What’s new for 2022 in federal taxes
A law change and some regulations take effect while an array of provisions expire.
S Corporation, Partnership & LLC Taxation
SALT payments before year end a priority for passthroughs
To be deductible at the entity level, payments by passthrough entities of state and local taxes should be made in the tax year of the liability, but state-specific elections may complicate that timing, tax advocates advise.
Minimizing a hobby loss issue by electing S status
To avoid the hobby loss rules, with their limitation on deductible expenses, an activity must be engaged in for profit; electing S status can help a taxpayer establish profit motive.
Further guidance issued on tax treatment of PPP loan forgiveness
Forgiveness amounts are excluded from gross income but included in gross receipts for purposes including determining “small business taxpayer” status under Sec. 448(c).
Carried interest reporting FAQs and guidance posted
The IRS posted FAQs with sample worksheets and instructions for taxpayers to use when calculating and reporting certain net long-term capital gains from partnership interests held in connection with the performance of services that must be recharacterized as short-term capital gains.
Beware of IRS initiatives against microcaptive insurance arrangements
Microcaptive insurance arrangements have been vigorously scrutinized recently by the IRS.
Guidance issued for LLCs seeking tax-exempt recognition
The IRS clarified the standards that an LLC must satisfy to obtain a determination letter that it is exempt from taxation under Sec. 501(c)(3).
Unvested partnership interests as compensation
This item focuses on the use of unvested capital interests as compensation.
Illinois PTE tax would provide SALT cap workaround
This item discusses Illinois Legislature's S.B. 2531, which includes a PTE tax that allows a workaround to the federal $10,000 limitation for state and local tax deductions.
Navigating the new Schedules K-2 and K-3
Schedule K-2 will report the partnership/S corporation–level activity attached to a flowthrough return, while Schedule K-3 will be provided to each partner or shareholder and report its proportionate amount for each item.
The potential for lost benefits of Up-Cs in a Sec. 280E environment
This item summarizes the traditional Up-C/TRA arrangement and addresses the impact of Sec. 280E on the Up-C/TRA structure.
The Sec. 1061 capital interest exception and its impact on hedge funds
A hedge fund manager may be required to maintain separate tracking of a single partnership interest into several buckets to avoid the negative tax consequences of the short-term capital gain treatment of assets held from one to three years under Sec. 1061 for certain partnerships on the economic return of their invested capital.
Comparing stock sales and asset sales of S corporations
The issue of a stock sale versus an asset sale raises a number of significant issues to be considered by S shareholders.
Partnership continuity in restructuring transactions
The issue of whether a partnership continues or terminates for U.S. federal income tax purposes frequently arises in restructuring transactions.
When does a partnership terminate under Sec. 708?
It can be difficult to determine whether a partnership that retains de minimis assets or performs administrative functions during its winding-up period terminates, particularly if such activities cross tax years.
Current developments in S corporations
This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible terminated S corporations, S corporation income and losses, the one-class-of-stock requirement, and other issues.
Where individual, corporate, and passthrough entity taxation meet
Passthrough owners must consider many risks and uncertainties, in addition to political trends on Capitol Hill, before opting into a state-level regime designed to bypass the $10,000 SALT deduction cap created by the TCJA.
Compensatory split-dollar life insurance benefits are compensation
Economic benefits from a compensatory split-dollar life insurance arrangement are not property distributions.
Using a family LLC for estate planning
LLCs can help families achieve key business and tax objectives, while also providing liability protection and concentrating management power in the hands of less than all of the owners.
The partner-to-partner attribution trap and the anti-churning rules
Taxpayers dealing with tax basis step-up transactions involving related parties or rollover equity interests should consider the application of the anti-churning rules to avoid unforeseen results.
