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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.

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