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Brexiting • Digital Taxes • Prenups • Wayfair M&A Due Diligence

Nov. 2, 2019, 2:01 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 launched the new International Forum with a piece from Peter A. Glicklich and Heath Martin of Davies Ward Phillips & Vineberg on the U.S. response to unilateral digital taxation. In this new series, members of the Bloomberg Tax Forum will share their views on important tax topics throughout the year.

We also look at last-minute planning for Brexit; prenuptial agreements; post-Wayfair sales tax due diligence; making charitable dispositions of ESOP stock; a tax policy book review; questioning the cryptocurrency guidance; C corp/S corp toggling; technology and IP taxation; the proposed recognized built-in gain regulations; and tighter tax incentive rules in California. We’ll hear from:

  • Clive Jie-A-Joen and Monique van Herksen of Simmons & Simmons on Brexit-triggered decisions
  • Bob Boyd of Boyd Collar Nolen Tuggle & Roddenbery and Beth Garrett of Frazier & Deeter on the increasing interest in prenups
  • Jennifer Weidler Karpchuk of Chamberlain Hrdlicka on the sales tax liability issues that need to be on an M&A checklist
  • Robert Rojas of Rojas & Associates on the challenges involved in making charitable dispositions of ESOP securities
  • Aparna Mathur of the American Enterprise Institute and Kyle Pomerleau of the Tax Foundation on “The Triumph of Injustice”
  • Shannon (Retzke) Smith, Wonchi Ju, Victoria Redding, and Naeseong Park of Withers Bergman LLP on the cryptocurrency guidance
  • Robert Willens on the adverse consequences of toggling between S corporation and C corporation status
  • Gary Ashford of Harbottle and Lewis LLP on the changing world of technology and intellectual property taxation
  • Betty Mak of Maxur on the need for input on the proposed recognized built-in gain and loss regulations
  • Mark Nachbar and Joseph Dean of Ryan LLC on stricter rules for business tax breaks from California municipalities
Demonstrators hold EU and UK flags as they walk near the Houses of Parliament in central London on Oct. 29
Photorapher: Daniel Leal-Olivas/AFP via Getty Images

Clive Jie-A-Joen and Monique van Herksen of Simmons & Simmons list some transfer pricing aspects companies may want to consider while they are making (last-minute) Brexit-triggered decisions. Read: BREXIT Revisited—Last Minute Transfer Pricing Considerations

Prenuptial agreements were once used only by the very wealthy, but their use could be growing. Bob Boyd of Boyd Collar Nolen Tuggle & Roddenbery and Beth Garrett of Frazier & Deeter explain the increasing interest in prenups and how the 2017 tax law affects existing and new agreements. Read: Effects of The Tax Cuts and Jobs Act of 2017 on Prenuptial Agreements

The effects of Wayfair extend far beyond a going-forward obligation on online retailers to collect and remit sales tax in states that have enacted the applicable legislation. Jennifer Weidler Karpchuk of Chamberlain Hrdlicka outlines the sales tax liability issues that need to be on an M&A due diligence checklist. Read: M&A Due Diligence Checklist Post-Wayfair

Robert Rojas of Rojas & Associates examines the challenges involved in making charitable dispositions of replacement securities in the context of an employee stock ownership plan. The author encourages clarification of the relevant tax rules pertaining to such dispositions. Read: Charitable Dispositions of Replacement Securities in an ESOP Context

A new book by economists Emmanuel Saez and Gabriel Zucman, “The Triumph of Injustice,” argues that economic inequality in the U.S. has worsened significantly over the last few decades. Aparna Mathur of the American Enterprise Institute and Kyle Pomerleau of the Tax Foundation challenge the the authors’ methodological assumptions and resulting conclusions. Read: The Failure of ‘The Triumph of Injustice'—Understating Taxes at the Top and Incomes at the Bottom

The IRS finally released more guidance on taxing cryptocurrency, but questions still remain. Shannon (Retzke) Smith, Wonchi Ju, Victoria Redding, and Naeseong Park of Withers Bergman LLP highlight what taxpayers need to be aware of and what still needs to be explained. Read: IRS ‘Forks up’ New Cryptocurrency Guidance

The lower corporate tax rate might encourage some small business owners to switch from S corporation to C corporation status. Robert Willens examines a case where three family-owned corporations regularly switched back and forth—while trying to keep the S corporation tax benefits. Read: Switching From S Corp to C Corp and Back Didn’t Work Out for Shareholders

Gary Ashford of Harbottle and Lewis LLP considers the current status of global attempts to address the taxation of the digital economy, and reviews the measures the U.K. has adopted. Read: The Changing World of Technology and Intellectual Property Taxation

At a recent Practising Law Institute event, an IRS official reiterated the need for taxpayer input on the proposed regulations related to built-in gain and loss. Betty Mak of Maxar walks through prior guidance, the proposed regulations, and the need for comment. Read: Government Wants More Input on Proposed Built-In Gain, Loss Regulations

Deals where California municipalities share a portion of their sales tax revenue with companies like Apple Inc. will continue, but with more disclosure. Mark Nachbar and Joseph Dean of Ryan LLC outline the legislation that the governor signed and the more severe bills that were vetoed. Read: California’s Response to ‘Corporate Welfare’

From the Archive

Bloomberg Tax contributors from both the U.S. and abroad have been staying abreast of the ever-changing status of the U.K.'s exit (or not) from the EU and what multinational businesses need to do.

Robert Marchant of Crowe explained the importance and relevance of Incoterms in international trade, and particularly for the U.K. in light of Brexit.

Monique van Herksen and Hatice Ismail of Simmons & Simmons referred 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 tax advisers and their clients.

Historically, U.S. multinational companies have transferred manufacturing operations offshore to achieve significant labor-cost savings, to be closer to growing markets, to insulate from foreign exchange and customs duty impacts, or to access unique sources of raw materials. Lynlee Brown, Jay Camillo, Brant Miller, and Kelly Stals, of Ernst & Young LLP said U.S. trade actions, expanded global imposition of tariffs stemming from U.S. trade policies, and Brexit all contribute to the vastly different tax and trade landscape through which multinational companies must navigate.

Beyond Tax

What’s happening outside the world of tax?

Eli Lilly General Counsel Michael Harrington examines why amending Rule 702 on expert testimony is a good idea. He says a clarifying amendment would go a long way toward ensuring that insufficient and unpredictable standards won’t interfere with just outcomes in courts of law. Read: Everyone Has an Opinion—But Not Everyone’s an Expert

Mentors and sponsors don’t serve the same purpose and are hard to come by, but both are critical in BigLaw, writes Bryan Cave Leighton Paisner’s Stephanie Wickouski. In addition, touted successes of BigLaw programs could be tainted by associates feeling pressure to provide positive feedback. Read: Can Mentors and Sponsors Be Found and Coexist in BigLaw?

Exclusive Content for Bloomberg Tax Subscribers

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

Thomas M. Cryan Jr. and Anthony Provenzano of Miller & Chevalier’s employee benefits and executive compensation practice in Washington highlight the tax issues for executives transitioning into retirement. The authors discuss the implications of worker classification, deferred compensation, employee benefits, fringe benefits, and payroll tax issues.

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