Tax consequences of bailout

[Arthur Rubin]

I heard (on the radio) that the Senate-passed bailout had tax components, as well as the financial components. Anyone know what they are?

[Demosthenes]

From taxprof blog.

The three tax provisions in the bailout portion of the bill would:

Treat gain or loss from the sale or exchange of preferred stock by financial institutions as ordinary income or loss
Impose special rules for tax treatment of executive compensation of employers participating in the Troubled Assets Relief Program (TARP)
Exclude discharges of acquisition indebtedness on principal residences from gross income

The revenue offsets in the tax extenders portion of the bill would:

Limit the deduction for income attributable to domestic production of oil and gas
Eliminate the different treatment of foreign oil and gas extraction income and foreign oil-related income for foreign tax credit purposes
Require broker reporting of customer’s basis in securities transactions
Extend the 0.2% FUTA surtax
Increase and extend the Oil Spill Liability Trust Fund tax
Impose a new tax on the nonqualified deferred compensation from certain offshore tax indifferent parties

[Arthur Rubin]

From taxprof blog.

Exclude discharges of acquisition indebtedness on principal residences from gross income

...

Require broker reporting of customer’s basis in securities transactions

I thought both of those were already in existing tax law?

[MSA]

From taxprof blog.

Exclude discharges of acquisition indebtedness on principal residences from gross income

...

Require broker reporting of customer’s basis in securities transactions

I thought both of those were already in existing tax law?

Yes and no.

Regarding the "discharges of acquisition indebtedness" provision: yes, this is already in effect. But the provision was originally scheduled to expire at the end of 2009; the bailout bill pushes that expiration date back to 2012.

Broker reporting of basis: The law currently requires that brokers report the sales price of securities, but does not require that they track and report basis. (A lot of brokers track basis for the customers anyway; but they don't report it to the IRS.)

There are actually a lot more tax provisions in the bailout bill than these two. One source for these is CCH's free summary analysis of the tax provisions of the bailout bill at http://tax.cchgroup.com/Legislation/200 ... on-Act.pdf.

[Arthur Rubin]

Regarding the "discharges of acquisition indebtedness" provision: yes, this is already in effect. But the provision was originally scheduled to expire at the end of 2009; the bailout bill pushes that expiration date back to 2012.

Broker reporting of basis: The law currently requires that brokers report the sales price of securities, but does not require that they track and report basis. (A lot of brokers track basis for the customers anyway; but they don't report it to the IRS.)

Actually, I thought there was already an existing law which required broker reporting of basis for assets purchased after 2010, but the date kept getting pushed back.