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Crime-Fraud Exception • GILTI Gambling • Low-Balling Stock Value

Oct. 5, 2019, 2:00 PM

This is a weekend roundup of Bloomberg Tax Insights, which are written by practitioners featuring expert analysis on current issues in tax practice and policy. The articles featured here represent just a handful of the many Insights published each week. For a full archive of articles, browse by jurisdiction at Daily Tax Report, Daily Tax Report: State, and Daily Tax Report: International.

This week we look at the DOJ Tax Division’s interest in the crime-fraud exception to attorney-client privilege; the benefits and risks of the GILTI high-tax exception; how not to value stock; BEPS and Dr. Seuss; and how the Utah Supreme Court uniquely interprets the commerce clause. We’ll hear from:

  • Sarah Paul and Daniel Strickland of Eversheds Sutherland (US) LLP on the Tax Division’s apparent growing enthusiasm for the crime-fraud exception
  • David Flores of True Partners Consulting LLC on the similarities between the GILTI high-tax exception and blackjack or poker
  • Robert Willens on why you can’t use the pre-merger-announcement stock value on a gift tax return
  • Jeff VanderWolk from Squire Patton Boggs on the possible similarities between BEPS Pillar One and Pillar Two and Thing One and Thing Two from the “The Cat in the Hat”
  • Richard Pomp of the University of Connecticut School of Law on how the Utah Supreme Court erred in finding that the protections of the foreign commerce clause don’t apply to individuals
Non-hypothetical willing buyers and sellers at the New York Stock Exchange.
Photographer: Spencer Platt/Getty Images

The Department of Justice Tax Division may be raising the crime-fraud exception to attorney-client privilege earlier and more often. Sarah Paul and Daniel Strickland of Eversheds Sutherland (US) LLP outline how tax practitioners should prepare themselves and what issues to consider. Read: Tackling the Tax Division’s New Crime-Fraud Strategy

Working through the benefits and risks of one of the latest twists in proposed GILTI regulations—the high-tax exception—is not unlike playing blackjack or poker. David Flores of True Partners Consulting LLC goes through taxpayers’ options when deciding whether to take advantage of the provision should it become final. Read: GILTI High-Taxed Income Exception—Are You All In?

No, you can’t contribute shares of the public corporation you founded to a trust just prior to its merger with another corporation and report the much lower pre-merger-announcement share value on your gift tax return—if you were thinking about doing so. Robert Willens takes us through a recent IRS Chief Counsel Advice Memorandum reaching that conclusion. Read: The Value of Stock Must Take Into Consideration a Pending Merger

The OECD plans to issue in early October a public consultation document on the next steps in the Inclusive Framework’s digitalization project. Jeff VanderWolk of Squire Patton Boggs (US) LLP outlines what to watch for and warns that the comment period is expected to be no more than six weeks, with a public consultation meeting scheduled in Paris in late November. Read: Next Steps in the OECD/Inclusive Framework’s Digitalization Project

The Utah Steiner decision continues to garner criticism from state tax experts. Professor Richard Pomp of the University of Connecticut School of Law concurs with Steven Wlodychak and Bruce Ely that the U.S. Supreme Court should take the case. Pomp finds incredible the Utah Supreme Court ruling that the protections of the foreign commerce clause don’t apply to individuals. Read: Utah Interpretation of Foreign Commerce Clause Deserves Higher Court Input

From the Archive

Tax authorities and courts in the U.S. and Europe may be pushing the boundaries of attorney-client privilege and privacy laws to ensure that taxpayers are paying what those authorities say is legally owed. The EU’s “DAC6" disclosure rules and a recent Swiss Supreme Court decision reflect this trend.

Monique van Herksen and Hatice Ismail of Simmons & Simmons refered to Dutch and British guidance to analyze the sixth major amendment to the EU Directive on Administrative Cooperation in the field of Taxation (DAC 6), which imposes a new reporting requirement for potentially aggressive tax planning structures.

International tax lawyer Ashish Goel looked at how the implementation of DAC6 was progressing, and some issues which may arise for taxpayers.

Alisa Burkhard and Luzius Cavelti of Altenburger Ltd. examined a Federal Supreme Court of Switzerland decision indicating that foreign tax authorities may be allowed to go on “fishing expeditions” for account holder information without showing “foreseeable relevance” in their administrative assistance requests to the Swiss Federal Tax Administration.

Beyond Tax

What’s happening outside the world of tax?

Valuing law firms is complicated, but when external investments or capital market listings are allowed, valuation will become essential. Madhav Srinivasan, CFO at Hunton Andrews Kurth LLP, shares his insights into how to look at law firms’ value and measures up the AmLaw 100 to the S&P 500 for comparison. Read: What Drives Law Firm Value? Stacking Up Firms With S&P 500

The recent acquittal of former Skadden Arps partner Greg Craig on Foreign Agents Registration Act-derived charges highlights the need to seriously rethink the FARA enforcement strategy before further encouraging prosecution under this vague and anachronistic law, writes Cadwalader partner Joseph Moreno. Read: Craig Acquittal Shows Uncertain Future for Aggressive FARA Enforcement

U.S. film studios, television networks, and big tech companies should find a way to compete in the European market if they want to win the broader streaming media world war. O’Melveny attorneys say U.S. streaming companies need a battle plan to compete globally. Read: The Streaming Media Arms Race and Brewing Cold War With Europe

Advising older clients on how to navigate legal issues in a divorce is more complicated than advising younger clients because there are usually more assets and larger estates at stake. KoonsFuller shareholder Sally Pretorius walks through important steps for a “Grey Divorce.” Read: Navigating Silver Foxes and Vixens Through Divorce

Exclusive Content for Bloomberg Tax Subscribers

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Lowell Yoder of McDermott Will & Emery LLP explains the three baskets into which controlled foreign corporation (CFC) income generally falls: Subpart F income, global intangible low-taxed income (GILTI), or residual income.

To contact the reporter on this story: Erin McManus in Washington at emcmanus@bloombergtax.com