From The Boston Tax Institute

Boston Tax Alert 2011-41, 2011-42, 2011-43


Lu Gauthier of The Boston Tax Institute has given me permission to republish his newsletter. The BTI newsletter is a regular feature of this blog now, although I have been a little irregular in putting them up. Be sure to check out the BTI catalog for great CPE value.



On 07/26/11, the United States Court of Appeals for the First Circuit affirmed the decision of the United States Tax Court in Recovery Group, Inc. v. Commissioner holding that a covenant not to compete, which was entered into in connection with the redemption of the stock interest of a 23% shareholder, was an amortizable section 197 intangible which had to be amortized over 15 years instead of over its one year term. The opinion states "According, we hold that, pursuant to this section, a 'section 197 intangible' includes any covenant not to compete entered into in connection with the acquisition of any shares--substantial or not--of stock in a corporation that is engaged in a trade or business." Note the reference to ANY shares! As you may recall, although the S corporation lost on this issue in the Tax Court, it was able to avoid the 20% taxpayer accuracy-related penalty on the built-in gains tax that resulted from the increase in its taxable income as a result of this decision based on reliance on professional advice.


I also noticed this case and put up the full-text on this site and did a commentary on it on my Forbes blog.
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Removed at request of party on November 16,2014.

I had noticed this one but had trouble making much out of it.  Something tells me somebody else might end up paying that penalty.
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On 07/19/11, MA DOR issued a working draft of Directive 11-XX - Seven-Month Extension for Combined Reporting Filers which reads in part as follows:



Effective for tax years beginning on or after January 1, 2010, a taxpayer corporation that is a member of a combined group and that must report income derived from the activities of that group in a combined report ("combined reporting filer") may receive an extension of seven months, in lieu of the six-month extension allowed to corporate excise filers under G.L. c 62C, § 19, to file its combined report upon the combined group's request for this extension. The seven-month extension also applies to the non-income measure filing required from any member of the combined group if the member has the same tax year as the combined group. For the tax year beginning on or after January 1, 2010 but before January 1, 2011, a combined reporting filer that has previously requested a six-month extension will be granted an extension of an additional month, for a total of seven months. Pending further instructions, these taxpayers need take no further action to obtain the additional month extension for the 2010 tax year.



This and other topics will be discussed in detail in our 1-day seminar entitled MA Combined Reporting on 08/16 in Waltham.