Archive - June 2011
Hendrix v. Commissioner – The Government Loses Another Defined Value Clause Argument
Gift and estate planning is a major component of private equity, venture capital and hedge fund taxation. The issues come up in the context of an investment manager’s individual tax planning. Investment managers typically own a profits interest in a general partnership that in turn has a 20% profits interest in one or several funds, or alternatively a management contract with the investment funds under management. The value of the manager’s interest in the GP is minimal at the outset. The reason is that the managed investments themselves have not appreciated in value. If the manager...
June 30, 2011 read more
IRS SUSPENDS TWO ANNUAL REPORTING REQUIREMENTS – GIVING RELIEF FOR CERTAIN FOREIGN FINANCIAL ASSETS REPORTING AND PFIC REPORTING (NOTICE 2011-55)
On June 17, 2011, the IRS issued Notice 2011-55. In the notice, the IRS suspended (but not excused) the annual information reporting requirements (1) under IRC Section 6038D for individuals who hold interests in specified foreign financial assets during the applicable taxable year having an aggregate value in excess of $50,000 and (2) under IRC 1298(f) for US Persons who are shareholders of Passive Foreign Investment Company (PFIC).Because the filing requirements under IRC Sections 1298(f) and 6039(D) are only suspended and not excused, fund tax administrators should implement procedures...
June 29, 2011 read more
FBAR – Extensions, Extensions, Extensions!
Just as I thought that Treasury was done issuing notices extending the FBAR filing deadline for persons with signature authority but no financial interest in foreign accounts, here comes yet another notice. On June 17, 2011 the Financial Crimes Enforcement Network, or colloquially known as FinCen issued Notice 2011-2. This is the 3rd signature authority notice that I counted in the last month and the fifth notice since 2009 that extends the filing deadline for some signature authority accounts. So to recap, the whole extension plethora started with Notice 2009-35, then came Notice...
June 20, 2011 read more
Additional FBAR Relief for Certain Foreign Financial Account Signatories (Notice 2011-54)
On June 16, 2011, the IRS, in Notice 2011-54, further extended the deadline from June 30, 2011, to November 1, 2011, for the filing of the Report of Foreign Bank and Financial Accounts (FBAR) for persons with no financial interest in a foreign financial account but with signatory or other authority over such accounts for calendar years 2009 or earlier. The deadline continues to be June 30, 2011 for calendar year 2010.Notice 2011-54 benefits investment funds and managers that have authority over foreign financial accounts in which such investments fund or managers have no legal or...
June 19, 2011 read more
Boltar v. Commissioner: A Cautionary Tale About Appraisals
As with sausage and law, most taxpayers and their tax lawyers do not want to see how their valuation expert "made" their appraisal report. In other words, they generally leave the methodolgy to the experts and focus only on the appraised value that will be used to support their return position.The taxpayer in Boltar LLC v. Commissioner, 136 T.C. No. 14 (April 5, 2011), however, learned the hard way that an appraisal that does not use reliable methods and relies on factual incaccuracies can be as worthless as the paper its printed on.While the appraisal at issue in Boltar was used by...
June 10, 2011 read more
Lending and the 864(b)(2) safe harbor – the industry keeps pushing for guidance but Treasury seems busy with other issues
Here we are at the time when another guidance priority list is being finalized and the Treasury has requested comments regarding what should go on this list. I am not going to go on and on about this, but it is notable that the Treasury has not budged on this issue. Enough has been written about the safe harbor and its implication to investment funds. Even more has been written about lending and how the safe harbor, may, should, or may not apply to lending type activities by foreign funds. To funds, the stakes are pretty high – no US tax vs. tax on net basis. The question that is on many...
June 07, 2011 read more