ArentFox Schiff Legal Podcasts

In the latest episode of “Tax Stuff You Should Know,” hosts Bob Pluth and Gene Magidenko unpack the CFM Insurance decision, spotlighting the complexities of captive insurance arrangements and the Internal Revenue Service’s (IRS) scrutiny of them.

They underscore the importance of tax planning needing to correspond with economic and substantive reality, the audit risks, including those tied to refund claims, and the implications of the IRS’ Dirty Dozen list. The discussion also stresses the importance of meticulous documentation and legal compliance, and notes that reliance on qualified professional advice can help mitigate penalties.

Takeaways

- Captive insurance companies must operate as bona fide insurance providers.

- The IRS continues to flag certain planning strategies as high risk.

- Taxpayers must maintain thorough documentation and comply with legal requirements.

- Courts focus on the substance of a transaction or structure rather than its form.

- Good-faith reliance on competent tax advice may mitigate penalties.

- Arrangements that promise outsized tax benefits warrant skepticism.

On January 20, Canada’s Prime Minister Mark Carney addressed the World Economic Forum. Coming a week after his meeting with China’s President Xi Jinping, his remarks made headlines globally.

 

In this episode of Five Questions, Five Answers, we asked Automotive News Toronto Bureau Chief David Kennedy for his perspective on where the prime minister is taking Canada’s trade policy and what the bilateral accord could mean for North America.

Takeaways 

- Annual imports of up to 49,000 Chinese electric vehicles under the Canada-China accord. 

- A 50% increase in Canadian exports to China by 2030. 

- The increasing importance of compliance with evolving import regulations. 

​- The establishment of cross-functional market-access committees within companies.

In the latest episode of “Tax Stuff You Should Know,” hosts Bob Pluth and Gene Magidenko unpack the income tax consequences of partnership liquidations and related traps for the unwary.

They demystify the treatment of hot assets, the mixing-bowl rules, and special rules that apply to the distribution of cash and marketable securities — common traps that can convert what looks like a simple wind‑down into a surprising tax bill for one or more of the partners.

Key Takeaways

- Partnership liquidations frequently arise in family‑owned and closely held contexts.

- Liquidating distributions generally are tax-free to the partnership and to partners, except if there are “hot assets” or if a partner receives cash and marketable securities exceeding basis.

- Mixing‑bowl rules can adversely impact distributions of property that had originally been contributed to the partnership within the preceding seven years.

- Disproportionate distributions can create unexpected tax liabilities.

- Understanding the contribution and operational history of a partnership is essential for accurate analysis.

In this episode of Five Questions, Five Answers, Birgit Matthiesen and Jessica DiPietro explore the historical context and implications of the Nixon Shock and the Trade Expansion Act, focusing on Section 232 investigations and their impact on US trade policy.

Birgit and Jessica discuss the complexities of these investigations, the broad scope of tariffs, and the importance of understanding product classifications and valuations. They also look ahead to the future of Section 232 actions and the need for companies to stay informed and prepared for potential trade remedy actions in 2026.

Takeaways

• Know that Section 232 investigations can be initiated by multiple actors, including the president and Congress.

• Anticipate wide investigative scopes that can sweep in diverse products and complicate compliance.

• Monitor Federal Register notices to stay current on tariff actions and scope changes.

• Note that the current Administration frames economic security as national security.

• Track the rising number of Section 232 investigations as a signal of policy direction.

• Prepare proactively by assessing and managing your company’s tariff exposure.

Kevin Timson talks with Mercer Capital’s David Harkins, who shares insights into automotive dealership valuation. The discussion highlights (1) the importance of understanding value drivers like brand, real estate and fixed operations (2) the wealth of insights found in factory financial statements and (3) the impact of local market dynamics on dealership valuations. David also emphasizes focusing on controllable factors, the significance of good valuations on succession planning and the challenges posed by current economic conditions in understanding how valuations will increase over the next several years.

In the fourth episode of “Tax Stuff You Should Know,” hosts Bob Pluth and Gene Magidenko delve into the concept of profits interests, a valuable tool for partnerships and limited liability companies to reward service providers without triggering immediate adverse income tax consequences.

They examine Internal Revenue Service (IRS) guidance on profits interests, including the criteria for non-taxable grants, the complexities introduced by vesting, and the design features to maximize the benefits of this valuable planning tool. The discussion also covers common use cases, potential pitfalls, and the importance of understanding both the tax implications and the flexibility offered by this compensation method.

Takeaways

- Profits interests can offer participation in upside without upfront capital contributions from service providers.

- IRS guidance provides a roadmap for structuring profits interests.

- Flexible design features can be incorporated into profits interests to meet specific goals.

- Profits interests offer the potential for capital gain treatment to holders.

- There is no immediate tax liability upon receipt of a properly structured profits interest.

- The holder’s tax reporting obligations may become more complicated upon receiving a profits interest.

Join AFS Life Sciences Partner Stephanie Trunk and Darshan Kulkarni, Life Sciences regulatory and compliance attorney, to unpack the recent acceleration of mergers and acquisitions across the life sciences sector.

They examine why deal flow is increasing, why buyers are favoring asset purchases over mega-deals, and how drug pricing and compliance priorities under the Trump Administration are shaping decisions.

They also explore how rigorous due diligence can mitigate risk, where artificial intelligence (AI) may streamline diligence, and why intellectual property (IP) mapping to actual products remains a recurring gap. The discussion closes with practical insights on building a robust compliance culture and navigating an evolving health care enforcement landscape.

Key Takeaways Include:

- Increasingly, buyers favor strategic, targeted acquisitions over mega-deals.

- Policy impacts from the Trump Administration influencing deal strategy.

- Heightened due diligence emphasis on compliance and pricing risks.

- Emerging role of AI to streamline due diligence workflows.

- Persistent gaps in IP diligence, including weak mapping to products.

In episode three of “Tax Stuff You Should Know,” hosts Bob Pluth and Gene Magidenko delve into the intricate world of S corporations, tracing their historical development, examining the qualifications for electing S status, and identifying the missteps that can inadvertently revoke that designation.

Bob and Gene unpack the consequences of the termination of an S election, pinpoint frequent triggers of terminations, and suggest practical strategies to prevent these issues. Their conversation underscores the need for careful planning to maintain S corporation status and outlines solutions for inadvertent terminations and other S corporation maladies.

Key Takeaways

• There are complex rules governing the eligibility of S corporations, including the types of shareholders (individuals, estates, certain trusts and tax-exempt organizations qualify, but nonresident noncitizen individuals, partnerships, corporations, and ineligible trusts do not).

• S corporation status terminates if the election is revoked or the corporation ceases to meet all eligibility requirements at any time.

• Termination often results from ineligible shareholders or failure to maintain a single class of stock.

• An inadvertent termination can result in unfavorable tax consequences, which are compounded by the fact that the termination often is not discovered until years later.

• There are ways to mitigate the risk of an inadvertent termination, such as keeping up with the maintenance of corporate records, putting into place a shareholder agreement with transfer restrictions, and requiring S corporation shares to be certificated.

• Relief for certain inadvertent terminations and other S corporation issues may be available through revenue procedures, but in some cases a private letter ruling from the Internal Revenue Service (IRS) is needed to resolve the problem.

In this episode of Five Questions, Five Answers, host Birgit Matthiesen welcomes AFS attorney James Kim to explore the current state of US tariffs and their impact on importers and various industries, with a special focus on the electric vehicle sector.

The conversation highlights evolving trade policies, challenges faced by businesses in navigating tariffs, and the importance of compliance with trade agreements such as United States-Mexico-Canada Agreement (USMCA). Birgit and James emphasize the need for proactive strategies in supply chain management in order to adapt to the rapidly changing trade landscape.

Takeaways

- Indicating permanence. The current state of tariffs suggests they are here to stay.

- Increasing cost pressures arise from rising tariffs and reduced tax credits.

- Offering potential tariff savings. The USMCA requires strict compliance.

- Ensuring flexibility in contracts is essential to handle tariff fluctuations.

- Reducing dependency on high-risk countries involves diversifying supply chains.

In this episode of Tax Stuff You Should Know, hosts Bob Pluth and Gene Magidenko delve into the complexities of profits interests, a compensation tool for partnerships and limited liability companies (LLCs) taxed as partnerships.

They discuss the differences between profits interests and capital interests, tax implications, and the importance of structuring these interests to comply with Internal Revenue Service guidance. The conversation also covers vesting, other design considerations, and the common uses of profits interests in incentivizing employees.

Takeaways

- Profits interests can be a potent tool for partnerships and LLCs.

- They also can offer considerable advantages to their holders, including tax efficiency upon receipt and capital gain treatment upon a sale of the business.

- Care should be taken in designing profits interests, as there can be some complexity involved in their proper structuring.

- There are circumstances where profits interests may not be optimal; for example, not all service providers should receive profits interests due to tax reporting complexity.