MoFo Tax Talk - Volume 4, No. 4 - January 2012


In this issue: Treasury Releases Temporary and Proposed Regulations on Withholding under Equity Swaps; IRS Releases Temporary and Proposed Regulations on Reporting of Specified Foreign Financial Assets; IRS Issues Private Letter Ruling on Look-Through Approach for Purposes of Worthless Stock Deduction; IRS Private Letter Ruling: Conversion of Bonds to a New Interest Rate Period is Not a Significant Modification; New Proposed Regulations Clarify Scope of Section 892 and Create De Minimis Exception for Inadvertent Commercial Activity; IRS Guidance on REMICs and REITs with Respect to the Home Affordable Refinance Program; Tenth Circuit Affirms Tax Court’s Holding in Anschutz Co. v. Commissioner; IRS Technical Advice: Cumulative Preferred Stock that Pays Accumulated Dividends at Redemption is Section 1504(a)(4)Preferred Stock; IRS Provides Transitional Relief from Reporting Obligations of Corporate Actions; The Classroom – Legging-In and Legging-Out of an Integrated Transaction; and MoFo in the News.

As we were waiting for the Treasury Department’s (“Treasury”) Foreign Account Tax Compliance Act (“FATCA”) regulations to spoil our holidays, Treasury officials gave us a gift of sorts and said the regulations would be out sometime “early” this year. Hopefully, they will be published prior to FATCA’s next effective date of March 18. Even without the FATCA regulations, Q4 2011 had a number of important tax developments affecting the capital markets. Treasury released the final version of the specified foreign financial asset reporting form, along with temporary and proposed regulations.

The Tenth Circuit affirmed the Tax Court’s ruling in Anschutz Co. v. Commissioner on whether a prepaid variable forward plus a stock loan is a sale for federal income tax purposes. The Internal Revenue Service (the “IRS”) issued various pieces of private guidance addressing the tax consequences of a number of transactions including modifications of debt instruments, worthless stock deductions for affiliated corporations and accreting dividends on preferred stock. These are discussed below. In addition, to kick-off Q1 2012, Treasury released temporary and proposed regulations addressing dividend equivalents. To conclude this edition, we have our regular features, The Classroom and MoFo in the News.

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