Daily Tax Update - June 14, 2010

IRS AND TREASURY ISSUE FINAL REGULATIONS REGARDING TREATMENT OF PREPAID INCOME UNDER BUILT-IN GAIN PROVISIONS OF SECTION 382(h): On Friday, the IRS and Treasury issued final regulations regarding the treatment of prepaid income under the built-in gain provisions of section 382(h).

  • Section 382 limits the use of net operating losses and certain built-in losses by a corporation after an ownership change. Section 382(h) provides that the section 382 limitation shall be increased by the amount of recognized built-in gains.
  • The final regulations are substantively identical to temporary regulations that were issued in 2007. The regulations provide that prepaid income is not recognized built-in gain for purposes of section 382(h). Under the regulations, the term “prepaid income” means any amount received prior to the ownership change date that is attributable to performance occurring on or after the ownership change date.
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com.

REID FILES CLOTURE MOTION ON EXTENDERS PACKAGE: Today, Senate Majority Leader Harry Reid filed a motion to end debate on the $140 billion extenders package. 60 votes are needed to obtain cloture. The Senate likely will vote on the motion to end debate Wednesday, with a vote on final passage possible by the end of the week.

TREASURY UPDATES SECTION 1603 APPLICANT CHECKLIST: Today, the Treasury Department website was updated to provide a checklist of information to be provided by each applicant for a grant under section 1603 of the American Recovery and Reinvestment Act of 2009.

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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