In a letter sent shortly after the government froze $500 million in Xelan assets, Michael C. Durney, a former Justice Department Deputy Assistant Attorney General for the Tax Division and current litigant in the Xelan matter, wrote Eileen O'Connor, Assistant Attorney General for the Tax Division, that the action was unprecedented and unwarranted.  MORE »

The Senate on October 11 finally approved by a 69-17 vote a bicameral agreement (H.R. 4520) to replace the extraterritorial income exclusion with a revenue-neutral package that includes a manufacturing deduction, a corporate rate cut, and international tax reforms. The House approved the $140 billion corporate tax cut bill on October 7 by a 280-141 vote; it now heads to President Bush's desk for his signature. The final bill includes provisions that will increase reporting requirements by corporations for noncash charitable contributions, reduce deductions for gifts of intellectual property, impose stiff requirements on gifts of vehicles, and extend the existing deduction for gifts of computer equipment used for education and of scientific property used for research.  MORE »

The IRS has ruled in technical advice that although an organization is no longer a church, it will retain its tax-exempt status and be subject it to intermediate sanctions for automatic excess benefit transactions and political intervention.  MORE »

In technical advice, the Service has ruled that an individual's bequest to a sister who belongs to a religious order and took a vow of poverty does not qualify for an estate tax charitable deduction.  MORE »

The Service has announced that it intends to propose regulations modifying the regulations under section 4940 of the Internal Revenue Code of 1986, as amended, with respect to distributions received by private foundations from trusts and estates.  MORE »

The IRS and Treasury have identified a type of transaction in which S corporation shareholders attempt to transfer the incidence of taxation on S corporation income by purportedly donating S corporation nonvoting stock to an exempt organization, while retaining the economic benefits associated with that stock. This notice alerts taxpayers and their representatives that these transactions are tax avoidance transactions and identifies these transactions, and substantially similar transactions, as listed transactions and alerts parties involved with these transactions to certain responsibilities that may arise from their involvement with them.  MORE »

The IRS has issued guidance to private foundations on the treatment of distributions received from a section 4947(a)(2) split-interest trust in computing a foundation's distributable amount under section 4942. The guidance follows the Ninth Circuit's decision in Ann Jackson Family Foundation v. Commissioner in which the court affirmed the Tax Court's holding that reg. section 53.4942(a)-2(b)(2) was invalid to the extent it requires including in a private foundation's distributable amount for the year the full amount of the income portion of distributions from split-interest trusts.  MORE »

The Service has ruled privately that a private foundation's proposal to transfer approximately 15 percent of its net assets to an organization that has applied for exemption and for private foundation status will not jeopardize the private foundation classification of either entity.  MORE »

Continuing our reporting of the political football on the effect of estate tax repeal on charitable giving, the OMB Watch and Responsible Wealth, two government watchdog groups, on August 2 cited two recent Congressional Budget Office reports to bolster their claims that estate tax repeal "would cause charities to lose between $12 and $24 billion in giving per year" and "cost the U.S. Treasury $1 trillion over the next two decades."  MORE »

The Service has ruled privately that four charitable lead trusts will qualify under section 2522(c)(2), an individual will be entitled to gift tax charitable deductions, the trusts will not be included in the individual's gross estate, and the trusts will not be grantor trusts under sections 673 through 678.  MORE »