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Tax News
Archive - February 2011
FinCen Finalizes the Proposed FBAR Regs
FinCen Finalizes the Proposed FBAR Regs
So the 31 CFR §103.24 FBAR regulations became final on February 24,2011.  The regulations are effective as of March 28, 2011. I personally had a modicum of hope that the final version would exempt interest in private equity, venture capital and hedge funds as  reportable accounts, but that did not happen.  On this issue, the final regulations basically adopt the proposed regulations. Section 103.24(c)(3)(iv)(B) provides, just as the proposed regulations, that “Other investment fund. [Reserved].”  So in essence, for the time being, it appears that it is in IRS’ hands to resolve...
February 24, 2011 read more
Form 8938 and Others – Headaches for Fund Investors
Form 8938 and Others – Headaches for  Fund Investors
I was reading TNT today and the following jumped at me. It was a comment by Jane A. Bruno about Form 8938, the FBAR and the recently enacted reporting obligations that affect US residents that live and work abroad. The comment had some well reasoned remarks and observations and a pleading tone asking Treasury to discontinue this avalanche of information collection and reporting requirements that could drive taxpayers mad.  The comment reminded me that it is tax season and that many fund investors will be filing their individual tax returns soon.  Well, in the last few years it seems that...
February 16, 2011 read more
The Greenbook for Obama’s 2012 budget was just released
The Greenbook for Obama’s 2012 budget was just released
The Administration just came out with its 2012 budget and as expected, the budget contains, again, a proposal to tax carried interest. The main difference from last year’s proposal is the change from “service partnership interest” (SPI) to “investment services partnership interest” (ISPI). In other words, while last year’s budget aimed at all services profits interest in partnerships, this year’s budget clearly addresses investment partnerships only. Just as last year, the new budget expressly discusses the anti-abuse rule that would subject “disqualified interest” to...
February 15, 2011 read more
The 2011 Offshore Voluntary Disclosure Initiative (OVDI) is Official
The 2011 Offshore Voluntary Disclosure Initiative (OVDI) is Official
I mentioned several times on this blog that a new program was pretty much in the cards. Few days ago the Government went on the record and announced the new OVDI. The IRS issued press release IR-2011-14 (Feb. 8, 2011) which summarizes the highlights of the program and also links to a more detailed Q&A. The press release can be found here and the Q&A could be found here. As suggested by the IRS previously, the new program has stiffer penalty rules. OVDI requires individuals to pay a penalty of 25% of the amount in the foreign bank accounts in the year with the highest aggregate...
February 11, 2011 read more
New Entities Created in Bankruptcy Subject to the Section 7874 Inversion Rules
New Entities Created in Bankruptcy Subject to the Section 7874 Inversion Rules
A few days ago the Office of Chief Counsel (International) released an internal memorandum that addressed the potential application of the inversion rules of Section 7874 in bankruptcy. Section 7874 was enacted in 2004 as another tool to battle expatriation and the avoidance of U.S. tax.  In most basic terms, the section provides that certain expatriated entities (foreign corporations that acquire U.S. corporations or partnerships and which are at least 60% owned by the former owners of the acquired U.S. entity and which do not have substantial business operations in their country of...
February 07, 2011 read more
Obama Proposes to Make Small Business Stock Exclusion Permanent
Obama Proposes to Make Small Business Stock Exclusion Permanent
The Obama administration announced on January 31, 2011 that the President's 2012 budget plan will include a proposal to make permanent the 100% exclusion from tax on capital gains from the sale or exchange of qualified small business stock.   IRC Section 1202(a)(4), added by The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which provides for the 100% exclusion, currently applies only to qualified small business stock issued after Dec. 31, 2010, and before Jan. 1, 2012 (IRC Section 1202 provides for a 50% exclusion on capital gains with respect to...
February 02, 2011 read more
VPF with a Short Sale on the Backend is a No Go, Service Says
VPF with a Short Sale on the Backend is a No Go, Service Says
Few days ago Chief Counsel (Financial Institutions & Products) released Written Determination Number: 201104031 (UILC: 9300.99-11).  Basically, the IRS said that you can't unwind a variable prepaid forward (VPF) by delivering borrowed shares and not recognize gain.  A VPF is a prepaid forward with an embedded collar where an owner of the shares pledges the shares to a financial institution in exchange for cash. Because of the collar, and because of the variable delivery of shares when the deal is unwound, the transaction is not treated as a sale from the outset.  In other words, the...
February 01, 2011 read more