Tax Blog/Blawg

Any corporate tax executive who has ever been involved in contesting an audit adjustment knows all too well how unfavorable documents relating to the subject of the adjustment – particularly improvident comments reflected in email correspondences – can be an ongoing impediment to resolving a tax dispute from the audit phase right up to and through litigation with the IRS or Department of Justice.  When such documents exist, even where taken out of context, the government will zealously sink its teeth into them like a junkyard dog, making the prospects of reaching a reasonable ...

Pennsylvania may soon join the other states that have challenged the use of the so-called Delaware Loophole, according to our colleagues at the State and Local Tax Blawg.  The legislation, contained in Pa. House Bill 2150, would disallow deductions that a parent operating corporation claims for royalty payments made to a "Delaware Holding Company."

The new limitation would not apply where the transaction is related to "a valid business purpose."  In this regard, the legislation defines a valid business purpose as, “[a] purpose, other than the avoidance or reduction of taxation ...

Two weeks ago, the Fifth Circuit summarily rejected a taxpayer request for an en banc rehearing in Southgate Master Fund LLC v. United States.  The appellate court had previously concluded that the taxpayer was not entitled to a claimed capital loss from a transaction involving the acquisition of distressed debt via a partnership because the partnership was a “sham” that should be disregarded for federal tax purposes.  The taxpayer's petition for rehearing, along with two amicus briefs, raised the specter that the Fifth Circuit's opinion would require taxpayers to have a non-tax ...

The passage of President Obama's health-care legislation will no doubt have long-lasting consequences for the economy in general and the health-care industry in particular.  Less noticed by the general public, but central in the minds of tax professionals, has been a single provision in the accompanying reconciliation bill that codifies the so-called "economic substance" doctrine.  Having often been introduced in bills that eventually died in the catacombs of the legislative process, many practitioners were beginning to believe that codification was a cousin of Bigfoot and the Loch Ness Monster - often spotted, but never confirmed.