Reports | Robert Willens

377 Results

What is "Computer Software": January 6, 2009; Many important tax determinations depend on whether property is properly characterized as "computer software". For example, where an acquisition of a trad...

The Obama Stimulus Plan Has a Tax Component: January 5, 2009; It now appears clear that President-elect Obama's stimulus plan will, perhaps to secure Republican approval of the plan, be heavily freighted with tax reductions. W...

Tax Considerations for Victims of "Ponzi Schemes": January 5, 2009; There have been severaldecided cases and I.R.S. pronouncements addressing the Federalincometax issues faced by victims of "Ponzi Schemes"...

Open Market Purchaser Denied Theft Loss Deduction: January 2, 2009; P Corporation (P) had purchased, on the open market, shares in Novatek (N) on six separate occasionsduring 1995 and 1996. P purchased the shares through a sto...

Can Pre and Post-Judgment Interest Be Deducted?: December 31, 2008; In CCA 200836025, May 20, 2008,a taxpayer (T)was called upon to pay judgments in product liability suitsin connection witha product it had b...

Deducting Fines and Penalties: December 30, 2008; In FAA (Field Attorney Advice Memorandum)20084301F, September 25, 2008, States X, Y, and Z each filed a lawsuit against taxpayer, (T), in Federal court, accus...

FASB Sets New Disclosure Requirements for "Financial Assets": December 29, 2008; FSP FAS No. 107-a establishes enhanced disclosure requirements for certainfinancial assets. It amends the disclosure requirements set forth in SFAS No. 107,&n...

Payments to Avoid "Breaking the Buck": December 29, 2008; The I.R.S. has issued numerous pronouncements this year designed to insure that adverse tax consequences do not get in the way of transactions that are otherwise he...

Options Can Reduce Corporate AMT Obligations: December 26, 2008; Although the Alternative Minimum Tax (AMT) has received the bulk of its notoriety for the privations it visits on individual, "middle-class", taxpayers, t...

Deferring Estate Tax With Closely-Held Business Interests: December 24, 2008; In order to insure that the estate tax can befunded without having to precipitouslyliquidate the business the value of which accounted for the bulk, if...

FASB Will Relax "Impairment" Rules: December 23, 2008; There have been numerous complaints lodged with the Financial Accounting Standards Board (FASB) regarding the rigidity of the rules that currently exist with respec...

Preserving Reorganization Treatment: December 23, 2008; InLTR 200842029, July 18, 2008, FC, a foreign corporation, created a domesticsubsidiary, MS, with andinto which T Corporation (T),an unrelat...

Will the Auto Bailout Dissipate GM's NOLs?: December 22, 2008; Oneelement of the "auto bailout" is the requirement that the recipients of the Treasury Department's loan, G.M. and Chrysler, reduce their funded in...

Continuity of Interest and the "Signing Date Rule": December 22, 2008; In order for a merger to qualify as a reorganization it must, among severalother requirements, exhibit continuity of interest (COI). It will...

Senator Grassley May Pursue Inversions: December 19, 2008; A once popular transaction, commonly known as an "inversion", is, due to a combination of unfavorable publicity and legislative actions, no longer being p...

"Start-Up" Expenditures Are Not Currently Deductible: December 18, 2008; Even though times are, to put it mildly, challenging, we have witnesseda number of new hedge funds (and other businesses, such as tax and accounting advisory servic...

A "Casual" Gambler's Wagering Activities Have Tax Implications: December 18, 2008; The tax code provides, in Sec. 165(a),that there shall be allowed as a deduction any loss sustained during the taxable year (which is)not compensated fo...

Cinematic Alternative Investment: December 17, 2008; Hedge funds interested in investing in "the arts" may be encouraged to do so by certain beneficial tax rules that have recently been extended for an addit...

Eli Lilly and "In-Process" R&D/Goodwill Impairments: December 17, 2008; Eli Lilly (LLY) recently completed the acquisition of ImClone. As a directresult of that acquisition, LLY dramatically reduced its earnings forecast for 2008....

Liberty Media Will Split-Off Liberty Entertainment: December 16, 2008; Liberty Media Corporation (L) recently announced that its board of directors has authorized a plan to distribute to the holders of its Liberty Entertainment group t...

Financial Institutions Receive More Treasury Largesse: December 16, 2008; One of the lesser known aspectsof the government's reaction to thecredit crunch has been an unprecedented relaxation by Treasury and the I.R.S. of punit...

Tax Issues Arising From The Madoff Revelations: December 15, 2008; Investors caught up in the apparent fraud perpetrated by Mr. Bernard Madoff (BM) may find that certain Federal income tax provisions,dealing with taxpayers wh...

Accruing Rights Fees: December 12, 2008; FAA (Field Attorney Advice)20084101F, June 11, 2008, addresses the case of a taxpayer (T) which is a TV network and cable/satellite programming provider. T&nb...

Sec. 382 and the "Auto Bailout": December 11, 2008; During the course of the credit crisis, the Treasury Department and the I.R.S. have taken steps to neutralize aspects of Sec. 382 of the Internal Revenue Codew...

A REIT Can Pay Its Dividends In Its Stock: December 11, 2008; Sec. 857(b) provides that "there is hereby imposed for each taxable year on real estate investment trust taxable income of every realestate investment tr...

U.S./U.K. Treaty Does Not Override Internal Revenue Code: December 11, 2008; Recently, in AM 2008-009, August 21, 2008, the I.R.S. was called upon to answer a question that had been posed to it by numerous taxpayers. The question involved th...

The Nature of a Put Option With Respect to ESOP Stock: December 10, 2008; LTR 200841042, June 17, 2008, addresses the case ofa corporation (T) which maintains an Employee Stock Ownership Plan (ESOP). The plan provides that "the...

Tax Issues Arising From TRB's Filing: December 9, 2008; Tribune Co. (TRB) announced, on December 8, 2008, that it is filing for bankruptcy. Tribune is an 'S' corporation and, presently, all of its outstanding stock is ow...

FASB Opines on "Going Concern" and "Subsequent Event" Issues: December 9, 2008; The Financial Accounting Standards Board, (FASB), on October 9, 2008, issued two Proposed Statements of Financial Accounting Standards ("Exposure Drafts) one d...

A "Passive" Partner Can Be "Active" for Spin-Off Purposes: December 8, 2008; Under what circumstances, if any, can a partner in a partnership be treated as engaged in the active conduct of a trade or business, for purposes of the spin-off ru...

When Is Option Income Reported?: December 5, 2008; The tax consequencesarising fromexercising an employee stockoption are governed by Sec. 83 of the Internal Revenue Code. In general, income (equal...

Taxpayer Not a "Victim" of the 9/11 Terrorist Attacks: December 4, 2008; It is often said that almost every aspect of life and deathembodies a tax consequence and this point was recently made painfully clear in a decision rendered...

GW/PDS--No "Helen of Troy" Problem: December 3, 2008; Grey Wolf International, Inc. (GW) is scheduled to merge, later this month, with and into a controlled subsidiary of Precision Drilling Trust (PDS)for a combination of cash an...

Bailing Out of Midway Games: December 3, 2008; National Amusements, Inc. (NAI), Sumco, Inc. (SI), and Mr. Redstone himself (SMR) announced that, on November 28,2008, each had sold its entire interest in Midway Games,...

Curtailing DRD "Arbitrage": December 3, 2008; In an attempt to prevent what might be termed "tax arbitrage" the tax law contains rules that are designed to prevent the unfettered enjoyment of certain...

AllianceBernstein's Competitive Advantage: December 2, 2008; AllianceBernstein Holding L.P. (AB)has a competitive advantage vis a vis its peers that operate as C corporations. AB, by contrast, is a partnership and a par...

Does Notice 2008-91 Incorporate Jacobs Engineering?: December 1, 2008; Where a controlled foreign corporation (CFC)--a foreigncorporation more than 50 percent of the stock of which is owned by one or more U.S. persons who each&nb...

Treating a Stock Transfer as an Asset Transfer under Sec. 336(e): November 28, 2008; Sec. 336(e) was enacted some 22 years ago, in The Tax Reform Act of 1986 (P.L. 99-514), in connection with the repeal, in that Act, of the so-called"Gene...

H.R. 7300 Is Premised on "Separation of Powers": November 26, 2008; Sec. 382(a) of the Internal Revenue Code is designed to inhibit a practice, referred to pejoratively, as"trafficking" in net operating losses (NOLs)...

Can An Acquirer's NOLs Offset a Target's Profits?: November 25, 2008; Many companies, particularly in the environment in which we currentlyfind ourselves,are in possession of copiousnet operating losses (NOLs) which...

Requiem for Notice 2008-83: November 24, 2008; Where a "loss" corporation experiences an "ownership change", the amount of taxable income, for any taxable year ending after the date of the ow...

I.R.S. Issues Regulations Regarding "Outbound" Reorganizations: November 24, 2008; Where a domestic corporation acquires the properties of another domestic corporation in a transactionwhich qualifies as a reorganization--for example, in...

Berkshire Hathaway Takes A Stake in Goldman Sachs: November 21, 2008; Goldman Sachs (GS) recently announced that it had reached an agreement with Berkshire Hathaway (BH) in connection withwhich GS will issue to BH50,000 sh...

Taxes and Debt Swaps: November 20, 2008; It seems inevitable, as the credit crisis moves into new stages, that many debtors will be seeking to refinance outstanding indebtedness that, under current conditi...

Gannett Is a Unitary Business: November 20, 2008; In 1995, Gannett (G) purchased the stock of Multimedia, Inc. (MM). G immediately sold off MM's entertainment and security alarm businesses but chose not to sell its...

The Investment Company Rules and REIT Formations: November 19, 2008; When property is transferred to a corporation in exchange for stock in such corporation, the exchange will be tax-free to the transferors (even though the value of...

Capital Contributions Can Affect NOL Usage: November 18, 2008; Sec. 382(a) of the Internal Revenue Code provides that the taxable income of a "new loss corporation", (1) for a taxable year follow...

Fannie and Freddie Establish a Valuation Allowance: November 17, 2008; The third quarter earnings reports for both Fannie Mae and Freddie Mac embody massive non-cash charges resulting, primarily, from the establishment, by each such entity, of a substa...

MLPs and Tax-Exempt Organizations: November 17, 2008; Sec. 7704(a) of the Internal Revenue Code provides, as a general rule, that a publicly-traded partnership (PTP or MLP) "shall be treated as a corporation"...

I.R.S.'s Views Regarding The Auction Rate Securities Settlement: November 14, 2008; As many investors now know all too well, an auction rate security (ARS) is a security in which the payment rate is reset periodically pursuant to an auction rate se...

JPM's Unusual "Capital Raise": November 13, 2008; A parent company's share of the earnings of a subsidiary is included in consolidated earnings simply by inclusion of the subsidiary in the consolidated financial st...

Exelon/NRG--Are Two Steps Sufficient?: November 13, 2008; Exelon Corp. (EXC) recently announced thatit will launch, through a newly-created subsidiary (EX), an exchange offer for all of the outstanding shares of NRG...

HLTH's Buyback and NOLs: November 12, 2008; HLTH Corp. recently announced a massive stock buyback as an alternative to, and in lieu of, its planned merger, subsequently cancelled, with its 84 percent owned subsidia...

Taxpayer Denied "Trader" Status: November 11, 2008; There are any number of benefits associated with being designated as a trader (as opposed to an investor ) with respect to a taxpayer's activities...

Barring "Sidewise" Attribution: November 10, 2008; A corporation seekingto avail itself ofthe myriadtax advantages of Real Estate Investment Trust (REIT) status will not be successful unless, among...

Stock Distributions by REITs Can Be "Dividends": November 7, 2008; Sec. 857(b)(1 ) of the Internal Revenue Code imposes, for each taxable year, a tax on a real estate investment trust's (REIT) taxable income. However, unlike...

CFCs and Partnerships--Ruling Breaks New Ground: November 6, 2008; A "U.S. shareholder" of a controlled foreign corporation (CFC) is required to include in gross income such U.S. shareholder's share of the CFC's "att...

A Guide to Pension Accounting: November 5, 2008; With the market in the doldrums investors have turned their attention to the vagaries of pension accounting on the theory that a declinein the value of pensio...

WFC Alters Terms of Merger With WB: November 4, 2008; The S-4 recently filed by Wells Fargo (WFC) in connection with its acquisition of Wachovia (WB) reveals a change in the structure of the business combination. Originally,...

TARP Warrants Constitute Permanent Equity: November 4, 2008; The warrants that the Treasury Department (TD) is purchasing in connection with the CPP portion of TARP have a 10 year term and are immediately exercisable. The TD will a...

I.R.S. Will Not Rigorously Apply the "AHYDO" Rules: November 4, 2008; Where a debt instrument is classified as an "Applicable High Yield Discount Obligation" (AHYDO), the issuer will be stripped of its ability to deduct the...

A Change in Plans--BAC's Acquisition of MER May Be Taxable: November 3, 2008; Bank of America (BAC) has gone to some lengths to insure that its pending acquisition of Merrill Lynch (MER) will constitute a tax-free reorganization. However, if...

On Target?: October 31, 2008; We read with great interest the plan formulated by Pershing Square LLP with respect to the restructuring of Target Corp. (TGT). The plan involves a strategy that we...

Fannie Mae's DTA Will Be Eliminated: October 31, 2008; It comes as no surprise that Fannie Mae (FNM) announced, on October 29, 2008, its intention to "take" a valuation allowance against its deferred tax asset (DTA)...

Tax Court Concludes That Redemption Dividends Are Not Deductible: October 30, 2008; One of the more contentious tax issues that has cropped up over the past few years is the question of whether distributions in redemption of stock held by an Employ...

WAMU's Insolvency Does Not Remove It From the WMI Group: October 29, 2008; The issue of who is entitled to the tax refund that will result from the carryback of the losses sustained by Washington Mutual Bank (WAMU) in connection with the t...

PNC/NCC - Big Profits in RBILs: October 28, 2008; The PNC Financial Services Group, Inc. (PNC) and National City Corp. (NCC) signed a definitive merger agreement for PNC to acquire NCC for some $2.23/share. NCC sha...

Short Sales and Wash Sales: October 28, 2008; The well-known and universally feared wash sale rule, found in Sec. 1091(a) of the tax code,disallows as a deduction (under Sec. 165))any...

Will the Liquidation of a "SPAC" Produce Capital Gains?: October 27, 2008; During the bull market that has now so unceremoniously come to ajarring halt, a new type of corporation appeared on the investment scene and, for a time, thes...

Is Stock Held By A Voting Trust "Owned" By The Settlor?: October 24, 2008; It goes without saying that many important tax determinations turn on the issue of who "owns" a share of stock. For example, the ability to file a consoli...

Marriott is Denied A Loss Deduction: October 23, 2008; In 1994, Marriott International, Inc. (M)found itselfin need of some tax deductions and entered into a transaction, the principal element of which was a...

Analyzing OMX's Tax Profile: October 22, 2008; OfficeMax, Inc. (OMX) is paying "cash taxes" each year yet is reporting, at the same time, a substantial amount of "credit carryforwards" that,...

More Tier 1 Capital News from the Fed: October 21, 2008; Over the past few weeks, the Fed has taken some "heroic" measures to bolster the Tier 1 Capital ratios of its constituents. We have written about the first two initiatives...

Options and the Wash Sale Rules: October 21, 2008; The wash sale rules are, in broad outline, very well known to most investors and traders. However, there are certainintricacies that are not nearlyas we...

The Fed Bolsters Bank Capital: October 20, 2008; One of the provisions of The Emergency Economic Stabilization Act of 2008 (EESA) is designed to address the hardships faced by banks who invested in the preferred s...

Can Merger Arbitrage Be Used To Convert The "Character" of Gain?: October 17, 2008; Merger arbitrage, in the best of times,is a difficult business. Successful practitioners of this craft must be able to predict the likely outcome of a propose...

IVGN and ABI Amend Their Merger Agreement: October 16, 2008; Invitrogen Corp. (IVGN) and Applied Biosystems, Inc. (ABI) announced, on October 15, 2008,an amendment to their pending merger agreement. Under the prior term...

Valuing Liabilities With Credit Enhancement/"Defensive" Intangibles: October 15, 2008; Statement of Financial Accounting Standards(SFAS)No. 159, The Fair Value Option for Financial Assets and Financial Liabilities , hase...

Wells Fargo and Wachovia--What The Merger Agreement Reveals: October 14, 2008; The merger agreement,pursuant to the terms ofwhich Wachovia Corp. (WB) will be acquired by Wells Fargo & Co. (WFC), reveals some interesting informa...

Who Is Entitled to WAMU's Refund?: October 14, 2008; Ordinarily, thecommon parent of a consolidated tax returngroup (in this case Washington Mutual, Inc. or WMI) for any consolidated return year is th...

Precision Drilling Wins The Battle for Grey Wolf: October 13, 2008; Precision Drilling Trust (PDS),a Canadian mutual fund trust,has reacheda definitive agreement with Grey Wolf, Inc. (GW) in connection with which t...

NDS Group plc Is Going Private: October 10, 2008; NDS Group plc (NNDS) is largely owned by News Corporation (NWS). The latter owns all 42 million sharesof the former's Class B (high vote) stockwith the result...

Tax-Exempt Money Market Funds Get A Reprieve: October 8, 2008; A corporation shall be considered a Regulated Investment Company (RIC) with the result that itwill beentitled to reduce its taxable income by the divide...

Government Guarantees Will Not Imperil Variable Annuity Contracts: October 8, 2008; Once again, the I.R.S. is providing relief from certain untoward tax consequences that might otherwise result from the Treasury Department's extraordinary efforts t...

TY's "In-Kind" Redemption Should Be Tax-Efficient: October 8, 2008; Tri-Continental Corporation (TY) is a closed-end management investment company. Recently, it announced a settlement with a shareholder group whereby the members of...

Deducting Restitution Payments: October 7, 2008; In LTR 200834016, May 20, 2008, the taxpayer (T) was a physician who practiced medicine through his professional corporation, an 'S' corporation. T was indicted for...

Determining Fair Value in "Inactive" Markets: October 6, 2008; FASB has issued FSP FAS 157-d, a pronouncement of immense importance in light of current market conditions, which has as its objective the "clarification"...

I.R.S. Permits Increased Access To Funds Accumulated Abroad: October 6, 2008; The I.R.S. istaking actionto ease the credit crunch bypermitting U.S. corporations to access earnings accumulated by their foreign subsidiaries wi...

Tax Provisions of the "Bailout" Legislation: October 3, 2008; The Emergency Economic Stimulus Act of 2008, popularly known as the "bailout" legislation, contains some tax provisions that will benefit some taxpayers a...

PG/SJM--Assessing The Impact of the Anti-Morris Trust Rules: October 2, 2008; Procter & Gamble (PG) and J.M. Smucker Co. (SJM) will be engaging (for the second time in the past six years)in a "reverse Morris Trust" transac...

S.E.C. and I.R.S. Issue Ameliorative Guidance: October 1, 2008; The S.E.C. and FASB took the extraordinary step of issuing, jointly, guidance with respect to the application of SFAS No. 157, Fair Value Measurements , in...

Spread the Word: Acquired NOLs Are More Valuable Than Ever: October 1, 2008; It has been five years since the I.R.S. issued a pronouncement, Notice 2003-65, I.R.B. 2003-40 (September 12, 2003), that had the effect of increasing the value, so...

Calculating Gain On A Deferred Payment Sale: September 30, 2008; Assume a taxpayer owns a parcel of real estate and enters into a contract for the sale of such realty for an ascertainable amount. The buyer remits a down payment, repres...

Lehman's Bankruptcy Will Not Adversely Affect Stock Lenders: September 29, 2008; The Internal Revenue Servicehas taken decisivesteps to insure that taxpayers who loaned stock or securities to Lehman Brothers, Inc. (LB) will not suffe...

BAC/MER: A Reorganization Is Intended: September 26, 2008; In contrast to the manner in which the JP Morgan Chase/Bear Stearns deal was carried out, the acquisition by Bank of America (BAC) of Merrill Lynch (MER) is intende...

The Fed Proposes To Change The Calculation of Tier 1 Capital: September 25, 2008; Recently, the Federal Reserve Board requested public comments on an interagency notice of proposed rulemaking that would alter the manner in which a banking organiz...

Can Income Be Accelerated?: September 24, 2008; Although it is generally preferable to defer reporting income for tax purposes, certain taxpayers, in exigent circumstances, will seek to do the exact opposite: The...

Mr. Ergen's GRAT: September 23, 2008; Mr. Charles W. Ergen has, a recently filed Form 4 reveals, transferred some 75 million Class B common shares of DISH to a trust for the benefit of his children. The...

SJM's "Extraordinary" Dividend: September 22, 2008; In connection with the acquisition of Folgers Coffee Company (FCC)by JM Smucker Company(SJM), the latter has announced the payment of a $5 special divid...

Post-Acquisition Spin-Offs Can Be Tax-Free: September 19, 2008; What, if any, tax rules operate to discourage a spin-off which closely follows an acquisition of the distributing corporation's stock? The onepotential impedi...

Settlement of "Equity Forward" Is a Non-Recognition Event: September 18, 2008; Many companies have chosento repurchase their shares bymeans of "equity forward" contracts. InCCA 200832002, April 23, 2008, A Corporati...

FASB Proposes Changes to the EPS Calculation: September 17, 2008; The Financial Accounting Standards Board (FASB) is proposing changes to the manner in which earnings per share (EPS)is calculated. The vehicle for the changes...

Dissecting Met Life's Split-Off of RGA: September 16, 2008; Met Life's (M) "split-off" of Reinsurance Group of America (RGA) is one of the most highly engineered transactions we have ever encountered. The private l...

Discovery Becomes a Pure Play Programmer: September 15, 2008; Discovery Holding Company (DHC) was, several years ago, spun-off from Liberty Media. DHC is now undertaking its own spin-off in conjunction with a series of re-stru...

Involuntary Conversions: September 12, 2008; When property is "involuntarily converted" in one of certain enumerated ways specified in Sec. 1033the tax code, the taxpayer can elect to defer the...

HOV's Tax "Poison Pill": September 11, 2008; Hovnanian Enterprises, Inc. (HOV) announced, on August 4, 2008, that its Board of Directors has adopted a "shareholder rights" plan but not for the usual...

Deposits vs. Advance Payments: September 10, 2008; One of the most difficultdeterminations a tax accountant is called upon to make is whether a sum of money received by a taxpayer is properly characterized as...

The Fannie and Freddie "Bail-Out" Has A Tax Component: September 9, 2008; In addition to all of their other woes, Fannie Mae and Freddie Mac are, almost certainly, "loss corporations" for Federal income tax purposes. A loss corp...

Senators Seek to "Punish" Investors in Certain Commodities: September 9, 2008; On the dubious theory that the startling increase in oil prices (which, of late, certainlyseems to have abated) is caused, at least in part, by persons w...

Carolina Group Post-Mortem: September 8, 2008; The private letter ruling that was issued to Loews (L) in connection with its split-off of Lorillard (LO) was recently released by the I.R.S. for public consumption...

Can Idearc Repurchase Its Debt?: September 5, 2008; Idearc, Inc., (I)the exclusive publisher of Verizon's yellow and white pages, was spun-off from Verizon (V), in November, 2006. The spin-off featured a debt f...

Liberty Media Will Redeem Some Tracking Stock: September 4, 2008; Liberty Media Corporation (L) announced on September 3, 2008 that its board of directors has authorized its management to "proceed with thedevelopment of...

Allscripts Update: September 3, 2008; Allscripts Healthcare Solutions, Inc. (A) is inching closer towards completing its transformative deal with Misys plc (M). On September 22, 2008, the Ashareho...

The Lessons of Thor Power Tool Resonate In a Recession: September 2, 2008; Over the course of a recession corporate inventories tend to accumulate, particularly at companies that were unsuccessful in accurately forecasting the (depressed)...

Home Depot Denied a Refund of Indiana Sales Taxes: August 29, 2008; Home Depot, Inc.(HD)does business in Indiana. It offers its customers the option of purchasing merchandise with "private label" credit cards....

When Vested Shares Become Non-Vested: August 28, 2008; In Rev. Rul. 2007-49, 2007-31, I.R.B. 237, a group of investors formed a corporation (X). In exchange for Mr. A's agreement to perform services on behalf of X, X, a...

Fording/Teck: Exit Stage Left?: August 27, 2008; Fording Canadian Coal Trust (FDG), an unincorporated,open-ended "mutual fund trust", and Teck Cominco Ltd. (TCK) have entered into a "plan of a...

Investor Denied Deductions for "Seminar" Expenses: August 26, 2008; Under Sec. 212(1) of the Internal Revenue Code, an individual is allowed a deduction for all of the ordinary and necessary expenses paid or incurred during the taxa...

Taxing Interest and Dividend Arrearages: August 25, 2008; Where debtsecurities with interestarrearagesorcumulativepreferred stock with accumulated dividends are purchased, the tax treatment of...

I.R.S. Issues New Rules Regarding Amortization of "Start-Up" Costs: August 22, 2008; Sec. 162(a) of the Internal Revenue Code provides that there shall be allowed as a deduction all of the "ordinary and necessary" expenses paid or incurred durin...

How the "Expansion Doctrine" Facilitates CY's Spin-Off of SPWR: August 21, 2008; LTR 200830005, April 16, 2008,permitsthe shareholders of acorporation that had acquired control of another corporation in a taxable transaction wi...

Will the "Active Financing Exception" Be Allowed to Expire?: August 20, 2008; General Electric's (GE) effective tax rate, for the year ended December 31, 2007, was only 15.5 percent. The statutory rate, of course, is 35 percent. Virtually all...

Deducting an MBA Candidate's Education Expenses: August 20, 2008; Can a candidate for a Masters of Business Administration (MBA) degree deduct, for Federal income tax purposes,her educational expenses? This is a question that...

Newsday Post-Mortem: August 19, 2008; Tribune Company (TRB) is an 'S' corporation. Its 'S' corporation election filed on March 14, 2008became effective on January 1, 2008. Sec. 1363(a) provides that &qu...

What Is a Deferred Tax Asset?: August 18, 2008; It is well-known that, in light of their different goals and objectives, income tax accounting and financial accountingtreat, in many cases,identical it...

Daxor's Unusual Tax Status: August 16, 2008; The July 21edition of Barrons , in Shirley Lazo's Speaking of Dividends column, discusses the recent announcement by Daxor (DXR) of its intention t...

Teva's Acquisition of Barr Will Constitute a Reorganization: August 15, 2008; Teva Pharmaceutical Industries, Ltd. (T) and Barr Pharamceuticals, Inc. (B) have entered into a definitive agreement pursuant to which T, a foreign corporation, will acqu...

"RMA" Accounts and Estate and Gift Taxes: August 14, 2008; Rev. Rul. 2008-35 tackles the issue of whether a taxpayer a portion of whose assets are held in a Restricted Management Account (RMA) at a bankmay, in li...

NYMEX--Is There a Case for Capital Gains?: August 13, 2008; The merger of NYMEX with and into a subsidiary of CME, a transaction intended to qualify as a reorganization under Sec. 368(a)(1)(A), has run into some turbulence fr...

Deducting Mortgage Interest: August 13, 2008; Sec. 163(a) of the Internal Revenue Code provides, generally, that there shall be allowed as a deduction all interest paid or accrued within the taxable year on indebtedn...

Tax Court Rejects I.R.S. Attempt to Find "Constructive" Dividend: August 12, 2008; Where a corporation makes a distribution of property to one or more of its shareholders "with respect to its stock", the distribution will be included in the re...

The "Open Transaction" Doctrine Lives: August 11, 2008; The I.R.S. may well have to pay out a large number of tax refunds as a result of a decision rendered by the United States Court of Federal Claims in a case entitled F...

Ashland/Hercules: The Stock Is Taxable: August 9, 2008; Recently, the boards of directorsof Ashland, Inc. (A) and Hercules, Inc. (H) reached an agreement with respect to a transaction in which A would acquire all of the...

How to Disqualify a Pension Plan: August 8, 2008; It has been reported that financial institutions have been eyeing underfunded,"frozen",corporate pension plans. The transaction that has...

Accounting for "Rebates": August 7, 2008; In Chief Counsel Advice Memorandum (CCA) 200826006, March 12, 2008, the taxpayer (T) was a retailer of consumer products which had adopted a "cash rebate program&quo...

PCH Will Be Blazing New Spin-Off Trails: August 6, 2008; Potlatch Corporation (PCH), a real estate investment trust (REIT), recently announced that its Board of Directors had approved a plan pursuant to which PCH will spi...

BMY/IMCL--Time Is Of The Essence: August 5, 2008; Bristol-Myers Squibb Company (BMY) recently announced a proposal in which it seeks to enter into an agreement to acquire ImClone Systems, Inc. (IMCL)for $60 p...

ICGE's "Hidden" Tax Asset: August 4, 2008; Internet Capital Group, Inc. (ICGE) is a company which both builds and acquires internet software and service companies. ICGE refers to these companies as its "...

When Is Income "Constructively" Received?: August 2, 2008; Reg. Sec. 1.451-1(a) provides that gains, profits, and income are to be included in gross income for the taxable year in which they are eitheractually or...

Can "Retainer Fees" Be Deducted?: August 1, 2008; Frequently, corporations are required, in order to secure the services of a professional, to pay such professional a "retainer fee". In some cases, the fee...

The Limits of the "Claim of Right" Rule: July 31, 2008; During the years 1973 through 1981, Texaco, Inc. engaged insales of crude petroleum and refined petroleum products at prices that exceeded the price controls set by...

Deducting Expenses Incurred in a "Private Equity" Transaction: July 30, 2008; LTR 200830009, April 11, 2008 considers certain tax consequences associated with a "typical" private equity transaction. The conclusions the ruling reache...

"Peripheral" Oil and Gas Income Constitutes Qualifying Income: July 29, 2008; In the Revenue Act of 1987 (P.L. 100-203), Congress passed provisions designed to prevent the erosion of the corporate tax base. During the years leading up to the enactm...

Some Investment Interest Is Not An Itemized Deduction: July 28, 2008; Rev. Rul. 2008-12, 2008-10, I.R.B. 520, addressed the case of a taxpayer (LP)who was a partner in a partnership (perhaps a hedge fund) that is engaged in the trade...

A REIT Must Earn "Rents From Real Property": July 26, 2008; In order for a Real Estate Investment Trust (REIT) to preserve its status as such, substantially all of its gross income must be derived from certain sources, most n...

BAC Will Reap the Benefits of "Purchase Accounting": July 25, 2008; The acquisition of Countrywide (C) by Bank of America Corp.(B) was recently completed and preliminary details regarding the accounting for this transaction--w...

Fund of Fund's Management Fees Are "Sec. 212" Expenses: July 24, 2008; Rev. Rul. 2008-39 addresses the tax treatment of management fees paid by a partnership--popularly known as a "fund of funds"--which is, itself, a partner in one...

New Regulations Encourage Foreign Leasing Activity: July 23, 2008; In order to prevent undue deferral of U.S. taxeswith respect toforeign source income the Internal Revenue Code provides thata "United States shareh...

Navigating the 'S' Corporation Distribution Rules: July 22, 2008; When a C corporation seeks toelectto be taxed as a Real Estate Investment Trust (REIT) it must, among other things, rid itself of its earnings and profit...

Cleveland-Cliffs/Alpha Natural Resources---The "72% Solution": July 21, 2008; On July 16, 2008, Cleveland-Cliffs, Inc. (CLF) and Alpha Natural Resources, Inc. (ANR) announced that each suchentity's board of directors had approved a defi...

Converting Capital Gain Into Dividend Income: July 19, 2008; When a corporation sells assets to another corporation, it is often a matter of indifference to the seller whether, in cases where the deal has to be financed, it receive...

Supreme Court Upholds Florida's Imposition of Stamp Taxes: July 18, 2008; The Bankruptcy Code provides a stamp tax exemption for any asset transfer under a plan confirmed under Chapter 11 of the Bankruptcy Code . At issue in a case whic...

FASB's Plan Will Bloat Balance Sheets: July 17, 2008; The Financial Accounting Standards Board (FASB) has signaled its intention to revise two important accounting pronouncements for the express purpose of making these...

InBev's Interest Expense--Deductible in the U.S.?: July 16, 2008; The Wall Street Journal for July 10, 2008 ran an article in its regular Breaking Views column regarding an interesting, tax-oriented, aspect of the pote...

Shell Oil's "Double Dipping" Strategy Pays Off: July 15, 2008; In the early '90s, with (if you can imagine it) oil prices severely depressed, many integrated oil companies were holding properties the market value of which was substan...

EK's Stock Repurchase Funded by Tax Refund: July 14, 2008; On June 24, 2008, Eastman Kodak Company (EK) announced that its Board of Directors had authorized a stock repurchase program totaling as much as $1 billion of the company...

I.R.S. Clamps Down on "Effective" Repatriations of Foreign Earnings: July 12, 2008; For the second time since early June, 2008 the I.R.S. has taken decisivesteps to prevent what it obviously considers one of the most objectionable tax outcomes in t...

How Will SJM's "Special Dividend" Be Taxed?: July 11, 2008; Procter & Gamble (PG) and J.M. Smucker Company (SJM), as we previously reported are teaming up (See The Willens Report,Volume 2 Issue 171, June 5, 2008), once a...

Student Loan Forgiveness Need Not Give Rise to Income: July 10, 2008; Under Sec. 61(a)(12) of the Internal Revenue Code, gross income includes incomefrom the discharge of indebtedness. However, certain exceptions to this general rule...

Has The Service Taken Undue Liberties With the Wash Sale Rule?: July 9, 2008; Sec. 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears tha...

Digimarc's "Two-Step"--How Will the Distribution Be Taxed?: July 8, 2008; Digimarc Corporation (D) is engaged in two businesses; the "secure ID" business and the "digital watermarking" business. L-1 Identity Solutions, Inc....

Gain From Sale of "CO2 Emission Allowances" Is Not "FPHCI": July 7, 2008; Sec. 951 of the Internal Revenue Code requires a "U.S. shareholder" of a Controlled Foreign Corporation (CFC) to include in its gross income its pro-rata share...

How To Handle Restricted Stock and Options In A Spin-Off: July 6, 2008; In the case of a spin-off, ordinarily a whollytax-free transaction, the possibility for income recognition, on the part of both the distributing corporation and the...

KFT's Will Divest Post in A "Reverse Morris Trust": July 5, 2008; Kraft Foods, Inc. (K) will be divesting its Post Cereals business (P) in a tax-efficient manner. In fact, Kshould be able to retire an amount of itsstock (uti...

FASB Offers New Guidance Regarding EPS Determinations: July 3, 2008; The staff of the Financial Accounting Standards Board (FASB) has, it seems, increased the rate at which accounting guidance is being issued. The latest offering involves...

Can STI Efficiently "Monetize" Its KO Stake: July 2, 2008; For many years, SunTrust Banks, Inc. (STI) has owned shares in Coca-Cola (KO). These shares have been, and continue to be, highly appreciated. Currently, the "unreal...

Can A Former Executive Be An "Outside" Director?: July 1, 2008; The Internal Revenue Code, at Sec. 162(m)(1), imposes certain limitations on a publicly-held corporation's ability to deduct certain compensation paid to a group of emplo...

A REIT Escapes "Prohibited Transaction" Treatment: June 30, 2008; It seems hard to believe, I know, but the Internal Revenue Code actually imposes, with respect to certain highlyobjectionable transactions, a 100 percent tax. For e...

Adding A "Liquidity Facility" to ARPS: June 29, 2008; The I.R.S. has recentlyobserved that "...in response to recent auction failures, issuers and third parties mayseek to add liquidity facilities to auction...

A Utility is Found to Have Changed Its "Method of Accounting": June 28, 2008; Rev. Rul. 2008-30 addresses the case of a regulated public utility (U) that operates and maintains sewer lines and sewerage disposal plants. U charges a "customer co...

Will MasterCard's Payments to Amex Be Deductible?: June 27, 2008; MasterCard Incorporated (M) announced, on June 25, 2008, that it had reached an agreement to settle its outstanding litigation with American Express (A). The form of the...

Index Product Avoids "FIRPTA" Sanctions: June 26, 2008; A foreign person's investment in United States real property is robbed of some of its allure by the specter of income taxes. Thus, under Sec. 897(a) of the Internal Reven...

New Jersey's "Throw Out" Rule Judged to be Constitutional: June 25, 2008; New Jersey, in common with most States, taxes the income of a multistate enterprise by applying an "allocation factor"tothe group's total income. Th...

Willis Group and HRH Are Planning a Reorganization: June 24, 2008; Willis Group Holdings Limited (W) and Hilb Rogal & Hobbs (H) recently announced a transaction in which H will be absorbed by W in a transaction that will be structure...

GAP Retires Warrants--Is the Payment Tax Deductible?: June 23, 2008; On June 5, 2008, The Great Atlantic & Pacific Tea Company, Inc. (GAP) announced that it had "settled",for cash amounting to $45.7 million, some 4.657...

Repaying Debt In Connection With a "Leveraged" Spin-Off: June 22, 2008; Where a spin-off (or, for that matter, a split-off) is part of a 'D' reorganization--because the distributing corporation transfers property to the controlled corporation...

Will Goodwill Gain Earned by a REIT Be Qualifying Income?: June 21, 2008; The acquisition of a Real Investment Trust (REIT) almost always takes the form of an asset acquisition. This format enables the buyer to secure a "cost basis" i...

Service Denies Refund of "Erroneously Paid" FICA Taxes: June 20, 2008; The benefits of deferring compensation are well-known. The hope is that these amounts will be includible in gross income in a taxableyear, subsequent to the employe...

How Are Termination Fees Taxed?: June 19, 2008; LTR 2008823012, March 10, 2008, addresses the often-encountered, but surprisingly elusive,question of how termination fees (sometimes known as "break-up"...

FASB Seeks To Improve Loss Contingency Disclosure: June 18, 2008; Many important "users" of financial statements, particularly in uncertaintimes like those in which we nowfind ourselves, have groused that companies...

Will The Celera Split-Off Be Tax-Free?: June 17, 2008; Applera Corp. (A) and Invitrogen Corp. (I) have announced a business combination in which A will be merged with and into a LLC created by I for purposes of the transactio...

Accounting for Sales With A "Right of Return": June 17, 2008; When an enterprise sells its products but affordsthe buyers a right to returnsuch products,revenue from the sales transaction is to be recognized, for f...

Capital One Is Denied a Tax Benefit: June 16, 2008; Capital One Financial Corporation (CO) owns subsidiaries whose principal business activity is the issuance of credit cards. These subsidiaries are among the largest such...

Combining A PE's Portfolio Companies: June 15, 2008; Many private equity (PE) enterprises in possession, on behalf of their clients, of a stable of portfolio companies, may find that one or more these investments have not &...

Qualifying for Partnership Tax Status: June 14, 2008; In general, a publicly-traded partnership (PTP) is treated, for Federal income tax purposes, as a corporation. See Sec. 7704(a). A PTP, in turn, is defined as a par...

O'Reilly Automotive and CSK's Path to a Business Combination: June 13, 2008; O'Reilly Automotive, Inc. (O) and CSK Auto Corporation (C) are taking steps to implement the merger agreement the parties entered intoon April, 1, 2008. The transac...

Retiring Debt In Connection With a Spin-Off: June 12, 2008; It has become standard operating procedurefor corporations engaging in spin-off transactions to, in addition to accomplishing the corporate business purpose or purp...

FASB Wants Better Disclosure of Credit Default Swaps: June 11, 2008; It ishardly arevelation that the credit derivative market has exploded over the recent past yet, in many (if not most)cases, investors are blissfully&nb...

Selling A Bank Charter: June 10, 2008; Franchises, including bank charters and insurance charters, can be exceedinglyvaluable commodities. Ordinarily, however, the charter, alone, cannot be sold. Instead...

District Court Upends "SILOs": June 9, 2008; One of the most popular tax shelters of the recent past, the so-called "SILO",was dealt a stunning blow at the hands of the U.S. District Court for the No...

No "Doubtful Collectability" Exception for OID: June 8, 2008; Debt instruments which contain a "pay in kind" (PIK) feature are considered to have been issued with Original Issue Discount (OID). OID is defined, in Sec...

Donating Appreciated Property: June 7, 2008; One of the most widely-recommended tax planningstrategies isthe donation ofappreciated property to an organization to which tax deductible contributions...

Accounting for Financial Guarantee Insurance Contracts: June 6, 2008; In light of the recentturmoil surrounding the purveyors offinancial guarantee insurance, the Financial Accounting Standards Board (FASB) decided it was high&n...

SII and WHQ Are Cutting It Close: June 5, 2008; Smith International, Inc. (SII) and W-H Energy Services, Inc. (WHQ) recently announced a "strategic combination" that will be structured as a "forward"...

PG and SJM Team Up Again: June 5, 2008; For the second time in the past six years, theProcter & Gamble Company(PG) and theJ. M. Smucker Company (SJM) will be collaborating on a tax-efficie...

What If the Charity Promptly Sells Donated Stock?: June 4, 2008; "...A sale by one person cannot be transformed...into a sale by another (person) by using the latter as a mere conduit through which to pass title..." See...

MetLife and RGA To Part Company: June 3, 2008; MetLife, Inc. (M) presently owns 51.8 percent of the outstanding common stock of Reinsurance Group of America, Inc. (R). Some 3,000,000 shares of R were purchased by M in...

An ‘S’ Corporation’s “Built-In Gains”: June 3, 2008; An ‘S' corporation that was formerly a C corporation-for example Tribune Corp.-may be taxed on a particular variety of income know as "net recognized built-in...

I.R.S. Eliminates The Utility of “Killer ‘B’s”: June 2, 2008; One of the most difficult tasks a tax adviser is called upon to accomplish is the extraction of earnings from a U.S. corporation's foreign subsidiaries in a "tax-eff...

Clear Channel Communications--A "Public" LBO: June 1, 2008; Clear Channel Communications, Inc. (CCU) recently announced that the company, the sponsors of its long-running LBO, and the financiers of such LBO, had entered into a set...

Waiving Dividends: May 31, 2008; In some cases, a corporationis desirous of increasingits dividend payout but, in order to minimize the drain on the company's resources that such higher divid...

How Is A Foreclosure Taxed?: May 30, 2008; A taxpayer owns real property the acquisition of which was financed, largely, with debt. Assume that the mortgage secures a recourse obligation against the taxpa...

Contributions to Capital Do Not Constitute Gross Income: May 29, 2008; Virtually all "accessions to wealth" over which the taxpayer has "dominion and control" constitute gross income under Sec. 61 of the Internal Revenue...

UBS's Rights Offering--Part II: May 28, 2008; UBS's setbacks in the mortgage securities arena have caused it to visit the marketplace for the purpose of replenishing the capital its mortgage losses have eroded. Its l...

I.R.S. Weighs In On the Credit Crisis: May 27, 2008; The United States shareholders of a Controlled Foreign Corporation (CFC; a foreign corporation more than 50 percent of the voting power or value of the stock of which is...

"Instrument C"--The Verdict Is In: May 26, 2008; The Financial Accounting Standards Board (FASB) has finalized its "guidance" with respect to the accounting for a certain, immensely popular, variety of convert...

Allocating Earnings and Profits In a Spin-Off--Time For a Change?: May 25, 2008; In the case of a spin-off or split-off to which Sec. 355 applies, the Internal Revenue Code (see Sec. 312(h)(1))provides that "proper adjustment" with res...

I.R.S. Ignores Technical Violation of the Control Requirement: May 24, 2008; Where property is transferred by one or more persons to a corporation in exchange forthe latter'sstock, no gain or loss will be recognized by such transferors...

TWX Announces Details of Its Separation Plan: May 23, 2008; Time Warner, Inc. (TWX) and Time Warner Cable, Inc. (TWC) announced, on May 21, 2008, that their respective boards of directors have approved an agreement that will resul...

Calpine/NRG--Are the NOLs in Peril?: May 23, 2008; NRG Energy, Inc. (N) recently proposed a business combination with Calpine Corp. (C) in connection with which N would acquire each of C's outstanding shares in exchange f...

I.R.S. Endorses Most Types of Post-Reorganization Transfers: May 22, 2008; Where the assets or stock acquired in a potentialreorganizationaretransferred shortly after the reorganization, the issue arises whether such transfer w...

5th Circuit Rejects Short Sale Version of "Son of Boss": May 21, 2008; After a surprising loss in the District Court in Colorado regarding the efficacy of an "option" Son of Boss transaction, the I.R.S. scored a decisive victory, i...

High Court Upholds Differential Scheme For Taxing Muni Bonds: May 20, 2008; With respect to the taxation of interest on municipal bonds, some States exempt interest on their own bonds from taxes which are, nonetheless, imposedwith respect t...

Reducing Taxes on Timber--The "Farm" Bill Contains A Surprise: May 20, 2008; A "capital gain" is defined, succinctly, as gain from the sale or exchange of a capital asset. Corporations do not often generate capital gai...

How Are Abandoned Shares Treated In A Merger?: May 19, 2008; In order for a merger, or any other "acquisitive" transaction for that matter, to qualify as a tax-free reorganization, both the terms of the specifications (fo...

CVC Goes "Sundancing": May 18, 2008; On May 7, 2008, Rainbow Media Holdings LLC, a programming subsidiary of Cablevision Systems Corporation (CVC), announced that it had reached an agreement to acquire the&n...

I.R.S. Clarifies Tax Treatment of Medicaid Rebates: May 17, 2008; The I.R.S. has recentlydeveloped anabidinginterest in the manner in which "rebates" are properlycharacterized for federal incometa...

"Stepping" Out Of A Reorganization: May 16, 2008; A corporation's acquisition of the stock of another corporation can qualify as a reorganization under Sec. 368(a)(1)(B) if the stock is acquired in exchange solely for th...

Forming "New Clearwire": May 15, 2008; Clearwire Corporation (C) and Sprint Nextel Corporation (S) announced, recently, that they have entered into a definitive agreement to combine their "next generation...

Earnings & Profits Not Reduced by Capital Expenditures: May 14, 2008; If a foreign corporation is a Controlled Foreign Corporation (CFC; a foreign corporation more than 50 percent of the voting power or value of the stock of which is owned...

Accounting for Inventories Will Undergo an Overhaul: May 13, 2008; Generally accepted accounting principles (GAAP) normally requires the use of historical cost with respect to inventories and only in one case is a departure from this sta...

Can Sprint Spin-Off Nextel?: May 12, 2008; Sprint Corporation (S) isin the process of evaluatingits options with respect to Nextel Communications (N), its wholly-owned subsidiary, and, apparently, ...

How Does the I.R.S. View Leveraged Partnerships?: May 11, 2008; It seems likely that Tribune's plans for divesting assets will feature, prominently, a tax-saving technique popularlyknown as a "leveraged partnership" (L...

Qualifying for the "Bankruptcy Exception" Is Never Easy: May 10, 2008; When a "loss corporation" (T)is under the jurisdiction of a court in a "Title 11 or similar case" (a receivership, foreclosure, or similar proce...

Mergers of Mutual Funds--Satisfying "COBE": May 9, 2008; Requisite to a reorganization is a continuity of business enterprise (COBE) through the issuing corporation under the modified corporate form. See...

What If The "(h)(10)" Subsidiary Is Insolvent?: May 8, 2008; Elections under Sec. 338(h)(10) are frequently made. They are ordinarilybeneficial because the election provides a buyer of corporate stock with acost basis i...

Genesco Will Distribute Finish Line Shares: May 7, 2008; On April 30, 2008, Genesco, Inc.(GCO) announced that its Board of Directors had declared a dividend on its common stock in order to distribute 6,518,971 shares of C...

Preliminary Views on Time Warner Cable: May 6, 2008; Time Warner, Inc. (TWX) has announced its intentionto distribute the stock of its controlled subsidiary, Time Warner Cable, Inc. (TWC) in the near future. No detail...

Court Strikes Down "LILO" Tax Shelter: May 5, 2008; One of the more popular tax shelters of the recently concludedtax shelter era, a technique that wasemployed extensively by financial institutions, was the so-...

No Theft at WorldCom: May 4, 2008; Mr. Taghadoss was employed by WorldCom (W) for more than 17 years. During that span, he received stock options which he had exercised on October 31, 2000. He also acquire...

I.R.S. Loses "Son of Boss" Case: May 3, 2008; The I.R.S.'s unblemished record in "Son of Boss" cases came to ascreeching halt in Colorado the other day with its loss in the District Court of Colorado...

The Equity Method of Accounting: May 2, 2008; Where an investment in voting stock gives the investor the power to exercise "significant influence" over the operating and financial policies of the investee,...

Inter-Corporate Dividends Are Lightly Taxed: May 1, 2008; The U.S. tax system is considereda "classical" system. That, however, is merely a euphemism for "double taxation". Corporate income is taxed twi...

REITs Can Satisfy Dividend Requirements With Stock: April 30, 2008; Real Estate Investment Trusts (REITs) are not, contrary to popular belief, statutorily exempt from tax. Theirfavorable taxstatus necessitates the taking...

A "Dealer" Must Have Customers: April 29, 2008; Sec. 475 provides that, in the case of a dealer in securities , the securities held by such dealer must be "marked to market"--treated as ifthey w...

I.R.S.'s New Estate Regulations Reject "Kohler": April 28, 2008; Sec. 2001 of the Internal Revenue Code imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. For this p...

Leucadia and Jefferies--What Are They Up To?: April 27, 2008; Leucadia National Corporation (L) and Jefferies Group, Inc. (J) recently announced an unusual transaction in which each corporation will exchange shares of its authorized...

Buying In "Discounted" Debt: April 26, 2008; Many issuers will find that the debt they recently issued is, due to the well-publicized upheavals that the capital markets have undergone, trading at a substantial disco...

Collapsing Chipotle's Classes of Stock: April 25, 2008; Chipotle Mexican Grill, Inc. (CMG) was "split-off" from McDonald's, Inc.(M)in October, 2006. At the time, M owned all ofCMG's Class B stock an...

PDL BioPharma Announces Radical Restructuring: April 24, 2008; PDL BioPharma, Inc. (PDL) announced, on April 10, 2008, that its board of directors had reached two momentous decisions. The board declared a "special cash dividend&...

Captive Insurance: April 23, 2008; Sec. 162 of the Internal Revenue Code provides that there shall be allowed as a deduction all of the "ordinary and necessary" expenses paid or incurred during t...

FNM Gets an Unexpected Windfall: April 23, 2008; On August 7, 2006, the Treasury Department and the Internal Revenue Service published proposed regulations, Prop. Reg. Sec. 1.1221-1(e), under Sec. 1221(a)(4) of the Internal Revenu...

Tribune Will Sell Newsday "Tax Efficiently": April 22, 2008; It has been reported that Tribune Co. has reached an agreement in principle to "sell" Newsday to News Corp. The "selling price" would be in neighborho...

What Is the "Character" of Fannie Mae's Losses?: April 22, 2008; As of the end of its most recent fiscal year, Fannie Mae (F) was reporting some $12.967 billionof "net deferred tax assets" against which no "valuati...

Are "Sales Rebates" Gross Income?: April 21, 2008; The concept of gross income is exceedingly broad. Such concept encompasses virtually any "accession to wealth", which is clearly realized, andwit...

Cypress and SunPower--Is a Separation Imminent?: April 20, 2008; Cypress Semiconductor Corp. (CY) currently owns some 44.5 million Class B common shares of SunPower Corp. (S). The Class A common stock of S is widely-held and publicly-t...

Disavowing A Covenant Not To Compete--Part 2: April 19, 2008; When a covenant not to compete is entered into in connection with the sale of abusiness (or an interest therein), the sellerwill besaddled with ordinary...

Supreme Court Limits A State's Taxing Authority: April 18, 2008; At issue in a case entitled MeadWestvaco Corp. v. Illinois Department of Revenue _US_(2008) was the ability of the State ofIllinois to tax a portion of the...

Delta and Northwest Will Merge--What About the NOLs?: April 17, 2008; Delta Air Lines, Inc. (D) and Northwest Airlines Corp. (N) haveannounced that they have entered into a merger agreement pursuant to which D will be the issuing corp...

Quanex Will Engage In a "Bad Morris Trust" Transaction: April 16, 2008; Quanex Corporation (NX) recently announced that its Board of Directors has set April 23, 2008 as both the record date and distribution date for the previously-announced s...

Update on JPM/BSC Deal: April 16, 2008; The S-4 regarding the business combination to be executed by JP Morgan Chase, Inc.(JPM) and Bear Stearns Companies (BSC) was filed with the S.E.C. on Friday, April...

Acquiring Control In Anticipation of a Spin-Off: April 15, 2008; In order fora spin-off to qualify for tax-free status, it is necessary that the distributing corporation (T) be "in control" (within the meaning of S...

"TRS" Can Own Stock in a Corporation That Operates Lodging Facilities: April 14, 2008; In order to qualify for the special tax treatment afforded to Real Estate Investment Trusts (REITs) numerous requirements, regarding the composition of the entity's asset...

I.R.S. Pronouncements Are Entitled to Deference: April 13, 2008; In some cases, Congress will grant, in connection with the enactment of a statute, the I.R.S. broad authority to promulgate rules and regulations for the implementation o...

Novartis and Nestle Strike A Deal For Alcon: April 12, 2008; Novartis International AG (NO), to further strengthen its healthcare portfolio, has reached an agreement with Nestle S.A. (NE) to acquire a 25 percent stake i...

Disavowing A Covenant Not To Compete Is Difficult: April 11, 2008; A taxpayer, Mr. Muskat (M), was the President and controlling shareholder of a corporation (JP) which had beenengaged, since 1933,in a very successfulme...

WaMu's "Capital Raising"--Will Its Losses Be Affected?: April 10, 2008; Washington Mutual, Inc. (WM) recentlyannounced that it has entered into definitive agreements to raise an aggregate $7 billion through a direct sale of "equity...

Accounting for Financial Instruments: April 9, 2008; No accounting issue has received more attention, during the course of the "credit crisis", than the question of how one properly accounts for financial assets a...

A Guarantor's Bad Debt Deduction Must Await "Payment": April 8, 2008; Sec. 166(a) of the Internal Revenue Code provides that "there shall be allowed as a deduction any debt which becomes wholly worthless within the taxable year".&...

NOL Not Adversely Affected By Capital Contribution: April 7, 2008; When a "loss corporation" experiences an "ownership change", certain limits are placed upon its ability to utilize its net operating losses (NOL). An...

Senate Moves Toward Passage of Stimulus Legislation: April 6, 2008; The Senate is moving rather quickly, on a bipartisan basis,towards the passage of a stimulus bill that is primarilydirectedtowards stabilizing the housi...

NYMEX/CME Group--Measuring Continuity of Interest: April 5, 2008; On March 17, 2008, NYMEX Holdings, Inc. (NMX), entered into an agreement and plan of merger with CME Group, Inc. (CME) pursuant to which NMX will be merged with and into...

UBS's "Rights" Offering: April 4, 2008; UBS AG (UBS), in connection with its "Capital improvement program" (See Form 6-K, dated January 10, 2008),will beforegoing the payment of a cash div...

District Court Shoots Down "Midco" Transaction: April 3, 2008; Apurchasing corporation'sobjective, in the case of a taxable acquisition of another corporation, is (at least from a tax point of view) to secure a cost b...

A "TRS" Can Own A Health Care Facility: April 2, 2008; In order for a corporation to qualify as a Real Estate Investment Trust (REIT), numerous requirements must be satisfied. The most prominent requirements relate to the sou...

Rite Aid Struggles With SFAS No. 109: April 1, 2008; Recently, Rite Aid Corporation (RAD) made a stunning announcement. The company stated that in compliance with Statement of Financial Accounting Standards (SFAS) No. 109,...

Attempting to Read Between the Lines of the S.E.C.'s "157 Letter": March 31, 2008; In March, 2008, the Division of Corporation Finance (of the S.E.C.) sent an eagerly-anticipated letter to certain public companies (presumably those in the financial serv...

Narrowly Averting PFIC Status: March 31, 2008; One designation which is always best to avoid is that of a "Passive Foreign Investment Company" (PFIC). A PFIC is, at the end of the day, nothing more than ...

Real Estate Intangibles Are Real Estate Assets: March 30, 2008; In order for a corporation (or trust or association) to qualify for the favorable tax treatment afforded Real Estate Investment Trusts (REITs), numerous requirements must...

Termination of Transferee Does Not Derail a "Like Kind" Exchange: March 29, 2008; Sec. 1031(a) of the Internal Revenue Code provides that no gain or loss shall be recognized on the exchange of property held for productive use in a trad...

Can a Successor Continue to Amortize a Predecessor's Deferred Costs?: March 28, 2008; Sec. 59(e) of the Internal Revenue Code provides that any qualified expenditure to which an election applies shall be allowed as a deduction, ratably, over the 1...

Death Knell for "Instrument C"?: March 27, 2008; The Financial Accounting Standards Board (FASB) has decided to issue final guidance with respect to the accounting treatment of a popular security known, at least in acco...

Does Disney Love New York?: March 27, 2008; New York State ("New York" or "the State"), as do most other states, permits or requires related corporations to report (for tax purposes) their resul...

Liberty Alters The Terms Of Its Exchangeable Debentures: March 26, 2008; In theaftermath of its settlement with the I.R.S. regarding the deductibility of interest accruals with respect to its numerous issues of exchangeable debentures (t...

A Tale of Two Spin-Offs: March 25, 2008; Two of the mostprominent corporate separations of the recent past are (i) the distribution by News Corp. (N) of its stock in DirecTV (D), along with some other asse...

Securing A Loss From The Liquidation Of A Subsidiary: March 24, 2008; When a parent liquidates a subsidiary (the subsidiary's assets are distributed to the parent in exchange for, and in complete cancellation andredemption of, the par...

Structure of BSC Deal Will Permit Recognition of Losses: March 23, 2008; It seems abundantly clear that, given the precipitous decline in the price of the stock, most shareholders of The Bear Stearns Companies, Inc. (BSC)are "sittin...

Income From Discharge of Indebtedness: March 22, 2008; Where a taxpayer borrows a sum of money, the proceeds of the borrowing does not constitute gross income because the influx of assets isprecisely offset by the oblig...

FASB Advocates Increased Disclosures About "Plan" Assets: March 21, 2008; The Financial Accounting Standards Board (FASB) has put forth a proposal that would dramatically increase the volume and "quality" of disclosures that an employ...

Can JPM "Use" BSC's Prospective Losses?: March 20, 2008; The proposed transaction, althoughat this point we are still in the dark regarding the structure to be employed, in which JPM will be acquiring BSC, will most likel...

Allscripts Will Pay A Special Cash "Dividend": March 19, 2008; On March 18, 2008 Allscripts (A) and Misys Plc (M) announced that they had inked a definitive merger agreement. The agreement envisions a multi-step transaction in which...

JPM's "Bargain Purchase" of BSC: March 18, 2008; Even assuming that the reported book value (some $84/share) of The Bear Stearns Companies (BSC)is overstated because substantial asset write-downs have yet to be in...

Applera Corp. Will Effect a Split-Off: March 17, 2008; Applera Corp. (A) has two classes of tracking stock outstanding. One such class was issued to reflect the performance of its "Celera Group" activities. For seve...

IP Will Secure A "Cost Basis" in WY's Assets: March 17, 2008; Many observers believed that Weyerhaeuser (WY), which had announced its intention to explore strategic options with respect to its Containerboard, Packaging, and Recyclin...

Earning Research Credits With Respect To Licensed Property: March 16, 2008; The "Research Credit" has expired but, before too long, Congress will, if past practice is any guide, get around to extending it for at least oneadditiona...

Involuntary Acts Are Not Treated More Favorably Under the Tax Code: March 15, 2008; Certain tax penalties are triggered by acquisitions of control of a corporation and others are activated by dispositions of the stock of a corporation. For example,...

Effective Tax Rates Are Declining--Part 2: March 14, 2008; Two weeks ago, we reviewed the results of a study performed by Mr. Martin A. Sullivan for Tax Notes the results of which were a little unsettling. (See...

Before Hong Kong Was Part of China: March 13, 2008; A company organized in the United States, New York Guangdong Finance, Inc. (NY), in the early '90s, entered into loan transactions with two, affiliated, foreign corporati...

An Abandoned Security Is A (Wholly) Worthless Security: March 12, 2008; The Internal Revenue Code, within certain specified limits, allows taxpayers to obtain a tax deduction for losses they sustain. Thus, in general, Sec. 165(a) andReg...

Berkshire Hathaway Not Immune To The Charms of The "Cash Rich Split-Off": March 11, 2008; Berkshire Hathaway, Inc. (BH) has owned for more than five years some 16.3 percent of the stock (1,724,200 shares)of White Mountains Insurance Group, Ltd. (WM). Now...

What Is "A Foreign Country"?: March 11, 2008; By far, the most frequently litigated tax issue of the recent past concerns the question of whether Antarctica is, for purposes of Sec. 911, a "foreign country"...

Navigating the NOL Survival Rules: March 10, 2008; Congress has always shown a keen interest in preventing what it has referred to, pejoratively, as "trafficking" in Net Operating Losses (NOLs). Accordingl...

Solving the Mystery of the Disappearing Basis: March 9, 2008; Where a shareholder's stock is redeemed by the issuingcorporation, the redemption may be treated as either an "exchange" or as a "distribution"....

Fannie Mae's Deferred Tax Asset: March 8, 2008; Fannie Mae's (F)consolidated balance sheet reflects a "net deferred tax asset" amounting to $12.967 billion. There is much emphasis placed uponF's &...

Raising Capital With "Equity Units" Provides Tax Advantages: March 7, 2008; Included in the package of securities that Ambac Financial Group, Inc. recentlyissued to shore up its depleted capital basewas, in addition to its common stoc...

A Step-Up in Basis Is Hard To Come By: March 6, 2008; A buyer's objective, from a tax viewpoint, with respect to an acquisition, is to secure a "cost basis" with respect tothe target's assets. However, when a...

Genesco and Finish Line Settle Their Differences: March 6, 2008; Genesco, Inc. (G) has entered into a settlement agreement with Finish Line, Inc.(FL; itserstwhile merger partner) and with UBS Securities LLC (UBS; the...

Does Intent Play a Role in Characterizing a Distribution?: March 5, 2008; The tax consequences of distributions of property (within the meaning of Sec. 317(a))by a corporation to its shareholders with respect to its stock is governed by S...

Examining the Tax Treatment of "ETNs": March 5, 2008; Today, the House Ways & Means Select Revenue Measures Subcommittee will be holding hearings that will be of more than passing interest to a large cohort of Wall Stree...

Liberty Media Settles a Tax Dispute: March 4, 2008; Liberty Media Corp. (L) has, through the years,issued some $4.5 billion of exchangeable debentures . These debentures, which pay onlynominal interest,...

Effective Tax Rates Are Declining: March 3, 2008; A recent study in Tax Notes (Volume 18, No. 110, March 3, 2008)performed by Mr. Martin A. Sullivan demonstrates, conclusively, that U.S. corporations are r...

Extracting Cash From A Spun-Off Subsidiary: March 3, 2008; Although a spin-off is, invariably, "carried out" for one or more corporate business purposes, some distributing corporations are reluctant to undertake spin-of...

Sprint Nextel Corp. Throws In The Towel: March 2, 2008; Sprint Nextel Corporation's (S)fourth quarter earnings release contained a rather unsettling piece of information. It revealed one of the largest write-offs o...

Parsing the Word "Substantial": March 1, 2008; Many important tax determinations turn on establishing that an amount or quantity is substantial . For example, a transaction will qualify as a reorga...

HBS Graduate Denied A Tax Deduction For Education Expenses: February 29, 2008; The battle between the I.R.S. and Master of Business Administration (MBA) candidates seeking a tax deduction for the expenses of earning that prestigious degree rag...

Changing The Tax Treatment of Cell Phones: February 28, 2008; Although most tangible personal property benefits from the accelerated cost recovery system provided for in Sec. 168 of the tax code (typically, this property is deprecia...

Investment Advisory Fees--The I.R.S. Moves To Implement "Knight": February 28, 2008; Whether a client can deduct, for tax purposes, the fees charged by an investment advisor is, for obvious reasons, an important issuefor readers of The Willens Repor...

LINTA and NWS Close to Consummating Long-Awaited Split-Off: February 27, 2008; On February 25, 2008 Dow Jones Newswires reported that the Federal Communications Commission (FCC) "gave the green light" to the widely-publicized transaction i...

UAL's Special Distribution--Is It a Dividend?: February 26, 2008; United Airlines (UAL), on January 23, 2008, made a "special distribution" to its shareholders (of record as of January 9, 2008) in the amount of $2.15 per share...

"Disqualified Distributions": February 25, 2008; Even where a spin-off (or split-off) meets each of the "base" requirements of Sec. 355, things can still go awry if the distribution is made, in substantial par...

A REIT's Forex Profits Are "Qualifying Income": February 24, 2008; In order for a Real Estate Investment Trust (REIT) to maintain its tax-favored status (REITs, unlike other corporations, are entitled to a tax deduction for the dividends...

Disgorging "Short Swing" Profits: February 23, 2008; CCA 200808019, November 13, 2007, addresses the case of a taxpayer (T/P) who founded Corporation (C). Shortly after its founding, C engaged in an initial public offering...

Foreign Shareholders Can (Legally) Escape Tax on REIT Distributions: February 23, 2008; The acquisition of a Real Investment Trust (REIT) almost always takes the form of a "forward cash merger". Thus, the target willmerge with and into...