1. Topics

S Corporation, Partnership & LLC Taxation

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.

IRS finalizes rules on eligible terminated S corporations

The IRS issued final regulations on ETSCs and distributions of money from those corporations after the post-termination transition period.

The built-in gains tax

The built-in gains tax applies to C corporations that make an S corporation election, and it can be assessed during the five-year period starting with the first tax year for which the S election is effective.

Taxpayer not a shareholder of not-for-profit corporation

The president and a director of a not-for-profit is not its beneficial owner and cannot be a shareholder of it.

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.

Final regs. govern eligible terminated S corporation rules

The IRS finalized proposed regulations on eligible terminated S corporations, a new provision enacted under the Tax Cuts and Jobs Act that provided favorable treatment for corporations that wished to terminate their S elections.

Regulations coming on S corporations with accumulated E&P and GILTI

The IRS announced that it will issue regulations to allow S corporations with accumulated earnings and profits to elect to have global intangible low-taxed income inclusions increase the S corporation’s accumulated adjustments account.

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.

Private equity and F reorganizations involving S corporations

The M&A market is poised to regain its pre-COVID-19 activity levels as many business owners seek to exit closely held businesses or explore alternatives. One popular transaction that could emerge is Sec. 368(a)(1)(F) reorganizations F reorganizations) of S corporations.

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.
Next
Previous