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Yearly Archives: 2012

Chief Counsel to Follow ‘Bluebook' Citation in Tax Court

March 20, 2012


The IRS Office of Chief Counsel March 13 issued a notice (CC-2012-007) stating that The Bluebook: A Uniform System of Citation is the source for citation to be used in legal work, including U.S. Tax Court documents.


Note that case citations should be to the official reporter that is listed in T1 of the Bluebook, such as the United States Reporter or to the United States Tax Court Reports, rather than the document reprinted in a commercial service, such as Commerce Clearing House or Prentice Hall. If a case is not reported in an
official reporter, the citation should be to the slip opinion. In addition to citing to the slip opinion, a
parallel citation may be included to Westlaw or Lexis.
The Bluebook provides that short form citations to the Code, statutes, and Treasury regulations should cite to the section preceded by a section symbol. In Counsel documents, subsequent citations after the first full citation to the Internal Revenue Code and to the applicable regulations should instead be made to section numbers. For example, “section 61” may be used in citing to I.R.C. § 61 and “section 1.61–1” may be used in citing to Treas. Reg. §1.61-1.

Read more at: Tax Times blog

Bearer Notes – Non Deductible, Ordinary Income Rates and Not Qualify as Portfolio Debt.

March 9, 2012

Notice 2012-20 provides guidance relating to the portfolio interest exception, the short term debt exception under section 1.6049-5(b)(10), and the excise tax under section 4701 in connection with the repeal of section 163(f)(2)(B)(the bearer debt repeal).

Notice 2012-20 will be published in the Internal Revenue Bulletin 2012-13, dated March 26, 2012.

Issuers of debt obligations that are required to be in registered form but are not issued in registered form are subject to the disallowance of interest deductions under section 163(f) and the imposition of an excise tax under section 4701. Any gain on the sale or other disposition of such an obligation is generally treated under section 1287 as ordinary income rather than capital gain, and, under section 165(j), no deduction is permitted for any loss sustained. In addition, the exception from tax for U.S. source, portfolio interest received by a nonresident alien or foreign corporation under section 871(h) and section 881(c) (portfolio interest exception) is generally not available with respect to interest paid on debt that is not issued in registered form (bearer debt).


The foregoing rules generally do not apply with respect to bearer debt that complies with the foreign-targeting rules of section 163(f)(2)(B) and the regulations thereunder. However, section 502 of the HIRE Act generally eliminated the various exceptions for foreign-targeted bearer debt, effective for obligations issued after March 18, 2012. As a result of this change in law, with respect to obligations issued after March 18, 2012, the portfolio interest exception will be available only for obligations issued in registered form.

Read more at: Tax Times blog

Tax on Foreign Business With One Telecommuter Affirmed by New Jersey Appeals Court

March 9, 2012


Applying the New Jersey Corporation Business Tax Act to a foreign corporation that employs one employee to telecommute full-time from her New Jersey residence does not violate the federal Constitution, the Superior Court of New Jersey Appellate Division held March 2 (Telebright Corp. Inc. v. Director, New Jersey Division of Taxation, N.J. Super. Ct. App. Div., No. A-5096-09T2, 3/2/12).

Addressing the due process clause, Judge Susan Reisner said, “[t]axing a business based on its employing one full-time employee in the taxing state does not violate the Due Process Clause.” She added the corporation, Telebright Corp. Inc., “has sufficient ‘minimum connection' with this State to permit taxation consistent with the Due Process Clause.”

Read more at: Tax Times blog

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