Valuation discounts: what is required?
Article Abstract:
The IRS has not always allowed taxpayers to avail of minority and marketability discounts with respect to stock transfers in family-owned corporations. However, the Service changed its position regarding this matter in Rev. Rul. 93-12. In this case, a father was allowed to claim a minority discount in the valuation of the shares he transferred to his children. Nevertheless, taxpayers must still demonstrate, usually by using comparable sales, that these discounts from fair market value are allowable. Moreover, they must provide evidence that lifetime gifts are given for the purpose of shifting control of business to younger generations and not merely for avoiding estate or gift tax. The areas they must keep an eye on when applying for discounts include discount percentage, voting and nonvoting stock, special-use valuation, corporation liquidations and step-transaction theory.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1995
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Training expenses remain deductible despite INDOPCO
Article Abstract:
IRS Revenue Ruling 96-62 provides that the decision of the Supreme Court in the 'INDOPCO Inc.' case does not have an impact on the deductibility of employee training costs under IRC Sec. 162. Therefore, training expenses, which cover costs of trainers and regular revision of training materials, are generally deductible, despite the fact that they may generate some benefit in the future. However, training costs need to be capitalized if the training is aimed mainly at eliciting future benefits other than those related to training in normal trade or business routines. The ruling thus points out that training expenses to operate a new nuclear power plant are not deductible in situations similar to the 'Cleveland Electric' case. However, the IRS permitted a deduction for employee training costs in a new facility in Technical Advice Memorandum No. 9645002.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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Final Regs. explain $1 million cap on execs' compensation
Article Abstract:
The IRS has released final Regulations under Sec. 162(m) regarding the disallowance of a deduction for yearly compensation exceeding $1 million given by a publicly held corporation. The limitation of deduction is applicable to compensation awarded to the chief executive and any other individual belonging to the four highest paid officers for a particular tax year and whose compensation is supposed to be submitted to the SEC. The final regulations exempt income that is paid solely on a commission basis. Remuneration payable on account of the attainment of performance goals is likewise not covered by the limitation if certain conditions are met. Sec. 162(m) and the Regulations take effect for compensation paid in tax years starting Dec. 31, 1993.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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