One of the most pressing audit issues for large taxpayers today centres on the Internal Revenue Code Section 965 transition tax. The Internal Revenue Service has designated Section 965 as a campaign issue and is actively auditing taxpayers' transition tax calculations and positions, along with other tax reform items. The stakes are high, particularly given the potential to pay this tax over eight years.
The US District Court for the Northern District of Texas recently ruled in favour of Exxon Mobil Corporation in its battle against the government over tax penalties. Exxon had filed amended returns for its 2006 to 2009 tax years seeking a $1.35 billion tax refund based on a change of character of certain transactions. The government disallowed the refund claims and imposed a $200 million penalty pursuant to Section 6676 of the Internal Revenue Code. Exxon paid the penalty and filed suit for a refund.
A troubling New Jersey financial transaction tax proposal, which appeared to be gaining popularity over the past few months, has reportedly been left out of the 2021 budget deal that Governor Phil Murphy recently struck with legislative leaders. The decision to drop the transaction tax from the deal came days after the Wall Street Journal reported that prominent stock exchanges with data centres in New Jersey were prepared to exit the state if the tax plan was adopted.
The Internal Revenue Service recently issued proposed regulations under Section 1061, a provision enacted as part of the Tax Cuts and Jobs Act 2017 that recharacterises certain net long-term capital gain with respect to applicable partnership interests as short-term capital gain. The proposed regulations provide clarity on some of the statutory provisions. This article discusses some of the noteworthy provisions in the proposed regulations.
The Internal Revenue Service (IRS) recently issued guidance on the period of limitations for Section 965 of the Internal Revenue Code transition tax-related adjustments of partnerships. Typically, pursuant to Section 6501, the IRS has three years to assess a tax liability for a tax year. However, Section 6501(e)(1)(C) states that if the taxpayer omits from gross income an amount properly includible in income under Section 951(a), the tax may be assessed at any time within six years after the return was filed.