Jeffrey Paravano, Managing Partner of the firm's Washington, D.C., office, and associate John Lehrer were quoted in the April 14, 2010, Tax Notes Today article, "Fluctuations In Value Guidance To Specify When Methods Can Be Changed."
Paravano and Lehrer were quoted based on the presentation they made at the 60th Midyear Conference of the Tax Executives Institute, held April 11-14 in Washington, D.C. They were panelists, along with William Alexander, Associate Chief Counsel for the Internal Revenue Service, for the "Federal Tax" session.
Paravano highlighted five recently issued private letter rulings (PLRs) that he characterized as "massive" and "very helpful" in expanding the ability of taxpayers to use the rescission transaction relief provided for in Penn v. Robertson, according to the article. Contract rescission is an equitable remedy that allows taxpayers to treat a transaction as a nullity for tax purposes as long as it is done within the taxable year in which the contract was first executed. One requirement is that the parties be restored to status quo ante. "That was the big problem," Paravano said. For example, he asked, "How the heck do we get the people back to where they were before" the stock issuance or the merger or the spinoff?
During the session Lehrer asked Alexander whether the IRS plans to issue guidance on codification of the economic substance doctrine. "I'm not sure that you necessarily need more guidance" or what that guidance would look like, Alexander said, although he acknowledged that the Service is wrestling with whether codification has changed substantive law. Paravano, who described the codified doctrine as "harsh," asked whether Alexander had seen an uptick in PLRs from risk-averse taxpayers concerned about the codification. Alexander acknowledged that he has gotten some calls about it.