Daily Tax Update - June 13, 2007

IRS  ISSUES TEMPORARY REGULATIONS ON TREATMENT OF PREPAID INCOME UNDER SECTION 382:  Today, the IRS and Treasury issued proposed and temporary regulations that prevent prepaid income from being treated as recognized built-in gain for purposes of section 382(h).

  • A corporation can increase its section 382 limitation by the amount of any recognized built-in gain arising in a taxable year ending within the 5-year recognition period following an ownership change, provided that the corporation had a net unrealized built-in loss immediately before the ownership change.
  • The Preamble to the temporary regulations indicates that the IRS was aware that taxpayers were taking the position that prepaid income received before an ownership change, but included in gross income during the 5-year recognition period thereafter, qualifies as recognized built-in gain.
  • Temporary regulations provide that prepaid income is not recognized built-in gain for purposes of section 382(h).
  • The regulations can be accessed via: http://www.steptoe.com/assets/attachments/3026.pdf
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com

TAX BILLS INTRODUCED JUNE 12TH:
H.R. 2672: To amend the Internal Revenue Code of 1986 to provide a deduction for the cost of attendance at an eligible educational institution.
Sponsor: Rep. Smith, Adrian [NE-3] (introduced 6/12/2007)      Cosponsors (2)

H.R. 2676: To amend the Public Health Service Act, the Employee Retirement Income Security Act of 1974, and the Internal Revenue Code of 1986 to require group and individual health insurance coverage and group health plans to provide coverage for individuals participating in approved cancer clinical trials.
Sponsor: Rep. Pryce, Deborah [OH-15] (introduced 6/12/2007)      Cosponsors (3)

H.R. 2682: To amend the Internal Revenue Code of 1986 to make employers of spouses of military personnel eligible for the work opportunity credit.
Sponsor: Rep. Carter, John R. [TX-31] (introduced 6/12/2007)      Cosponsors (26)

H.R. 2691: To amend the Internal Revenue Code of 1986 to provide additional incentives for facilities producing electricity from wind.
Sponsor: Rep. Walz, Timothy J. [MN-1] (introduced 6/12/2007)      Cosponsors (5)

S. 1591: A bill to amend the Internal Revenue Code of 1986 to allow full expensing for the cost of qualified refinery property in the year in which the property is placed in service, and to classify petroleum refining property as 5-year property for purposes of depreciation.
Sponsor: Sen. Hatch, Orrin G. [UT] (introduced 6/12/2007)      Cosponsors (None)

S. 1593: A bill to amend the Internal Revenue Code of 1986 to provide tax relief and protections to military personnel, and for other purposes.
Sponsor: Sen. Baucus, Max [MT] (introduced 6/12/2007)      Cosponsors (13)

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.