In FAA 20204201F, the IRS concluded that the Sec. 704(c) allocation method adopted by a partnership between a U.S. corporation and its domestic and foreign affiliates was unreasonable under the Sec. 704(c) anti-abuse rule.
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TOPICS / PASSTHROUGHS
Partnership and LLC Taxation
Partner capital account reporting gets transition penalty relief
Errors by partnerships in reporting partners’ tax capital accounts under new rules for 2020 may be excused, the IRS outlined.
Carried interests regulations are finalized
The IRS finalized proposed regulations on certain carried interests to account for changes made by the Tax Cuts and Jobs Act (TCJA). The TCJA extended from one year to three years the holding period for making carried interests eligible for capital gain treatment.
Proposed regs. on carried interests
This item discusses proposed regulations regarding the tax treatment of carried interests.
Draft instructions for reporting partnership capital accounts are issued
The IRS released draft instructions for Form 1065 to calculate partner capital accounts using the tax-basis method.
Rules issued on transfers of partnership interests and effectively connected income
The IRS finalized proposed regulations on withholding from transfers of partnership interests to foreign persons and the definition of effectively connected income for those purposes.
Centralized partnership audit regime changes proposed
The IRS issued rules on two special enforcement matters for purposes of the unified partnership audit rules.
Partnerships and S corps. can deduct state and local taxes
The IRS said it would issue proposed regulations allowing S corporations and partnerships to deduct “specified income tax payments” paid to state and local governments above the line and not as passthrough items for partners and shareholders.
Settlement offers for pending litigation of syndicated conservation easements
The IRS announced time-limited settlement offers, requiring tax benefit concessions and assessing penalties, to eligible taxpayers with pending cases.
IRS proposes rules on carried interests
The IRS issued proposed regulations under Sec. 1061, enacted by the TCJA, which requires owners of certain partnership interests to hold them for three years to be eligible for capital gain treatment.
Draft instructions for partnership capital account reporting released
The IRS released draft instructions for Form 1065, U.S. Return of Partnership Income, to calculate partner capital accounts using the tax-basis method.
Rules govern withholding on transfers of partnership interests and ECI
The IRS finalized proposed regulations on withholding from transfers of partnership interests to foreign persons and the definition of effectively connected income for those purposes.
Divorce settlement payments do not increase LLC basis
Payments to ex-wife and divorce lawyer do not increase taxpayer’s basis in an LLC.
Economic issues when forming an LLC
A number of issues must be considered when reviewing the organizational documents for a limited liability company, including member compensation, allocation of income and loss, and when distributions will be made.
Upcoming deadline to amend certain BBA partnership returns
While the ability to temporarily file amended returns is welcome by many BBA partnerships,
some unanswered questions remain about the consequences of doing so, and in some circumstances filing an AAR could be preferable.
Proposed rules govern carried interests
The IRS issued proposed regulations under Sec. 1061, enacted by the law known as the Tax Cuts and Jobs Act, which requires owners of certain partnership interests to hold them for three years to be eligible for capital gain treatment.
The CARES Act and opportunities to implement changes on previously filed returns
The following discussion mostly focuses on the ability of partnerships to file amended returns and
the QIP technical correction under the guidance issued in Rev. Procs. 2020-23 and 2020-25, respectively.
Partnership allocations lacking substantial economic effect
If a partnership’s allocations are not respected, the IRS or the courts can reallocate items of income or loss and assess underpayment or accuracy-related penalties.
Partnership form being redesigned for 2021
The IRS proposes modifying the partnership form (Form 1065) to help standardize the format of international tax items.
Sec. 743(b) adjustments: Shortcuts and surprises
This discussion considers reasons the purchaser of a
partnership may want to rethink the use of such shortcuts when estimating the federal income tax consequences associated with a Sec. 743(b) adjustment in an acquired partnership interest.
PRACTICE MANAGEMENT
2026 tax software survey
CPAs rate their return preparation software’s performance during this year’s tax season.
