In this issue: 2010 Tax Relief Act; Knock-Out Option Treated as Direct Ownership of Underlying; Tax System Overhaul Recommended by Deficit Reduction Commission; Proposed Regulations Clarify and Expand Scope of “Publicly Traded”; Short Form HIRE Act Protocol; Repatriation Holiday on the Horizon?; RIC Modernization Provisions; Modification of Mortgage Loans – New REIT Safe Harbor; IRS Reporting Obligations for Corporate Actions; and more...

This latest issue of TaxTalk comes to you with a slight delay. The benefit of this delay is that we can provide a timely update on the most recent federal income tax developments. Both Congress and the Internal Revenue Service (“IRS”) have been busy passing legislation and issuing regulations and other guidance. On the Congressional front, the Bush tax cuts were extended at the last possible moment and a new law modernizing the tax rules applicable to regulated investment companies (“RICs”) was enacted. The IRS also had a busy holiday season and came out with proposed regulations expanding the scope of the “publicly traded” definition and issued guidance applicable to real estate investment trusts (“REITs”) in connection with the modification of mortgage loans. We also discuss the framework of the tax system overhaul that the National Commission on Fiscal Responsibility and Reform put forward in its draft report as well as a few additional items. Due to the blizzard of current events, this issue does not include our otherwise regular feature “The Classroom,” which is scheduled to return next quarter.