Successor partner's interest affected by IRD

Article Abstract:

Practitioners need to exercise caution when considering the tax effects of a partner's death, particularly if the death provokes the complicated issues brought about by the concept of income in respect of a decedent (IRD). These issues are covered by Section 691, which defines IRD as all income, generated by a cash-method decedent, which had not earlier been filed in the decedent's final tax return. Examples of IRD income include salary that has accrued, accounts receivable that are uncollected and interest income that has built up after the last tax filing. This types of income are considered IRD since they cannot be recognized until eventual receipt by the cash-method taxpayer. Under Section 691, responsibility for IRD income falls to the decedent's heirs who must pay taxes on it under an elaborate series of rules, which become even more complicated if the decedent were a partner.

Tax Law, Public Finance Activities, Inheritance tax, United States. Internal Revenue Service

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Reasonable compensation: the search for a defining concept

Article Abstract:

The US Court of Appeals for the Second Circuit ruled in RAPCO, Inc. v. Commissioner that compensation paid to a 95% shareholder in a private corporation was not reasonable and recharacterized a portion of the pay as dividends. Recent attention has been paid to provisions denying deductions for compensation in excess of $1 million, but less attention has been paid to the standards for compensation paid by private companies and compensation under $1 million. All such compensation expenses must be for services actually rendered and must be reasonable relative to those services.

Bonus & Merit Payments, United States, Compensation and benefits, Executives, Executive compensation, Expense deductions, Bonuses

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Determining the tax consequences of an installment sale of a partnership interest

Article Abstract:

The modified aggregate approach, a hybrid of the entity and aggregate theories, leads to confusion especially when the installment sale of a partnership interest is considered. A new approach called the 'complete aggregate approach is recommended. It requires adoption of the McGowan rule in Subchapter K and the repeal of Section 751.

Analysis, Stock transfer tax

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