By Keith A. Wood I. IRS Cannot Impose Tax on Withdrawals from an IRA It Seized; Hubbard v. Commissioner, 135 AFTR 2d 2025-484 (6th Cir). Mr. Hubbard was a Kentucky pharmacist. He was convicted on drug and money laundering offenses for operating a pill mill. The court allowed the IRS to seize a number of […]
By John G. Hodnette Enacted in 2017, Section 1061 provides a minimum holding period of three years for long-term capital gains for carried interests issued to certain service providers. Section 1061 treats as short-term capital gain (generally taxed at ordinary rates) the portion of gain allocated to a service provider with respect to an applicable partnership […]
By Helen Herbert I hope this message finds you well. As we approach Memorial Day, I want to personally encourage you to attend the 24th Annual North Carolina Tax Section Workshop taking place Friday, May 23 to Sunday, May 25. This workshop is being held at the Kiawah Island Golf Resort and is an opportunity […]
By John G. Hodnette Section 351(a) provides no gain or loss is recognized if property is transferred to a corporation by one or more persons solely in exchange for stock in such corporation, and immediately after the exchange such person or persons are in control (as defined in Section 368(c)) of the corporation. One of the […]
By John G. Hodnette A taxpayer’s relief from indebtedness is generally a taxable event. However, where Section 351 applies to a contribution of assets to a corporation for stock, the corporation’s assumption of liabilities may or may not be taxable under Section 357. Section 357(a) states assumptions of indebtedness pursuant to a Section 351 transaction generally […]
By John G. Hodnette Section 1361(b)(1) provides a corporation can qualify for taxation as an S corporation only if none of its owners are nonresident aliens, foreign entities, partnerships, corporations, or ineligible trusts. An S corporation shareholder generally must be a U.S. resident individual, but there are several exceptions. Section 1361(b)(1)(B) allows decedent’s estates, eligible trusts, […]
By John G. Hodnette Subject to the origin of the claim test, most judgments or settlements paid by a business are fully deductible as ordinary and necessary business expenses under Section 162(a). However, one exception is in Section 162(f), which provides “no deduction otherwise allowable shall be allowed under this chapter for any amount paid or […]
By Keith A. Wood I. Sections 453 and 1042 Deferral Provisions Can Apply in the Same ESOP Transaction; Berman vs. Commissioner, 163 TC No. 1 (2024). In 2002, Mr. and Mrs. Berman sold their closely held C corporation stock to an ESOP for promissory notes. They did not receive any sale proceeds in 2002. They […]
By John G. Hodnette The doctrine of equitable recoupment applies to both assessment by the IRS (in Section 6501) and refunds by taxpayers (in Section 6511) where the IRS or taxpayer may characterize a transaction, item, or event in a different way in open tax years than it was characterized in a closed year. Inconsistencies between […]
By John G. Hodnette Pursuant to Rev. Proc. 2001-43, recipients of unvested profits interests are treated as partners on the date of grant regardless of whether they make Section 83(b) elections. Therefore, when the profits interest later vests, there is no additional income provided the parties meet the requirements of Rev. Proc. 2001-43 and Rev. Proc. […]