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Multinational Whipsaw • Crypto Noncompliance • Conservation Woes

Jan. 18, 2020, 3:00 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 whipsaw effect of tariffs and transfer pricing; cryptocurrency traders’ noncompliance; the effect of the SALT deduction limit on land conservation; taxing the sharing economy; the China trade deal; AMT sequestration; and the benefit of opportunity zone reforms. We’ll hear from:

  • Damon V. Pike and Mark W. Schuette of BDO on how tariffs upset carefully planned transfer-pricing arrangements
  • Shehan Chandrasekera of CoinTracker on cryptocurrency tax compliance or the lack thereof
  • Leslie Ratley-Beach of the Land Trust Alliance on how the SALT deduction limitation adversely affects conservation donors
  • Scott Peterson of Avalara on taxing the sharing economy
  • Mario Mancuso, Sanjay Mullick, and Jeremy Iloulian of Kirkland & Ellis on the China trade deal
  • Shawn O’Brien, Warren Payne, and Maria Critelli of Mayer Brown on the return of sequestered AMT credits
  • Olugbenga Ajilore of the Center for American Progress on the benefits of reforming the opportunity zone program
Photographer: Erin McManus/Bloomberg Tax

Tariffs and year-end transfer pricing adjustments present a unique conundrum in the trade war era. Damon V. Pike and Mark W. Schuette of BDO analyze how tariffs upset carefully planned transfer-pricing arrangements and how to adjust those arrangements. Read: The Classic Whip-Saw Effect of Customs and Transfer Pricing

In the second half of 2019 the IRS finally released much-awaited guidance on cryptocurrency, and it didn’t exactly satisfy the cryptocurrency community. Shehan Chandrasekera of CoinTracker explores what to expect from the IRS in 2020. Read: Why Is Cryptocurrency Tax Compliance So Low?

New IRS regulations on state and local taxes that govern land-conservation donations remain problematic for landowners, land trusts, and legal experts. The regulations adversely affect conservation donors in many states and territories. Leslie Ratley-Beach of the Land Trust Alliance provides pointers for donors and their tax advisers on assessing the relative risks and options in addressing the new SALT regulations. Read: Land Conservation Erodes From State Tax Credit Treasury Regulations

State and local governments are struggling to keep up with the sharing economy. Scott Peterson of Avalara looks at the challenges of applying sales taxes to the services of the sharing economy. Read: Sales Tax and the Sharing Economy

The U.S. and China finally signed a trade agreement on Jan. 15. Mario Mancuso, Sanjay Mullick, and Jeremy Iloulian of Kirkland & Ellis look at what the agreement actually achieves and what questions remain. Read: U.S.-China Trade Deal—What It Does and What It Doesn’t

The IRS announced on Jan. 16 that it will return sequestered portions of refunds of alternative minimum tax credits following the Office of Management and Budget’s recent policy change on the matter. Shawn O’Brien, Warren Payne, and Maria Critelli of Mayer Brown explain what it means for affected taxpayers. Read: IRS to Return Previously Sequestered Amounts of AMT Refunds

The opportunity zone program has been described as a tax break for the wealthy. Critics say that it will benefit those with state political connections rather than economically struggling communities. Olugbenga Ajilore of the Center for American Progress says proponents of the program should welcome measures requiring transparency and accountability as well as substantive guardrails to ensure the projects benefit existing residents in the community. Read: Opportunity Zone Proponents Should Welcome Reforms, Not Fight Them

From the Archive

While many a cryptocurrency trader may be unaware of, or perhaps disregarding, their obligation to report transactions, Bloomberg Tax contributors have been paying close attention to what the IRS is doing regarding cryptocurrency.

The IRS released much-needed guidance on the taxation of cryptocurrency in Revenue Ruling 2019-24. Sahel Assar of Buchanan Ingersoll & Rooney PC said the guidance was a very good start but more is needed, especially regarding compliance with FATCA and FinCen requirements.

Shannon (Retzke) Smith, Wonchi Ju, Victoria Redding, and Naeseong Park of Withers Bergman LLP said questions still remain about the taxation of cryptocurrency. They highlighted what taxpayers need to be aware of and what remains to be explained.

“I know it when I see it.” The phrase has attained a certain level of infamy in judicial history. Jonathan Lachowitz of White Lighthouse Investment Management heard it echoing in the IRS guidance on the taxation of cryptocurrency.

Beyond Tax

What’s happening outside the world of tax?

When it comes to lateral hiring, no process, no matter how thorough and strictly employed, can guarantee complete safety against malpractice actions or impenetrable defenses to a suit arising from a pre-hire error, write Hinshaw & Culbertson attorneys. They recommend both pre- and post-hire actions to reduce risks. Read: Do You Really Know Everything About That Lateral Hire?

In a Q&A, Hogan Lovells attorneys Richard L. Wynne and David A. Gibbons examine how a potential economic downturn and worldwide political upheaval would impact distressed mergers and acquisitions. They discuss the current environment of uncertainty, how CFIUS scrutiny might affect deals, and preparations to make for successful restructurings. Read: Thinking Ahead—Distressed M&A in Uncertain Times

Litigation funding has so far been a win-win situation for those involved, but this success has also created new ethical concerns, including whether lawyers take less care analyzing cases since they are paid regardless of outcome. Susman Godfrey partner Shawn Rabin offers a solution—require attorneys who accept funding to share in the risk financially. Read: Litigation Funding Success Breeds New Set of Ethical Issues

A little-known Delaware law can fix technical defects in some corporate transactions, writes Scott Watnik, partner with Wilk Auslander, and other states are passing similar laws. If there’s any doubt a corporate transaction involving a Delaware corporation may not have been executed properly, counsel should consider using Sections 204/205 to ratify the transaction. Read: Your Corporate Client Made a Big Mistake—Delaware Law to the Rescue

Manufacturers, distributors, and suppliers of CBD products should embrace and participate in reform to address public health concerns, write Bilzin Sumberg attorneys. Consumer groups like the Arthritis Foundation are stepping in to guide consumers, while the industry waits for FDA action and more certainty to help guide any future litigation. Read: A Budding Opportunity—Why the CBD Industry Requires Regulation

Exclusive Content for Bloomberg Tax Subscribers

(*Note: Your Bloomberg Tax login will be required to read the following content.)

Tax questions are often simple. Answers, rarely so—as in the case of the simple question, “Can I transfer my real estate in the U.S. to a foreign corporation without U.S. taxation of the unrealized gain?” This question may arise as a result of foreign restructuring. It may also arise in the case of a nonresident alien owning U.S. real estate, because of concerns regarding U.S. estate taxation. Robert E. Ward of WardChisholm LLP analyzes the costs and benefits.

Bloomberg Tax Insights articles are written by experienced practitioners, academics, and policy experts discussing developments and current issues in taxation. To contribute please contact Erin McManus at emcmanus@bloombergtax.com.

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

To contact the editors responsible for this story: Meg Shreve at mshreve@bloombergtax.com; Kathy Larsen at klarsen@bloombergtax.com

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