New Tax Court decision gives a boost to ordinary loss treatment for hedging transactions

Article Abstract:

The Tax Court clarified the treatment of hedging transactions as ordinary losses or income in Federal National Mortgage Ass'n in that a hedge can qualify under any of the IRC section 1221 exclusions from capital asset treatment. This case answers the recognition of gains and losses questions raised by the US Supreme Court case, Arkansas Best Corp v. Commissioner. The Tax Court held that any hedge can qualify regardless of whether it involves a long or short position and is not required to be part of the same property the taxpayer holds or plans to acquire.

Analysis, Hedging (Finance), Recognition of gain or loss (Taxation), Recognized gain or loss (Taxation), Loss deductions

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The tax treatment of royalty income from affinity card programs

Article Abstract:

The Tax Court ruled in the Sierra Club case that a percentage of total sales on an affinity credit card paid to the Sierra Club by Chase Lincoln First Bank was not unrelated business income that would be subject to taxation. The IRS argued both that the Sierra Club had entered into a partnership to sell credit card services and that it was a sole proprietor offering credit card services. The Tax Court disagreed and found that the payments were tax-exempt royalties for the use of the Sierra Club's name and membership list.

Taxation, Cases, Affinity credit cards, Nonprofit organizations, Unrelated business income tax

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New rules for charitable remainder trusts would limit abuses

Article Abstract:

The Taxpayer Relief Act of 1997 and IRS proposed regulations have limited the use of charitable remainder trusts for those who primarily wish to gain gift tax reduction or income tax deferral or elimination. Trusts such as flip unitrusts will no longer be viable means of gaining those tax advantages. Charitable remainder trusts remain useful tools for charitable giving, charitable deductions, and source of income for donors.

Charitable remainder trusts

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