This update on recent developments in taxation relating to S corporations includes cases and rulings on eligible shareholders, electing small business trusts, inadvertent S election terminations, and other issues, as well as changes made by the TCJA.
This article reviews and analyzes recent rulings and decisions involving partnerships and discusses developments in partnership formation, debt and income allocations, distributions, and basis adjustments.
The IRS concluded that a taxpayer was not permitted to aggregate the S corporations with the partnership for the purpose of applying the at-risk rules of Sec. 465.
With the repeal of technical terminations, partnerships can only terminate for U.S. federal income tax purposes if no part of any business, financial operation, or venture continues to be conducted by any of its partners.
If the partnership agreement’s tax allocations do not have substantial economic effect, or if the partnership agreement is silent concerning tax allocations, the tax allocation must be made in accordance with the partners’ interests in the partnership.
This item discusses issues partnerships and their advisers should consider when designating a PR or DI, accounting for the potential for conflicts of interest, whether and to what extent limitations can be placed on the PR or DI, and how these roles differ dramatically from that of the TMP.
The passthrough of S corporation losses to the extent of the shareholder’s basis in his or her stock and debt can be beneficial, but the resulting reduced basis debt may lead to taxable income on repayment of the debt.
Broad state adoption of the model statute developed by the AICPA in partnership with other
major stakeholders will provide greater uniformity
and increased compliance.
A taxpayer’s amended returns sufficiently apprised the IRS of inconsistencies between the amended returns and the returns filed by the bankruptcy trustee of his wholly owned S corporation.
A terminated S corporation may remain a cash-basis taxpayer if its average gross receipts for the three previous tax periods are less than $25 million.
Disguised sale occurs when a partner(s) engages in a transaction that, when viewed together with a partnership, involve property and are characterized as the sale or exchange of property.
Because facade easements must be protected in perpetuity, a leaseholder was not allowed to claim a deduction for contributing an easement to a not-for-
profit preservation corporation.
Depending on how a taxpayer’s ownership is structured, the sale of a partnership interest can have a Sec. 280G impact on partners or members that are C corporations.