David Zimmerman Quoted in Tax Analysts Regarding Role of General Utilities Repeal in Tax Planning

"News Analysis: Anschutz Tripped Over General Utilities Repeal"
Tax Analysts

David Zimmerman discusses the repeal of the General Utilities doctrine, saying it changed the corporate tax landscape and still plays a frequent role in tax planning. "The repeal of General Utilities limited a corporation's ability to dispose of appreciated assets without incurring two levels of tax, which has put more pressure on companies to engage in tax-free spinoffs and other types of tax-free transactions in order to avoid double taxation," he said.

When a C corporation elects S corporation status, there is a period of time during which the built-in gain in its assets continues to be subject to two levels of tax. "There are a number of innovative financial product transactions that allow taxpayers to diversify their investments without running afoul of the 1986 tax reforms," Zimmerman said, adding that if it is properly structured, "entering into a prepaid variable forward contract should not create a recognition event or cause built-in gains recapture."

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