LLCs and LLPs

Optimal choice of entity for the QBI deduction

The enactment of the Sec. 199A QBI deduction adds a new consideration to the form of entity analysis because the QBI deduction available to a business owner may vary depending on a business’s entity form. This article discusses the differences in calculating the QBI deduction for S corporations and LLCs in a variety of scenarios.

Allocating LLC recourse debts

Regulations remove basis benefit for an LLC member when circumstances indicate a plan to circumvent or avoid debt payment obligation.

Dissolution of an LLC

Procedures for concluding the affairs of the LLC should be included in the operating agreement.

Liquidation of an LLC

Rules regarding gain or loss on liquidation are a major reason for formation as an LLC rather than as a corporation.

Debt Modification Issues for LLCs

Practitioners should be familiar with the cancellation-of-debt rules to ensure that modifications of an LLC's debts are not significant enough to cause the members to recognize income.

Changing an LLC’s Tax Year

An LLC's required year can change for several reasons. A change in the LLC's required year is treated as automatically approved by the IRS.

Active Members of an Investment Adviser LLC Are Subject to Self-Employment Tax

The IRS Office of Chief Counsel determined that actively working members of an investment management company formed as a limited liability company were not limited partners within the meaning of Sec. 1402(a)(13), and, thus, their net distributive shares of management fee income were subject to self-employment tax.

The Limited Liability Company Basis Limitation

Under Sec. 704(d), a member's allocable share of loss from a limited liability company (LLC) taxed as a partnership is deductible only to the extent of the member's outside basis in his or her LLC interest at the end of the LLC year. In determining a member's outside basis at year end, adjustments for increases and decreases are made in a specific order according to Regs. Sec. 1.704-1(d)(2).

Newsletter Articles

50th ANNIVERSARY

50 years of The Tax Adviser

The January 2020 issue marks the 50th anniversary of The Tax Adviser, which was first published in January 1970. Over the coming year, we will be looking back at early issues of the magazine, highlighting interesting tidbits.

PRACTICE MANAGEMENT

2019 tax software survey

This annual survey shows how CPAs rate the tax preparation software they used during last tax season and how it handled the recent tax law changes.