Tax/IRS Articles of Interest

The following are recommended articles that we have published in recent newsletters. Each discusses important issues in valuation.

Section 409a and the value of your stock plan - Internal Revenue Code Section 409A restricts compensation deferrals for income tax purposes. The restrictions apply to most types of deferred equity-based compensation, including stock options, stock appreciation rights (SARs) and phantom stock plans.

IRS tightens the reins on business valuations - The IRS has cracked down on abusive tax reporting and upgraded its Business Valuation Guidelines. Understanding IRS preferences can minimize taxpayer liabilities and expedite settlement.

Estate tax valuations and subsequent events - When appraised values seem to contradict real-life transactions Estate tax issues can be tricky. Suppose a business owner dies or gifts shares of his or her company to family members. So far, so good. But what if six months or a year later, the company sells for significantly more than its previously appraised value? If the IRS catches wind of this apparent discrepancy, the family members may receive a deficiency notice.

Don’t put estate planning on the back burner - As a result of the estate tax repeal scheduled for 2010, many people mistakenly believe that estate planning is no longer necessary.

4 Key IRS rulings at a glance - The Treasury Department periodically issues revenue rulings to help interpret tax laws. These interpretive rulings don’t carry the same weight as the Internal Revenue Code, but they do clarify complex or ambiguous topics — including business and intangible asset valuations.

What’s the IRS up to now? - The IRS has opposed family limited partnerships (FLPs) — largely unsuccessfully — since they came into vogue in the 1990s. Originally, its attacks centered on substance over form and gift on formation arguments.

Taxpayer victory in the battle over built-in capital gains tax - No two ways about it: Built-in capital gains tax is an economic reality for C corporations. Recent Tax Court rulings have forced the IRS to concede that hypothetical investors consider imbedded tax liabilities when buying and selling C corporations.