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  • This blog is made available by the law firm of Dickinson, Mackaman, Tyler & Hagen, P.C. for educational purposes only. It is intended to provide general information and a general understanding of the law, but not specific legal advice. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Use of this blog does not create an attorney-client relationship between you and Dickinson, Mackaman, Tyler & Hagen, P.C. or any of its attorneys. The content of this blog is not an advertisement for legal services, nor is it an invitation to form an attorney-client relationship. Statements made in this blog are the viewpoints of the individual authors, and do not necessarily reflect the views of Dickinson, Mackaman, Tyler & Hagen, P.C. or any of its clients. Although this blog may address certain tax issues, it is not intended to constitute a reliance opinion as described in IRS Circular 230 and, therefore, cannot be relied upon by itself to avoid any tax penalties.

Tax

Monday, October 20, 2008

New Tax Treatment of Acquired NOLs

When the market gives you lemons, the IRS sometimes hands you sugar.

 

Bad debts and loan losses held by a bank never looked so good.  The Internal Revenue Service issued Notice 2008-83, dated today, which permits an acquiring company to deduct losses on loans or bad debts when purchasing a “bank”, as defined in section 581.  After an ownership change (defined in section 382(g)), a proper deduction relating to losses on loans or bad debts is not treated as a built-in loss or attributed to the period before the change.  The result is a tax deduction that is not subject to the limitation rules of Section 382 when purchasing a bank.

 

With many banks sour with loan losses and bad debts, this Notice apparently hopes to increase the acquisitions of banks by providing tax benefits to sweeten the deal.  Not knowing the future of the debts and loans, the deal keeps getting sweeter as those items become deductible losses in the future.  And with limited restrictions, a potential 3 year retroactive applicability, and no end date in sight, this Notice may help stir up acquisitions.

 

Before you can sit on your porch and enjoy your IRS lemonade, you should know that there are serious questions being raised as to whether this change is within the authority of the Internal Revenue Service.  Others are still calculating the financial impact of this change and some estimate the loss of tax revenue to be in the billions.  The impact of this Notice has yet to be fully recognized, but the IRS may have found the secret ingredient to stimulate the banking acquisition market.

 

Contact Christine Halbrook at chalbrook@dickinsonlaw.com or at 515.246.4544 with further questions.

 

IRS Circular 230 Disclosure:  Although this written communication may address certain tax issues, it is not intended to constitute a reliance opinion as described in IRS Circular 230 and, therefore, it cannot be relied upon by itself to avoid any tax penalties.

 

Wednesday, December 19, 2007

S Corporation Shareholders and Health Insurance Premiums

Roth & Company's Tax Update Blog makes an excellent recommendation to S Corporation shareholders -- you need to make sure that your health insurance premiums are included on your 2007 W-2s.

Click here for the full article. 

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