LLCs and LLPs

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).

Contributing Intangible Property to an LLC

While there usually is little difficulty in determining whether a contribution to a limited liability company consists of property, questions can arise when a contribution could be characterized as property created by a person’s services or services that create property for the LLC’s benefit.

LLC Distributions of Contributed Property

An LLC member who makes a contribution to the LLC of property with an FMV different from its basis may be required to recognize gain or loss upon a subsequent distribution of the contributed property to another member.

Newsletter Articles

SPONSORED REPORT

States look to unclaimed property for revenue

State audits of abandoned and unclaimed property (AUP) have exploded in recent years. This report outlines the escheat process, common types of AUP, how different states are handling it and how companies can plan for potential audits and liabilities.

DEDUCTIONS

Understanding the new Sec. 199A business income deduction

The new deduction allows certain business owners to keep pace with the significant corporate tax cut provided by the Tax Cuts and Jobs Act.