Current Events Roundup: The New Stock Buyback Excise Tax, ILM 202224010, and Deitch v. Commissioner

[...]we evaluate Internal Revenue Service Legal Memorandum ("ILM") 202224010,3 in which the Office of Chief Counsel concluded that Code Sec. 1234A applies to merger termination fees. [...]we evaluate the Tax Court's decision in Deitch v. Commissioner, which considered the tax characte...

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Bibliographic Details
Published in:Journal of Taxation of Financial Products 2022-01, Vol.19 (3), p.5-30
Main Authors: Tompkins, Joshua S, Raglan, Hubert, Dalbey, Grant
Format: Article
Language:English
Subjects:
Employee stock ownership plans
ESOP
Excise taxes
Fair market value
Hedging
Inflation
Inflation Reduction Act 2022-US
Investment products
Investments
Securities buybacks
Stockholders
Tax court decisions
Tax courts
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Summary:[...]we evaluate Internal Revenue Service Legal Memorandum ("ILM") 202224010,3 in which the Office of Chief Counsel concluded that Code Sec. 1234A applies to merger termination fees. [...]we evaluate the Tax Court's decision in Deitch v. Commissioner, which considered the tax characterization of a loan with certain equity-like features. "Repurchase" is defined broadly as a redemption within the meaning of Code Sec. 317(b),4 which generally includes any acquisition by a corporation of its stock from a shareholder in exchange for property, except for its stock or rights to acquire its stock. [...]the excise tax extends to typical stock buy-back programs implemented through traditional open market transactions and through privately negotiated purchases. [...]ASRs effectively allow companies to repurchase stock at the inception of the ASR but for a price based on the VWAP of the stock over the forward period.
ISSN:1529-9287