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1. Success-based fees and milestone payments   CPEDirect

BY Alistair M. Nevius
When taxpayers incur costs that relate to an acquisition or restructuring, they generally must capitalize any costs incurred to facilitate (i.e., investigate or otherwise pursue) the transaction (Regs. Sec. 1.263(a)-5). When fees paid to service providers are contingent upon the successful closing of a transaction, taxpayers can use a facts-and-circumstances test or a safe harbor to determine what portion of the fees are deemed to “facilitate” that transaction (Rev.

2. Final rules clarify retailers’ treatment of vendor discounts in inventory valuation   WebExclusive

BY Paul Bonner
Final regulations issued Thursday restate and clarify retailers’ computation of ending inventory value, including the application of common vendor discounts (T.D. 9688). The amendments to Regs. Sec. 1.471-8 are intended to render that section’s provisions in plainer language and provide rules for how sales-based vendor allowances and vendor markdown allowances and margin protection payments are taken into account under the retail-inventory method.

3. Regs. govern dispositions of depreciable property   WebExclusive

BY Alistair M. Nevius, J.D.
The IRS issued final regulations providing rules for how to determine gain or loss when property subject to depreciation is disposed of, how to determine the asset disposed of, and how to account for partial dispositions of depreciated property (T.D. 9689). The regulations apply to property that is subject to depreciation under the modified accelerated cost recovery system (MACRS) and to tax years beginning on or after Jan.

4. Treating partners as employees: Risks to consider   CPEDirect

BY Noel P. Brock, CPA, J.D.
In today’s business environment, where many businesses find they cannot retain key employees without offering equity interests in the businesses, partnerships often grant employees interests in the company. Even a very small partnership interest, however, can cause the employee to be treated as a partner, not an employee, for federal tax purposes, while the partnership often mistakenly continues to treat the partner as an employee.

5. New treatment of disguised sales and partnership liabilities  

BY Alistair M. Nevius
The IRS issued proposed regulations in January dealing with disguised sales of property to or by a partnership under Sec. 707 and the treatment of partnership liabilities under Sec. 752 (REG-119305-11). According to the IRS, the proposed regulations are designed to address “deficiencies and technical ambiguities” in the current regulations.Sec.

6. Final rules issued on bona fide indebtedness and terminating partnership’s startup expenses   WebExclusive

BY Sally P. Schreiber, J.D.
On Tuesday, the IRS issued T.D. 9682, which finalized proposed regulations relating to basis of indebtedness of S corporations to their shareholders that provide that S corporation shareholders increase their basis of indebtedness of the S corporation to the shareholder only if the indebtedness is bona fide, which is determined under general Federal tax principles and depends upon all of the facts and circumstances.

7. New rules on covered asset acquisitions will shut down transactions to avoid Sec. 901(m)   WebExclusive

BY Sally P. Schreiber, J.D.
In Notice 2014-44, the IRS announced that it would issue regulations to prevent taxpayers from misapplying the statutory disposition rule in cases where the gain or loss from the disposition of the relevant foreign asset (RFA) is recognized for U.S. income tax purposes but not for foreign income tax purposes.

8. Definitions of R&E expenditures are amended under final rules   WebExclusive

BY Sally P. Schreiber, J.D.
The IRS issued final regulations on which amounts paid or incurred in connection with the development of tangible property, including pilot models, qualify for the Sec. 174 deduction (or amortization) for research and experimental expenditures (T.D. 9680). The regulations finalize proposed rules issued last September (REG-124148-05), with a few changes in response to comments.

9. Effective date of fiduciary fee unbundling rules delayed until 2015   WebExclusive

BY Sally P. Schreiber, J.D.
In response to a comment that the current effective date of the new rules on fiduciary fees does not give fiduciaries enough time to implement them, the IRS amended T.D. 9664 to delay the date. As a result, the new rules governing which costs of trusts and estates are subject to the 2% floor on miscellaneous deductions now apply to tax years beginning after Dec.

10. Partnership interest expense allocation rules are finalized   WebExclusive

BY Sally P. Schreiber, J.D.
The IRS has finalized, without substantive changes, proposed regulations that were issued in conjunction with temporary regulations in January 2012. The final regulations make permanent four changes to the rules for allocating and apportioning interest expense for partners in partnerships (T.D. 9676). The first change is to the method for apportioning interest expense for corporate partners whose interest in the partnership is 10% or more.
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