Daily Tax Update - March 11, 2008

IRS and Treasury Issue final regulations under section 165 Regarding securities that are abandoned:  Today, the IRS and Treasury issued final regulations addressing the application of the worthless securities loss rules in section 165(g) to securities that are abandoned.

  • The final regulations clarify that a loss from an abandoned security is governed by section 165(g). If the abandoned security is a capital asset, and not a worthless security of an affiliated corporation as described in section 165(g)(3), the resulting loss will be treated as a loss from the sale or exchange of a capital asset on the last day of the taxable year.
  • The final regulations establish that to abandon a security a taxpayer must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for the security.
  • The IRS had previously published a notice of proposed rulemaking regarding abandoned securities on July 30, 2007. These final regulations contain the rules described in that notice.
  • The final regulations are effective on March 12, 2008. 
  • For additional information, contact Lisa M. Zarlenga at lzarlenga@steptoe.com
  • The regulation can be accessed here.

FINANCE COMMITTEE SCHEDULES HEARING ON ESTATE TAXES: Tomorrow, the Senate Finance Committee will hold a hearing titled, the “Current Federal Estate Tax System.”

  • In conjunction with the hearing, the Joint Committee on Taxation has released a report titled, “Description And Analysis Of Alternative Wealth Transfer Tax Systems.”
  • The document can be accessed here.

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.

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