Partnership and LLC Taxation

TOPICS / PASSTHROUGHS

July 10, 2007

Rulings Relax Related-Party Exchange Rules

Editor: Annette B. Smith, CPA Recently released IRS Letter Rulings 200709036 and 200706001 suggest a liberal trend regarding related-party exchanges under Sec. 1031(f). The rulings may indicate a more favorable Service attitude toward exchanges in which the related parties have not cashed out of their original investments through “abusive” basis-shifting.

July 1, 2007

Some Schedule K-1 Recipients Get Reportable Transaction Disclosure Relief

Editor: John L. Miller, CPA Taxpayers that discover after filing their returns that they indirectly participated in a reportable transaction through a passthrough entity may be able to rely on Prop. Regs. Sec. 1.6011-4(e)(1) to avoid reportable transaction penalties. The preamble to the proposed regulations (REG-103038-05, 11/2/06) provided that this

July 1, 2007

Allocating Partnership Depreciation Between Trusts and Beneficiaries

This article reviews how depreciation from a partnership is allocated between a trust and its beneficiaries and highlights the potential trap the allocation can cause when the depreciation deduction flows through a partnership.

July 1, 2007

Choice of Entity for Expansion of Operations into a Foreign Country

Executive Summary When flowthrough treatment is desired, a U.S. business may expand into a foreign country with a branch office or plant. A foreign partnership is advantageous when foreign operations are expected to generate flowthrough losses to a U.S. partner, and foreign taxes are high. A foreign corporate entity

June 1, 2007

Technical Terminations: Tangible Personal Property Depreciation Issues

Editor: Mary Van Leuven, J.D., LL.M. Technical terminations of partnerships under Sec. 708 (b)(1)(B) and its regulations create numerous issues as to the proper tax treatment of depreciable tangible property owned by the terminating partnership, particularly when changing its accounting method for such property. Under Regs. Sec. 1.708-1(b)(1)(iv), the new

April 1, 2007

Partnership Freezes after Castle Harbour

A closely held C corporation that is growing rapidly or plans to enter into a new line of business may consider the creation of a “frozen” limited liability company (LLC)/partnership (frozen partnership) to reduce its income tax liability and shift future appreciation out of the corporation. However, if the frozen

April 1, 2007

Incorporating a Partnership or LLC: Does Rev. Rul. 84-111 Need Updating?

Taxpayers’ widespread adoption of the limited liability company (LLC) has caused Treasury and the IRS to take a closer look at transactions using it. For example, most states’ enactment of rules allowing for mergers involving LLCs was one reason Treasury issued Regs. Sec. 1.368-2(b), to address statutory mergers involving disregarded