisions to the baseline text from which the U.S. initiates treaty negotiations.

October 26, 2016

O.E.C.D. Reaction to Research Tax Incentives – Acceptance with a Limitation Blocking Mobility

October 26, 2016/ Ruchelman P.L.L.C.

Notwithstanding the war on State Aid within the E.U., the O.E.C.D. issued a Working Paper recognizing that the encouragement of R&D is an essential part of the development, innovation, and growth of an economy and that carefully tying incentives to the performance of R&D locally is not abusive. Philip R. Hirschfeld and Galia Antebi explain.

August 29, 2016

Crowdfunding: A Popular Way to Invest, but Watch Out for Taxes

August 29, 2016/ Ruchelman P.L.L.C.

Crowdfunding is an internet-based form of raising capital for businesses and other endeavors that is popular with millennials. Millions of dollars are raised each month through crowdfunding, but it is unlikely that much thought has been given to the tax consequences for investors and the companies being funded. The ways in which crowdfunding transactions are structured vary significantly, and as a result, the tax consequences vary. In Information Letter 2016-0036, the I.R.S. explains its view of the tax consequences. The tax consequences may not be benign for the company raising the funds unless certain conditions exist. Philip R. Hirschfeld and Elizabeth V. Zanet explain the I.R.S. view.

June 30, 2016

Property Contributions to Partnerships with Related Foreign Partners

June 30, 2016/ Ruchelman P.L.L.C.

The Tax Section of the American Bar Association recently commented on a set of proposed rules that appear in Notice 2015-54. When adopted, these rules would limit the ability of U.S. persons to transfer appreciated property to a partnership in a tax-free transaction when the partnership has a non-U.S. person as a partner. The I.R.S. is concerned that through special allocations of gain, built-in appreciation in contributed assets may escape taxation. The Tax Section makes a case for additional guidance concerning the methods proposed to eliminate that result. Philip R. Hirschfeld and Nina Krauthamer discuss the I.R.S. proposal and A.B.A. comments.

June 30, 2016

Proposed Reporting Requirements for Foreign-Owned U.S. Disregarded Entities

June 30, 2016/ Ruchelman P.L.L.C.

Recently-proposed regulations will require information reporting for single member L.L.C.’s that are owned by non-U.S. persons and treated as disregarded entities. Typically, this structure is used for the acquisition of an apartment by camera-shy, high net worth individuals and offshore trading companies wishing to appear as U.S. persons. The regulations are designed to supply the I.R.S. with information about the operations and ownership so that information may be exchanged with tax treaty partner jurisdictions. Philip R. Hirschfeld and Nina Krauthamer examine the proposed reporting rules.

May 23, 2016

Related-Party Debt: Proposed Code §385 Regulations Raise Major New Hurdles

May 23, 2016/ Ruchelman P.L.L.C.

In a follow-up piece on newly proposed anti-inversion regulations, Phillip R. Hirschfeld offers a detailed analysis of new debt equity regulations. Mind-boggling complexity is proposed for rules in an area of the tax law that lay dormant for almost 40 years.

April 29, 2016

Insights Vol. 3 No. 4: F.A.T.C.A. 24/7

April 29, 2016/ Ruchelman P.L.L.C.

This month, Galia Antebi and Philip R. Hirschfeld discuss (i) the growing list of countries with which the I.R.S. will exchange F.A.T.C.A. information, (ii) the litigation in Canada attempting to block F.A.T.C.A. exchanges with U.S., (iii) recent developments in acceptably encryption for F.A.T.C.A. exchanges, (iv) additional competent authority agreements, and (iv) an updated list of I.G.A. partner countries.

April 29, 2016

Inversions Under Siege: New Treasury Regulations Issued

April 29, 2016/ Ruchelman P.L.L.C.

On April 4, 2016, the Treasury Department issued a third round of new rules under Code §7874 aimed at halting the wave of inversions. Already, at least one inversion transaction, involving pharmaceutical giants Pfizer and Allergan, has been scuttled. Beyond that, the new rules resuscitate regulations issued under Code §385. Philip R. Hirschfeld explains.

March 31, 2016

Insights Vol. 3 No. 3: F.A.T.C.A. 24/7

March 31, 2016/ Web Admin

This month, Galia Antebi and Philip R. Hirschfeld discuss (i) changes to F.A.T.C.A. regulations designed to ease burdens on F.F.I.’s; (ii) continued I.R.S. interest in public comments; (iii) finalization of domestic entity reporting regulations under Code §6038D; (iv) an exemption from F.A.T.C.A. for a Swiss attorney’s confidential client escrow accounts; (v) competent authority agreements that have been reached with Brazil, Colombia, and Italy; and (vi) an updated list of I.G.A. partner countries.