1. "There is also a Circuit split on the application of the 40% substantial overvaluation penalty in certain settings, so we are watching that." This split is as to whether, if the case is resolved by some predicate issues (such as economic substance before getting to the overvaluation), the overvaluation penalty can apply. The split is with virtually every circuit applying the penalty except the Fifth and Eleventh Circuits, both of which may be ready to join the crowd.
2. The Chief Counsel is also concerned about tax avoidance in so-called Midco transactions:
Earlier in the litigation chain, we are working to develop the law of transferee liability as it applies to intermediary or Midco transactions -- in particular transactions where a closely held C corporation sells its assets but winds up not paying the corporate tax, because a "Midco" purchaser of the shares of the cash-rich company essentially disappears without causing the correct tax to be paid. The government has had a difficult time holding the selling shareholders responsible in these cases, and we are urging different outcomes in both trial and appellate settings. There is a clear tax administration interest, both in getting the correct tax paid in old transactions and in eliminating the feasibility of future generations of dishonest Midco promoters from succeeding. We believe that current law, when correctly applied, provides the needed tools, but we will also be open to legislative solutions should the courts take different views.3. He is also concerned about FATCA implementation:
