Tax Provisions of the "Bailout Bill" (H.R. 1424)

October 09, 2008

The recently enacted "bailout bill" contains numerous important tax provisions. A summary of several key tax provisions is as follows:
 
Fannie and Freddie Preferred Stock
The bill allows banks and bank holding companies to deduct losses from the stock as ordinary losses so long as the stock is held as of 9/6/2008 or was sold between 1/1/2008 and 9/6/2008.
 
Mortgage Debt Forgiveness
The bill extends through 2013 a provision allowing taxpayers to exclude so-called qualified principal residence mortgage debt forgiveness from income.
 
2008 AMT Relief
The bill provides an AMT patch to provide exemption amounts as follows for 2008: Married Filing Jointly status: $69,950; Single/Head of Household status: $46,200; and Married Filing Separately status: $34,975
 
Tax-Free Distributions from Individual Retirement Plans
The bill extends through 2009 tax-free treatment of distributions from IRA's where the account owner has reached age 70 ½ and the distributions are donated to charity in an amount that does not exceed $100,000 in a tax year.
 
Business Provisions
The bill extends the research credit through 2009 and extends the 15 year depreciation on restaurant and leasehold improvements placed in service through 2009.
 
Individual Provision
The bill extends through 2009 the following individual provisions: the election to deduct state sales and use taxes; the above-the-line tuition deduction; the $250 above-the-line teacher expense deduction; and the standard deduction for property taxes for non-itemizers.

If you would like more information on the content of this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, whose practice areas include ERISA and employee benefits.

This alert is provided for general information, and is not a substitute for legal or other professional advice.

To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal Revenue Service, we also inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose.