Legal Updates & Commentary for Tax & Estate Planning
It is a basic precept of the tax law that the substance of a transaction, rather than its form, should determine its tax consequences when the form of the transaction does not coincide with its economic reality. This substance-over-form argument is a powerful tool in the hands of a taxing authority.
According…
It is not uncommon for a partner to engage in a business transaction with a partnership of which he is a member. If the partner engages in a transaction with his partnership other than in his capacity as a partner, he will be treated as if he were not a member of the partnership with…
Last week, we considered the U.S. taxation of a closely held foreign corporation that owned a minority interest in a partnership that was engaged in business in the U.S. This week, we turn our sights to the U.S. taxation of a domestic corporation that owned foreign corporate subsidiaries.
Policy Underlying the CFC Rules
In…
Whether they are acquiring an interest in U.S. real property or in a U.S. operating company, foreigners seek to structure their U.S. investments in a tax-efficient manner, so as to reduce their U.S. income tax liability with respect to both the current profits generated by the investment and the gain realized on…
Earlier this year, the President directed the Secretary of the Treasury to review all “significant tax regulations” issued on or after January 1, 2016, and to take steps to alleviate the burden of regulations that meet certain criteria.
Although not falling within the literal reach of this directive, but perhaps in…
A Borrower and a Lender Be
Everyone recognizes the importance of debt financing to a business. The business needs liquidity to purchase or improve assets, or to pay expenses. It borrows the necessary funds from an institutional lender that requires their repayment a fixed date or according to a fixed schedule. In order to compensate…
In the sale of a business, it is the goal of every business owner and his tax adviser to minimize the amount of gain recognized and, to the extent gain is recognized, to maximize the amount that is treated as capital gain.
The gain realized on…
If the amount realized by a taxpayer upon the sale of a partnership interest to a third party is insufficient to restore to the taxpayer his adjusted basis for the interest – i.e., his unrecovered investment in the partnership – a loss is sustained to the extent of the difference…
Many years ago, Congress decided that taxpayers who were “related” to one another should be required to use the same accounting method with respect to transactions between them in order to prevent the allowance of a deduction to one party (using the accrual method of accounting) without the corresponding inclusion in income…
In the course of valuing a target business, a potential buyer will want to develop an accurate picture of the target’s earnings and cash flow. In doing so, the buyer will try to normalize those earnings by “adding back” various target expenses that the buyer is unlikely to incur in the ordinary course of…
