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The American Jobs Creation Act provides significant tax breaks for businesses, but it also offsets these by revenue-raising provisions, many of which are aimed at cutting down on tax shelters and other tax avoidance schemes. Specifically, the act imposes new penalties and disclosure requirements on taxpayers and material advisers involved in reportable transactions.
In order to receive favourable treatment under Section 368(a)(1) of the Internal Revenue Code, a reorganization must satisfy several statutory requirements as well as non-statutory requirements that have developed in case law. Two of the principal non-statutory requirements are the continuity of interest and continuity of business enterprise requirements.
The US Tax Court recently ruled that the sale of a non-US subsidiary to a third party, following an election by the subsidiary to be treated as a disregarded entity for US federal income tax purposes, does not result in 'subpart F' income. Subpart F income includes foreign base company income, which in turn includes foreign personal holding company income.
The Internal Revenue Service has issued final regulations pursuant to Treasury Decision 9107 providing rules for the capitalization of intangible assets. The rules explain when capitalization is required for amounts paid to acquire or create an intangible, and require capitalization of amounts paid to facilitate an acquisition of a trade or business and certain other transactions.
The US Internal Revenue Code and the Treasury regulations promulgated thereunder impose requirements on 'confidential transactions', within the meaning of certain rules relating to tax shelters. The US Treasury Department recently released revised regulations that substantially narrow the scope of the rules requiring disclosure of such transactions.
For the first time in four litigated cases, the taxpayer has won a victory against the Internal Revenue Service regarding the deductibility of interest on debt incurred to purchase corporate owned life insurance (COLI). COLI plans allow a corporation to purchase life insurance policies on its employees.