The Tax Cuts and Jobs Act (TCJA), which became effective on January 1, 2018, made significant changes to tax legislation that impacted individuals, families, business owners and companies. Some changes were intended to be...more
What is a hedged executory contract? A “hedged executory contract” is another type of transaction that is eligible for integration under Code Section 988(d). A hedged executory contract results when a taxpayer enters into an...more
Are there special hedging provisions for section 988 transactions? Yes. In addition to the business hedging rules I address in our earlier Q&A with Andie series, a special hedging provision is available at Code section 988(d)...more
Which transactions qualify as section 988 transactions? In section 988 transactions, the taxpayer makes payments or receipts denominated in or determined by reference to one or more nonfunctional currency. ...more
Are all foreign currency gains taxable? No. Under a de minimis exemption individual taxpayers with foreign currency gains of $200 or less on a “personal transaction” do not need to report them....more
Navigating the federal taxation of foreign currency can be compared to trying to cross a perilous sea. Both involve unexpected rough patches, serious difficulties, and frustrating complexity....more
Do the tax hedge rules apply to consolidated tax groups? Yes. The Treasury Regulations treat members of a consolidated corporate group as divisions of a single entity. As a single entity, the risks and positions of all group...more
What are the tax accounting rules for hedges? Whether or not a qualified tax hedge is properly identified, it must be tax accounted for under a method that clearly reflects income. The timing of gains and losses on hedges...more
Tax reform, like spring, is in the air. The Biden Administration recently released its fiscal year 2025 revenue proposals, known as the annual “Greenbook.” The Greenbook’s 250+ pages of tax reforms include six potential...more
When must a hedge be identified and accounted for tax purposes? Taxpayers must identity each hedging transaction and the item it hedges. A taxpayer must clearly identify a hedging transaction “before the close of the day on...more
What is the “tax character” of a hedge? A taxpayer receives ordinary gain or loss on qualified hedges that have been properly identified in accordance with Treasury Regulation § 1.1221-2. This allows a taxpayer to ensure that...more
In November 2023, almost 11,000 cryptocurrencies and digital tokens were listed on CoinMarketCaps.com. In addition, tens of thousands of non-fungible tokens (NFTs) are sold daily on various crypto exchanges and NFT platforms....more
Businesses often manage their price risks by hedging those risks with financial derivative contracts. Because businesses generate ordinary income and loss on their normal business activities, they want to be sure their...more
In Part 1 of our discussion on Section 704(c) (Part 1) we described the basic idea of how the inherent built-in tax gain or loss on a piece of property contributed to a partnership is allocated to the contributing partner. As...more
On April 21, 2023, the Internal Revenue Service (IRS) released a Chief Counsel Advice memorandum (ILM 202316008), concluding that a protocol upgrade to the consensus mechanism of a cryptocurrency blockchain that did not...more
It is a common practice for businesses to manage their business price risks by entering into derivative contracts. Because their business activities generate ordinary income and loss, they want to obtain ordinary tax...more
Reportedly, there are over a million creditors in the bankruptcy of the cryptocurrency exchange FTX and its affiliated entities. A substantial number of these FTX creditors may include U.S. retail customers who held and...more
Tax Litigation: The Week of September 26th, 2022, through September 30th, 2022 Patitz, Moody v. Comm’r, T.C. Memo. 2022-99 | September 27, 2022 | Weiler, J. | Dkt. No. 2784-19 Powell and Iakovenko v. Comm’r, T.C. Summary...more
Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of July 25, 2022 – July 29, 2022...more
Section 1256 generally requires that certain contracts, including “foreign currency contracts,” be marked-to-market annually. The Internal Revenue Service (IRS) has long maintained that foreign currency options are not...more
Deal Costs, Generally- Every purchase and sale of a business, whether from the perspective of the seller or the buyer, is about economics, and few items will impact the economics of the transaction more certainly or...more
Among the criticisms I have leveled against FINRA are (1) that it is increasingly acting like a claimant’s arbitration attorney, by taking every possible opportunity to blame member firms for losses incurred by investors when...more
Tax Litigation: The Week of June 6th, 2022, through June 10th, 2022 Pocock v. Commissioner, T.C. Memo. 2022-55 | June 6, 2022 | Vasquez, J.| Dkt. No. 12558-17 Consolidated with Dkt. No. 23569-17L Spencer v Commissioner, T.C....more
Don’t Do It- There are certain generally accepted “dos and don’ts” of which almost every investor is certainly aware. For example, do not put all your eggs in one basket; if an investment seems too good to be true, stay...more
A New York intermediate appellate court has held that an insured was entitled to coverage under its fidelity bond for over $141 million in losses it sustained after an independent broker used the insured’s electronic trading...more