Tax News in Brief
Applicable Federal Rates (AFRs) for November: The Section 7520 rate for November 2011 is 1.4%, while the Applicable Federal Rates (AFRs) are as follows (Rev. Rul. 2011-25, 2011-45 IRB ):
|
Annual |
Semiannual |
Quarterly |
Monthly |
|
|
Short-term (≤ 3 years) |
0.19% |
0.19% |
0.19% |
0.19% |
|
Mid-term (> 3 years but ≤ 9 years) |
1.20% |
1.20% |
1.20% |
1.20% |
|
Long-term (> 9 years) |
2.67% |
2.65% |
2.64% |
2.64% |
Corporate Reorganizations: Final regulations (see TD 9548 ) under Reg. 1.355-2(g) address the distribution of stock of a controlled corporation acquired in a transaction described in IRC Sec. 355(a)(3)(B) —so-called hot stock rule. Under this rule, stock acquired in a taxable transaction is treated as boot (taxable to the distributee) if it is distributed within five years. The final regulations adopt the substantive rules of the temporary regulations that were issued in 2008 and apply to distributions occurring after 10/20/11.
2012 Social Security Wage Base: The social security wage base will increase from $106,800 in 2011 to $110,100 in 2012. As in prior years, there is no limit to the wages subject to the Medicare tax, so all covered wages are subject to the 1.45% tax. The FICA tax rate, which is the combined social security tax rate of 6.2% (4.2% on the employee portion in 2011) and the Medicare tax rate of 1.45%, is normally 7.65%, while the self-employment tax rate is normally 15.3% (13.3% in 2011). The threshold for coverage for domestic employees will be $1,800 in 2012.