Guidance on 5-year tax deferral for stock options
Washington, D. C. — The Internal Revenue Service provided initial guidance in early December on a provision of last December’s tax overhaul enabling qualified employees of private corporations to defer paying income taxes for up to five years on the value of qualified stock options and restricted stock units granted by their employers. However, the provision of the Tax Cuts and Jobs Act comes with a catch. In general, executives, highly compensated officers and those owning 1 percent or more of the corporation’s stock can’t make the deferral election. The IRS noted that Federal Insurance Contributions Act tax and Federal Unemployment Tax Act tax payable on the value of qualified stock cannot be deferred.
Notice 2018-97 spells out the initial guidance taxpayers can rely on until the IRS and the Treasury Department issue proposed regulations and ask for public comment on any other issues that need to be addressed in the final regulations.
IRS points to new limits on like-kind exchanges
Washington, D.C. — The IRS is reminding taxpayers about a change under the new tax law that limits like-kind exchanges to exchanges of real estate and similar property.
Under the tax overhaul, starting Jan. 1, 2018, any exchanges of personal or intangible property such as machinery, equipment, vehicles, artwork, collectibles, patents and other intellectual property generally won’t qualify for nonrecognition of gain or loss as like-kind exchanges. Certain exchanges of mutual ditch, reservoir or irrigation stock will still be eligible. Like-kind exchange treatment will now apply solely to exchanges of real property held for use in a trade or business or for investment, meaning real estate. Exchange of real property held primarily for sale still doesn’t qualify.