European Central Bank Issues Report on Economic Impact of US Tax Reform: Today, the European Central Bank released a report analyzing the macroeconomic impact of the federal tax reform bill passed in December. The report notes that, under the bill, the tax burden on US corporate income will fall to a level closer to that in a number of European countries, but that overall impact on the European Union and international tax landscape is highly uncertain.

Tax Court Rejects Back-to-Back Loan and Incorporated Pocketbook Theories for Increased S-Corp Basis: In Meruelo v. Commissioner of Internal Revenue, T.C. Memo. 2018-16, the Tax Court rejected petitioner’s arguments that “back-to-back” loan transactions and “incorporated pocketbook” transactions resulted in bona-fide indebtedness for purposes of determining a shareholder’s basis in an S corporation. The court stated that controlling test under prior case law, as under the Reg. § 1.1366-2(a)(2), was that basis in an S corporation’s debt requires proof of bona fide indebtedness of the S corporation that runs directly to the shareholder. Requiring that the shareholder make an “actual economic outlay” is a general tax principle that may be employed under the regulation, as under prior case law, to determine whether the test was met.