Tangible tax savings from shareholder owning intangibles
Article Abstract:
The Tax Court held in the case involving Martin Ice Cream (MIC) Co that the relationships cultivated by its owner with its customers were not owned by the corporation but by the individual owner who built them up. Based on this conclusion, the corporation MIC does not have control over the transfer of these intangible assets to its new subsidiary Strassberg Ice Cream (SIC) Distributors Inc or the later sale of these assets to Haagen-Dazs. The IRS argued that MIC should be recognized as the actual seller based on 'Court Holding Co' because the owner negotiated the sale of assets on behalf of MIC. Furthermore, the IRS asserted that the consideration measured taxable gain reflected on the redemption of the owner's stock in MIC since the split-off of SIC did not qualify for non-recognition under Sec 355. The Tax Court did not side with the IRS and confirmed that the MIC owner was the sole owner of the relationships with supermarket owners and managers.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1998
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Consent to one assessment does not preclude others
Article Abstract:
The Tax Court deemed in 'Evans' that the IRS was not prevented from making an affected items notice and examining additional tax, interest and penalties as a result of the signing of Form 4549, otherwise known as Income Tax Exam Changes. The taxpayer in this case consented to income adjustments to its 1982 tax return and signed a Form 4549 indicating that it agreed to the assessment and collection of tax, interest and penalties. After the form was signed, the IRS assessed a partnership where the taxpayer was a limited partner. This partnership was a limited partner in another partnership being examined by the IRS. The IRS rejected the losses and credits reported by the taxpayer, which filed a suit but lost. After the Tax Court disallowed deductions and credits reported by the second partnership, the Tax Matters Partner of the first partnership, the IRS issued an affected items notice. The taxpayer argued in the Tax Court against the notice.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1999
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Personal goodwill cuts tax on corporate sale or liquidation
Article Abstract:
The Tax Court ruled the existence of valuable intangible assets at the corporate level in 'Norwalk, Schilbach.' The case focused on public accounting firm DeMarta and Norwalk CPA Inc's decision to report taxable losses after subtracting the salaries of officers and other expenses on tax returns. The court ruled that goodwill is an asset that can be sold with an incorporated professional practice and may be inherent in the corporate entity based on several factors. It based its decision on 'Rudd,' a case that promoted goodwill as intangibles designed to entice new clients and old customers to continue using a firm's services. The decision indicated the importance of considering the effects of intangibles when liquidating a business or selling an operation. It also emphasized the need to evaluate the sale of intangible assets to obtain the desired tax treatment.
Publication Name: Practical Tax Strategies
Subject: Law
ISSN: 0040-0165
Year: 1998
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