The Tax Exchange - March 2016

Partnership varying interest regulations now effective

In the summer of 2015, the IRS issued final varying interest regulations under section 706, amending proposed regulations originally issued in 2009. The regulations are effective for tax years beginning on or after Aug. 3, 2015.

Flip or flop—a cautionary tale of renovation and taxation

In a recent U.S. Tax Court case, the IRS challenged the ordinary loss treatment of a foreclosed piece of residential real estate. The taxpayer worked in the field of commercial real estate construction and development for approximately 35 years and also purchased residential real estate properties that he hoped to rent or tear down, rebuild and sell.

States beginning to respond to federal partnership changes

On Nov. 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015, which repealed the so-called TEFRA partnership audit procedures enacted in 1982 and replaced them with a single unified audit, adjustment and collection system for all partnerships for tax years beginning after 2017. The voluntary procedures for electing large partnerships were also repealed.

IRS denies S corporation an ordinary loss on worthless stock

A recent IRS internal legal memorandum dealt a potential blow to S corporations hoping to take an ordinary (rather than capital) loss when a subsidiary becomes worthless.

Tax-related ID theft and tax data security issues continue to plague IRS

Despite IRS efforts to fortify data security and prevent tax-related identity theft, a malicious automated bot used approximately 101,000 stolen Social Security numbers to attempt to generate e-file personal identification numbers (PINs) through the IRS website in late January 2016.

Delaware to shift to single sales factor apportionment

Delaware recently enacted legislation that, among making other changes, will gradually phase in single sales factor apportionment for corporate income tax purposes for tax years beginning on or after Jan. 1, 2017.

European Union anti tax avoidance

The European Commission is advancing its crusade for fair and efficient taxation in the European Union (EU) through proposals contained in an anti-tax avoidance package. The package is most likely in response to the Organisation for Economic Co-operation and Development’s base erosion and profit shifting project and increased cross-border demands for a stronger approach to fighting tax abuse.

Leasing your office or building? Be mindful of this tax pitfall

If you lease office space or buildings, you may take advantage of lease agreements that contain free rent periods or increasing rent payments over time.