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Fort Worth Tax Law Blog

Mortgage relief settlement could defray tax liability

As part of a recent settlement between Bank of America and the U.S. Department of Justice, almost seven billion dollars will be available to provide relief for homeowners struggling with “underwater” mortgages.

Forgiveness of substantial mortgage debt could however lead to large tax bills in April just as these homeowners are getting their heads above water. One portion of the settlement – approximately $490 million – will defray some of the tax liabilities. This post will discuss how the settlement could affect a typical borrower.

 

Democrats Follow Through With Inversion Threat

Senate Democrats moved to discourage the use of inversion by outlining a proposal that would restrict the practice of earnings stripping, where U.S. companies borrow money from overseas parents and deduct the interest expense on U.S. taxes.

Inversion deals come with capital gains tax headaches

Lately, we have been following the corporate maneuvers designed to reduce U.S. corporate tax burdens. Unlike the recent Kinder Morgan move that will only affect some investors, inversion deals will bring broader unwelcome tax surprises for legacy investors.

Medtronic’s acquisition of Covidien provides an example of how an inversion deal works. The U.S. company, Medtronic, will now adopt Ireland, Covidien’s domicile as its own. New replacements shares will issue as substitutes for the old Medtronic ones. This “forced sale and reissuance of shares” is a taxable event.

Those who have held large quantities of stock in Medtronic for many years will have to pay capital gains tax. Depending on income that could be 20 percent in Federal tax plus the 3.8 percent Medicare surtax on gains. In the rest of the post, we will provide some examples and strategies to minimize the tax hit.

Investors Face Unexpected Tax Bills in Kinder Morgan Deal

Most of Wall Street was excited to hear Kinder Morgan Inc.'s $44 billion plan to consolidate its pipeline companies, however, some investors in the company's master limited partnership may be left with huge, unexpected tax bills.

Financial Institutions Brace Themselves as FATCA Prepares to Go Global

Just as financial institutions began getting a grip on the Foreign Account Tax Compliance Act (FATCA), the Organization for Economic Cooperation and Development threw a curveball by introducing the new global version. The OECD proposal is called the Global Standard for Automatic Exchange of Information and it will be the platform for a virtual highway where detailed account information will travel between governments.

Walgreen Abandons Inversion Deal Among Political Pressures

U.S. retailer Walgreen Co has decided to cancel its plan to reincorporate overseas to lower its tax bill, amidst a political push from the Obama administration to curb such corporate tax domicile-shifting deals.

First contact from IRS always by mail not phone warns IRS

Even though tax season is long over that has not stopped phone scammers warns the Internal Revenue Service.

In Bell County, Texas, an elderly woman lost $2,500 in an IRS phone scam. The woman received a call from a person claiming to be with the IRS. The caller told the woman she owed back taxes and the IRS would issue a warrant if she did not pay over the phone. The woman bought prepaid debit cards and called a 202 area code phone number to pay the purported debt.

This week in a press release, the IRS along with the Treasury Inspector General for Tax Administration warned of sophisticated phone scams. After a review of the 90,000 complaints received, TIGTA noted that approximately 1,100 victims had lost an estimated $5 million.

Tax Breaks for Major Oil and Gas Companies

With oil and gas companies spending billions of dollars on hydraulic fracturing the country's shale formations, they are discovering the advantages of deferring their taxes year after year. Within the U.S. tax code are incentives that provide for drilling investors a way to put off paying taxes, as long they continue to invest, allowing for a massive safety net while they keep drilling.

UBS Pays $403 Million Settlement to Germany

An investigation into whether Zurich-based UBS had been aiding German clients evade taxes ended on Tuesday with a $403 million settlement, the largest fine ever paid to a country by a Swiss lender. While the Swiss lender was able to put to rest allegations in Germany, it is still likely to face challenges elsewhere.