Archive - April 2011
Chief Counsel Reasons that IRS can’t Levy on SMLLC Property to Satisfy the Liability of the Owner
In CCA_2011032112062926 Chief Counsel was asked whether it is appropriate to levy on the assets of a single member LLC to satisfy the owner’s tax liability and the answer was No. However, CC also suggested that a reverse piercing veil approach may be appropriate. Nonetheless, it also acknowledged that the piercing standard is pretty high in most states. CC further reiterated that the proper approach is to levy on the LLC interest and issue a notice to the LLC for any distributions going to the owner.Why am I talking about this? Most asset protection planning revolves around...
April 25, 2011 read more
Safe Harbor Provides for 70% deductibility of Success-Based Fees
Many private equity and venture capital professionals are aware of the general rule that costs incurred to acquire an asset that has a useful life extending beyond the taxable year of acquisition must be capitalized. Under Treasury Regulations, this general rule extends to fees paid to professionals to "facilitate" acquisitions of whole businesses, as well as various restructurings and reorganizations, which may not result in the acquisition of an asset, but that nevertheless provide significant long-term benefits. A common example is a fee payable to the fund's investment banking firm...
April 23, 2011 read more
Sollberger v. Commissioner: The Tax Court Continues to Slam Monetization Strategies
In a recent decision the Tax Court rejected yet another monetization attempt in the case of Kurt Sollberger v. Commissioner, T.C. Memo. 2011-78 (April 4, 2011). This seems to shape a Tax Court trend considering that the court held against the taxpayer in the other two monetization cases that were decided last year, Calloway, 135 T.C. No. 3 (July 8, 2010) and Anschutz, 135 T.C. No. 5 (July 22, 2010). I previously reasoned on this blog that the negative result in the Anschutz case seemed to stem from poor execution than anything else. So what went wrong in the Sollberger case? In this...
April 21, 2011 read more
Notice 2011-34: The Second Round of FATCA Guidance is Released
So, while I was busy with work and finishing up the private equity tax book I’ve been toiling on, Treasury released the second round of FATCA guidance (on a Friday nonetheless). Here are my observations:The guidance comes in the form of another voluminous notice. It is 46 pages which in addition to the 62 pages of Notice 2010-60 comes to a total of 108. Why do I point that out? I point this out for several reasons. First, this in my mind equates to a possible 100-150 page proposed regulation, counting the preamble. It seems paradoxical to me to come up with volumes on top of...
April 16, 2011 read more
Tax Court: Fund Manager Gets Business Bad Debt Treatment for Loan to Advisor
Fund managers' compensation typically consists of two elements: a management fee--generally 1-2% of NAV (which in addition to paying the managers, is applied toward other operating expenses), and a performance fee--generally 20% of gains. In addition, fund managers may receive an investment return from any capital they invest into the fund (typically, around 1% of the fund's capital). The Tax Court's holding in Todd A. Dagres et ux. v. Commissioner; 136 T.C. No. 12 (March 28, 2011), indicates that the relative amouints of these components can be determinative of the issue of whether a...
April 04, 2011 read more