Archive - March 2011
Refunds in Asset Purchase Agreements
Recently the Service issued CCA 2010100811334240. While the ruling does not offer any new law, it is a good reminder of the often ignored practical and legal considerations surrounding tax refunds in acquisition agreements. In this ruling the parties entered into an asset purchase agreement. The parties thoughtfully addressed tax refunds in the agreement. The APA clearly listed “tax refunds” as assets sold. Thus, the parties were one step ahead of a lot of other buyers and sellers who do not address refunds at all and leave the issue in the air altogether. The parties...
March 23, 2011 read more
Tax Court: LLP Partners Did Not Qualify for Limited Partner Exception to Self-Employment Tax
A recent Tax Court opinion held that the "limited partner" exception to liability for self-employment tax ("SET") found in IRC Section 1402(a)(13) did not apply to the partners of a Kansas limited liability partnership, which was operated as a law firm specializing in, you guessed it, Federal income tax law. The opinion--Renkenmeyer, Cambell & Weaver, LLP v. Commissioner, 136 T.C. No. 7 (February 9, 2011)-- is noteworthy both to interest holders in "newer" entities such as LLPs, LLLPs, and LLCs, and also to old-fashioned limited partners.The prevailing view among practitioners...
March 15, 2011 read more
Penalties and Retainer Letters After the Enactment of Economic Substance
As mentioned a few times on this blog, Congress codified the economic substance doctrine last year as part of the Health Care and Education Reconciliation Act of 2010. One of the aspects of the new law is the introduction of a strict liability penalty for engaging in transactions that lack economic substance. Before the enactment of the doctrine, usually, to avoid the 20% penalty under Sec. 6662 of the Code, funds either relied on “reasonable cause” or on “adequate disclosure.” However, newly amended Sec. 6662(b)(6) of the Code provides for a 20% penalty for “[a]ny...
March 11, 2011 read more
Pete Stark Reintroduces Last Year's Currency Tax Bill
For those who do not remember, last year Pete Stark, a D- Cal Representative introduced H.R. 5783, the Investing in Our Future Act of 2010. That bill basically provided that currency transactions will be subject to a 0.005 percent tax on the value of the currency acquired in the transaction. Last year this Bill did not go anywhere. That did not stop Mr. Stark from reintroducing the Bill in the 112th Congress. It doesn’t seem that much has changed from the previous installment. The Bill, if it ever passes, could put a significant tax strain on hedge funds and private equity funds...
March 08, 2011 read more
FATCA and Foreign Funds
I was reading an article today by Lee Sheppard titled “Danilack Warns Multinationals on FATCA and GRAs.” In the article, Ms. Sheppard reports on deputy commissioner (international) Michael Danilack’s views on FATCA and raises some questions along the way. What intrigued me was the question about the holding company rule. Ms. Sheppard asks “What if private equity funds are making U.S. investments through a foreign holding company?” Then few more thoughts on Ms. Sheppard’s part follow and the discussion ends with Mr. Danilack’s answer - “the government does not want...
March 01, 2011 read more