Several recent cases illustrate the need for taxpayers to be extremely careful when involved in a Taxpayer Equity and Fiscal Responsibility Act audit.
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TOPICS / PASSTHROUGHS
Partnership and LLC Taxation
Tiered Partnerships: Will Net Investment Income Tax and Proposals to Change Taxation of Carried Interests Wreak Havoc?
Tiered partnerships could become subject to ordinary income tax treatment on many forms of revenue that had previously enjoyed a lower capital gain tax rate.
Sale of Unrealized Receivables Not Eligible for Installment Method
The Tax Court held that the taxpayers could not report the portion of a sale of a partnership interest that was attributable to unrealized receivables using the installment method.
Final Rules on Acceleration of COD Income Deferral Are Issued
The IRS issued final regulations on the rules to accelerate COD income that taxpayers elected to defer over a five-year period when an applicable debt instrument was reacquired by the issuer or a related party in 2009 or 2010.
Final Regulations for Noncompensatory Partnership Options
The IRS in issued final and proposed regulations governing the issuance, exercise, lapse of, and accounting for a noncompensatory partnership option.
Targeted Partnership Allocations: Part II
This article discusses a number of unresolved issues regarding targeted partnership allocations.
Application of Sec. 704(c) to Divisions
There is no guidance addressing how Sec. 704(c) principles should apply when a partnership distributes an asset to multiple partners in a partnership division, including in an assets-over division, which may leave open two alternative approaches.
Defining “Attributable to” Under Sec. 897(g)
The lack of regulatory and published guidance has created uncertainty in applying Sec. 897 to determine the amount of gain attributable to a USRPI.
Entities With Less Than $50 Million in Assets Get New Schedule M-3 Filing Rules
The IRS announced changes in the filing requirements for Schedule M-3, Net Income (Loss) Reconciliation, for certain corporations and partnerships.
Targeted Partnership Allocations: Part I
This article discusses the rules governing safe-harbor allocations, the rules governing targeted allocations, and reasons for the use of targeted allocations.
Schedule M-3 Filing Requirement Reduced for Entities Below $50 Million in Assets
The IRS announced changes in the filing requirements for Schedule M-3, Net Income (Loss) Reconciliation, for certain corporations and partnerships.
Foreign Corporations Investing in Partnerships: Common Branch Profits Tax Issues
Highlights of the tax compliance challenges that often arise as a result of U.S. branch profits tax exposure.
Sec. 901(m): Potential Trap for Partnership Transactions
New Sec. 901(m) limits the creditability of foreign taxes in certain acquisition transactions where a taxpayer receives a basis step-up for U.S. tax purposes but no corresponding basis step-up for foreign tax purposes.
Incorporating an Insolvent Partnership: Availability of the Insolvency Exclusion
Incurring COD income at the partnership level may provide significantly different, and potentially detrimental, tax results to owners in a partnership than would incurring COD income at the corporate level.
Check-the-Box: A Trap for the Unwary
It has never been easier to effect the choice of operating as a sole proprietorship, partnership, or corporation for federal income tax purposes; however, sometimes unforeseen problems can result.
Recently Issued Sec. 108(e)(8) Regulations: Liquidation Value Safe Harbor
Recently issued final regulations on partnership debt-for-equity exchanges contain a liquidation value safe-harbor method for valuing the partnership interest received in exchange for the cancellation of debt.
Partners’ Income Allocations and the New Net Investment Income Tax
The health care acts, along with recently issued Treasury guidance on the applicability of the additional Medicare tax, may prompt partnerships to reevaluate the potential tax impact of the partnership’s structure on their individual partners.
Long-Awaited Final Regs. Issued on Noncompensatory Partnership Options
The IRS issued regulations on the treatment of certain call options, warrants, convertible debt, and convertible equity that are not issued in connection with the performance of services, i.e., noncompensatory partnership options.
Payments to Taxpayer Held to Be Compensation, Not Distributions
The Eleventh Circuit held that payments made to a taxpayer by limited partnerships that he controlled but did not own an interest in were compensation reportable on Schedule C, not partnership distributions.
Current Developments in Partners and Partnerships
This article reviews and analyzes recent rulings and decisions involving partnerships. The discussion covers developments in partnership formation, income allocations, and basis adjustments.
INDIVIDUALS
Current Developments in Taxation of Individuals: Part 1
This update surveys recent federal tax developments involving individuals, including court cases, rulings, and guidance issued during the six months ending October 2025.
