The following were originally printed in the Weekly Report, part of the BNA Tax and Accounting Center.

Volume 28 Number 26
Monday, June 29, 2009

Mortgage Modification Program Success Payments Excluded from Income

IRS issues Rev. Rul. 2009-19, stating that a homeowner who benefits from Pay-for-Performance Success payments under the government's Home Affordable Modification Program may exclude them from income under the general welfare exclusion. Section 61(a) provides that gross income means all income from whatever source derived, unless otherwise provided by law, IRS says, but payments from social benefit programs under the government made for promoting general welfare and not for services rendered may not be included in the gross income of a recipient.

IRS Solicits Applications for $2 Billion in Tribal Development Bonds

IRS issues Notice 2009-51 requesting applications for allocations of the $2 billion available for §7871(f) Tribal Economic Development Bonds. The American Recovery and Reinvestment Act created the new code section, which provides Indian tribal governments with more flexibility to use tax-exempt bonds to fund economic development projects than is permitted under §7871(c). IRS says the bond authority will be allocated in a minimum of two tranches.

Tenth Circuit Finds Trial Court Hearings Did Not Violate Speedy Trial Act

The Tenth Circuit finds, in U.S. v. Smith, that a trial judge's decision to hold hearings on motions made by a defendant in a tax case that the court could have resolved without conducting hearings still served to toll the time limit for commencing a criminal trial under the Speedy Trial Act. The decision upholds a trial court finding that the time between June 2007, when the taxpayer filed his motions to dismiss the case against him, and the time the hearing was held in October 2007, should have been counted in calculating how many days had lapsed from his appearance to the date of his trial.

FOCUS: Who Can Replace ‘Converted' Property?

The author of this week's Focus examines a recent private letter ruling that indicates the IRS has expanded its view as to which taxpayers are eligible under §1033 to defer gain by reinvesting the proceeds of an involuntary conversion. The author says PLR 200921009 is a generous ruling “that deviates, more than a little, from the IRS's more literal previous interpretation of the term ‘the taxpayer' as it is employed in §1033” and that the PLR indicates some tax benefits are available to a taxpayer even when the implementing transaction is structured for the express purpose of attaining such benefits. “The trick, I suppose, is knowing which ones are impervious to an IRS challenge and which ones are susceptible to challenge under the economic substance doctrine,” the author writes.

Applicable Federal Rates:

IRS issues the applicable federal interest rates for July 2009.

Procedure:

IRS updates procedures for awarding §7430 litigation, administrative costs.

Employment Tax:

IRS updates guidance on taxation of employee annuities.

REITs:

IRS rules REIT's adjustment to outstanding options resulting from a special dividend distribution was treated as occurring by reason of a corporate transaction.

Valuation:

Tax Court values perpetual conservation easement covering golf course using “before and after” method.

Corporate Tax:

IRS rules it will not challenge equity characterization of variable rate demand preferred stock issued by RIC.