In This Issue:

- IRS Clarifies Deadline for Correcting Withholding Documentation

- Consent Payment Modifying Contingent Payment Debt Instrument Must be Tested for Significance

- IRS Concludes Correction of Error an Accounting Change

- Rev. Proc. 2014-51 Relaxes REIT 75% Asset Test Safe Harbor for Distressed Mortgages

- Consolidated Group Treated as Single Entity for Purposes of IRC § 382(l)(5) Bankruptcy Exception

- Domestic Partnership Converted to Foreign Corporation Deemed Tax-Free Transfer of Assets

- Fifth Circuit Rejects Partnerships as Shams, Disallows $1 Billion in Deductions and Remands for Consideration of Penalties

- Notice 2014-58 – Additional Guidance under the Codified Economic Substance Doctrine and Related Penalties

- MoFo in the News

- Excerpt from IRS Clarifies Deadline For Correcting Withholding Documentation:

In CCA 201434021 (the “CCA”), the taxpayer was a withholding agent paying U.S.-source interest to nonresident aliens. In general, such interest payments are characterized as “portfolio interest” (and thus not subject to U.S. withholding tax), provided that the withholding agent receives documentation (typically, Forms W-8BEN or W-8BEN-E) from the payee establishing the payee’s foreign status. In this case, however, the withholding agent did not collect documentation from the payees that would enable the withholding agent to treat the interest payments as portfolio interest. Under Section 1461, any person that is required to withhold tax is made liable for such tax. The withholding agent subsequently discovered its error and collected documentation from the payees sufficient for treating the interest payments as portfolio interest.

At issue in the CCA was whether the withholding agent collected the documentation in time to treat the interest as portfolio interest. Generally, a withholding agent must collect documentation from a payee before the end of the statute of limitation on the payee’s time to collect a refund of tax with respect to the interest. The statute of limitations for claiming a refund expires three years from the time a return is filed, or two years from the time the tax is paid, whichever is later.