1. Topics

S Corporation, Partnership & LLC Taxation

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.

Making a new S election after termination

Generally, after a corporation has revoked or terminated an S election, it cannot make an S election for any tax year before its fifth tax year that begins after the first tax year for which the termination was effective, unless the IRS consents to the election.

State and local considerations in using an F reorganization to facilitate an acquisition

Foresight of the potential state tax implications of an F reorganization will allow a seller to evaluate the lesser-known hazards.

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.

Tax savings opportunities from the CARES Act

This article summarizes business and individual tax provisions of the CARES Act, emergency legislation designed to speed relief to employers and individuals who are struggling due to the COVID- 19 pandemic.

Partnerships, a pandemic, and Rev. Proc. 2020-23

Partnerships must weigh the benefits of amending returns now that administrative hurdles have been removed.

LLC mergers

When advising on a merger of LLCs, tax advisers must consider the application of state merger law, the continuity of the merged entities, and whether the merger constitutes an assets-over or assets-up transaction.

Administrative adjustment requests under the BBA

This item briefly summarizes the BBA rules, discusses the requirements for filing an AAR under Sec. 6227, and addresses the effects of filing an AAR on certain types of partners.

State considerations when amending BBA partnership returns

This discussion provides a review of the federal filing requirements for amending partnership returns and focuses on three states that have taken varying approaches to address the corresponding state effects of the BBA.
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