On Dec. 24, 2007, the IRS published guidance on what is commonly referred to under the Treasury regulations as the Code Sec. 367(a) “anti-stuffing rule.” When a U.S. person transfers the stock or securities of a domestic corporation to a foreign corporation in an otherwise nontaxable transaction, Sec. 367(a) generally requires that gain be recognized. Treas. Reg. §1.367(a)-3( c ) allows a transfer without gain recognition provided that four conditions are met.

One of these conditions is the substantiality requirement of the active trade or business test. If, at the time of the transfer, the fair market value of the transferee corporation is at least equal to the fair market value of the U.S. target company, the substantiality test is met.

The “anti-stuffing rule” prevents “stuffing” the foreign entity with the value of certain assets acquired within a 36-month period prior to the exchange. Since the effective date of the anti stuffing rule more than 10 years ago, the IRS has provided little in terms of substantive guidance. Chief Counsel Advice 200751024 is helpful, but also raises some uncertainties, as Diana Wessells and Edward Tanenbaum explain in their column in Corporate Business Taxation Monthly.

There are many differences in the way states treat the various activities in which a construction contractor may be engaged. Some states tax portions of real property and various associated services depending on how the contractor bills the project, the nature of the project, and for whom the project is undertaken. Julie Bogle, in an article in the Journal of State Taxation, discusses the tax factors that contractors must consider in a time-sensitive, highly competitive industry.

Rev. Rul. 2007-33 recently addressed the following question: If a REIT recognizes foreign currency gain in a Code Sec. 988 transaction, to what extent is that gain “qualifying income” for purposes of the REIT income tests under Code Sec. 856(c)? Daniel Cullen, in an article in the Journal of Passthrough Entities, provides an overview of the REIT asset and income tests, the general rules governing Sec. 988 transactions that may impact REITS, as well as the foreign currency gain issue specifically addressed by Rev. Rul. 2007-33.

In addition to the complex nature of the IRS collections, the rules and procedures governing collections are constantly changing through legislative action, administrative regulation, and judicial rulings. An article in the Journal of Tax Practice & Procedure by David Lee Rice, Wayne R. Johnson and Ethan A. Cohen provides a brief survey of some recent changes in tax collections procedures by focusing on four areas of collections: (1) installment agreements; (2) offers-in-compromise; (3) collections due process; and (4) collection financial standards.

VAT fraud is an issue of growing concern for the tax authorities in EU countries because of its size and frequency, the increased sophistication of the fraud schemes and inherent difficulty of combating it, and its financial significance. Robert F. van Brederode, in an article in the International Tax Journal, focuses on the position of a third party who becomes entangled in the myriad of transactions that form what is generally referred to as carousel fraud.