Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact - Part II... [ read ]
As discussed in Part I of this series, the cancellation of indebtedness, whether in whole or in part, generally results in COD Income to a taxpayer which must be included in gross income. Section 108 of the Internal Revenue Code (the "Code"), though, provides a handful of exceptions to this general rule of income inclusion. However, due to Covid-19, Congress has expanded exceptions to the general COD Income rule beyond those in section 108. Furthermore, it is possible, based on measures passed during prior economic crises, that Congress will pass additional exceptions to the general COD Income rule and that situations will arise in which COD Income exceptions may be expanded beyond their typical scope.
Texas Comptroller Prevails in a Texas Franchise Tax Sourcing Case involving Satellite-Radio Programming — But Taxpayers Could Also Benefit in Other Contexts... [ read ]
In a case with potentially broad implications, the Third Court of Appeals recently agreed with the Texas Comptroller that revenues received by a taxpayer from subscription-based satellite-radio programming could be sourced to the location of the subscribers for Texas franchise tax purposes rather than to where the programming actually occurred.
Update on IRS Voluntary Disclosures... [ read ]
In a previous blog post, we discussed how and when to make a voluntary disclosure to the IRS using the revised voluntary disclosure guidelines announced by the IRS in November 2018. In April 2020, the IRS quietly updated Form 14457, Voluntary Disclosure Practice Preclearance Request and Application and its instructions. The changes to the form and instructions answer some of the outstanding questions but also raise new questions. For example, while the instructions clearly state that a disclosure will not guarantee immunity from prosecution, they also state multiple times that the practice provides a way to "avoid potential criminal prosecution."
The Texas Supreme Court Holds that the Sale of Military Aircraft to the U.S. Government for Foreign Buyers Could not be Sourced to Texas for Franchise Tax Purposes... [ read ]
In a recent decision involving the apportionment factor for Texas franchise tax purposes, the Texas Supreme Court held that the sale of certain military aircraft to the U.S. Government for ultimate delivery to foreign buyers could not be sourced to Texas, even though legal title and possession transferred in Texas, where the U.S. Government's involvement was statutorily required under federal law. In so holding, the Court disclaimed deciding whether tangible personal property must be sold to a buyer located in Texas or simply delivered to a point in Texas before the sale can be sourced to Texas. See Lockheed Martin Corp. v. Hegar, 2020 WL 2089741 (Tex. 2020). As discussed below, the decision is potentially significant both with respect to what it holds and also what it expressly disclaims to hold.
Debt Relief: Breaking Down the Tax Aspects of Covid-19's Economic Impact – Part I.... [ read ]
This is the first in a series of blogs which will address various tax aspects of loan modification, debt relief, restructuring, bankruptcy, and other topics that will likely be at the forefront of the legal landscape in the near future as a result of Covid-19. The posts in this series, while not exhaustive of all topics, will provide guidance on important practice points and raise several issues taxpayers and practitioners should be aware of. The first topic in the series, cancellation of indebtedness, illustrates the often-unexpected tax consequences accompanying relief from indebtedness.
*UPDATED* IRS HAS NOW ALSO EXTENDED DUE DATE AND PAYMENT DATE FOR GIFT AND GST TAX RETURNS, AS WELL AS ESTATE TAX RETURNS, AND ASSOCIATED TAX DUE, TO JULY 15, 2020.... [ read ]
As mentioned in a previous blog post, IRS Notice 2020-18 provides an automatic extension of time to file income tax returns and pay federal income taxes until July 15, 2020 for Affected Taxpayers—defined as any person, including any individual, trust, estate, partnership, corporation, or other entity under IRC 7701(a)(1), with a federal income tax return or payment otherwise due on April 15, 2020.
EXPENSES PAID WITH FORGIVEN PAYMENT PROTECTION PLAN (PPP) LOAN PROCEEDS ARE NOT DEDUCTIBLE... [ read ]
The CARES ACT added the Paycheck Protection Plan program, which provides for a loan on favorable terms to qualifying small businesses to pay permitted expenses. These expenses are limited to payroll costs, mortgage interest, rent and utilities --all as defined in the statute and in SBA Guidance and FAQs.
The Texas Supreme Court Denies a Cost of Goods Sold Deduction for Costs Associated with Picking up and Delivering Heavy Construction Rental Equipment... [ read ]
In one of three recent decisions issued by the Texas Supreme Court involving the Texas franchise tax, the Court held that certain costs associated with the rental of heavy construction equipment could not be included in the cost of goods sold deduction.
The Texas Supreme Court Denies a Cost of Goods Sold Deduction to a Movie Theater Company in a Texas Franchise Tax Case... [ read ]
In the recent case of American Multi-Cinema, Inc. v. Hegar, Cause No. 17-0464 (Tex. Apr. 3, 2020), the Texas Supreme Court held that a taxpayer engaged in exhibiting movies in movie theaters could not claim a cost of goods sold for the costs it incurred in exhibiting its movies. This case, which has been closely monitored by taxpayers and practitioners alike, addresses important questions regarding the definition of "tangible personal property" for cost of goods sold purposes. The Court ultimately concluded that American Multi-Cinema, Inc. ("AMC") did not qualify for the cost of goods sold deduction because it did not sell tangible personal property.
IRS PROVIDES PARTNERS—AND PARTNERSHIP TAX PROFESSIONALS—RELIEF IN REV. PROC. 2020-23... [ read ]
For those partnerships who had not elected early application or validly elected out, the 2018 tax year was the first year in which the new partnership audit rules, enacted by the Bipartisan Budget Act of 2015 (the "BBA"), took effect.