A member that contributes Sec. 704(c) property (property with a basis different than fair market value (FMV) when contributed) to a limited liability company (LLC) classified as a partnership may be required to recognize gain or loss if that property is later distributed to another member. Under Sec. 704(c)(1)(B), a distribution of
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TOPICS / PASSTHROUGHS
Partnership and LLC Taxation
Powers of attorney for partnerships
Rules for signing the power-of-attorney form vary widely between partnerships audited under the Bipartisan Budget Act of 2015 (BBA) versus those under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA).
AICPA proposes changes to Senate bill that would help most US businesses
Passthrough entities would lose ground compared with corporations under tax language in the Senate Finance Committee bill, the AICPA said in a letter to legislative finance leaders.
AICPA makes Priority Guidance Plan recommendations to IRS
In addition to its 183 recommendations for the IRS plan, the AICPA encouraged the agency to continue to pursue tax simplification.
Partnership reporting of contributions to foreign entities
Substantial penalties may be imposed if a taxpayer fails to report contributions to foreign entities.
Why non-US directors can rarely exempt US-source compensation from US income tax
At $3,000 and never adjusted for inflation during nearly a century, the Sec. 861(a)(3) de minimis exception seldom applies.
Sec. 541: A trap for the unwary investment partnership
The 20% personal holding company tax may unexpectedly apply to an investment partnership.
Sec. 987 final regulations: A practical approach for partnerships
Recent final regulations offer guidance as to what Treasury and the IRS may consider an eligible method for partnerships and Sec. 987 QBUs held by partnerships to determine Sec. 987 gain or loss.
Reconciliation bill clears committee on second try
Sunday revote came after Republican fiscal hawks initially joined Democrats to sink the bill, which includes tax provisions approved by the House Ways and Means Committee last week.
Ways and Means approves proposed TCJA extensions and tax changes
The bill would make key portions of the TCJA permanent and create a new “senior bonus” deduction, among its many provisions. An AICPA statement said it is “deeply troubled” by the plan to curtail use of passthroughs to avoid SALT cap. The bill now heads to the House Budget Committee.
Building not a certified historic structure
The Tax Court denied deduction of a qualified conservation contribution of a façade easement, noting the building lacked a required listing in the National Register of Historic Places.
The complex simplicity of partnership interests exchanged for services
Preventing unwanted tax consequences from compensatory partnership interests requires understanding Regs. Sec. 1.721-1(b)(2) and safe-harbor guidance under Rev. Procs. 93-27 and 2001-43.
New IRS form for partners receiving property distributions
Form 7217, Partner’s Report of Property Distributed by a Partnership, debuted for 2024, intended to apprise the IRS of factors in a partner’s basis computation.
Mandatory basis adjustments for certain LLC transfers
The partnership-level adjustment may be required for a substantial built-in loss, except for electing investment partnerships and securitization partnerships.
Strategies for information return penalties and Form 945 assessments
Penalties for failure to file correct information returns and backup withholding can be waived, but timely and correct responses to IRS notices are essential.
Using the IRS’s BBA Online Form Submission Service
To request a modification to an imputed underpayment from a Bipartisan Budget Act audit or push out the underlying adjustment, audited partnerships must use the IRS’s web-based service.
Expenses that could have been substantiated not allowed
The Cohan rule for estimating business deductions did not apply where taxpayers could have substantiated them but failed to do so, the Tax Court held.
IRS grants partnerships additional time to furnish complete Forms 8308
The IRS is providing relief from penalties imposed solely for failure to furnish Part IV of Form 8308 for partnerships by Jan. 31, 2025, if a partnership meets certain requirements.
Regs. address partnership recourse liabilities, related-party rules
The IRS issued regulations that finalize proposed regulations issued in 2013. The guidance is focused on when and to what extent a partner is treated as bearing the economic risk of loss and the special rules applying to a partner related to another partner.
Surprisingly taxable partnership distributions
Because partnerships’ income is taxed to the separate partners as it is earned, eventual distributions generally are not taxable, but there are exceptions. This article discusses several of these exceptions in which distributions of money or property or a reduction in liabilities treated as a distribution may create taxable income for partners, sometimes in unanticipated ways.
TAX PRACTICE MANAGEMENT
2025 tax software survey
AICPA members in tax practice assess how their return preparation software performed during tax season and offer insights into their procedures.
