Practice Update: A Surprising IRS Denial of the Accrual of Holding Period on Auction Rate Preferred Stock
Author: Mark Fichtenbaum.
Source: Volume 29, Number 04, Summer 2012 , pp.89-91(3)
< previous article |return to table of contents
Abstract:
A recent IRS advice memorandum denied the holding period, and thus the tax break, afforded dividends on auction rate preferred stock. The Service deemed the taxpayer’s investment so well protected as to imply a put. This article details the transaction and points out problems with the IRS’s analysis.Keywords: auction rate preferred stock; dividend received deduction – holding period computation; dividend received deduction – imputed put; auction rate preferred stock – diminution of risk
Affiliations:
1: Twenty-First Securities Corporation.