1. Topics

S Corporation, Partnership & LLC Taxation

IRS reallocates losses of joint venture among foreign and domestic partners

A CCA memorandum addressed the allocation of partnership losses where certain partners had negative capital account balances.

Dispute between shareholders did not strip taxpayers of beneficial rights of ownership

The Tax Court held that the taxpayers’ poor relations with other shareholders of an S corporation did not affect their ownership interest in the corporation.

Final rules govern election out of centralized partnership audits

The IRS finalized the rules for determining whether partnerships are eligible to elect out of the centralized audit procedures enacted in 2015, which apply to partnerships this year.

IRS holds investment transaction is sale of refined coal tax credits

Investors in a partnership were not entitled to deduct credits because the investment transaction was structured solely to facilitate the purchase of the credits.

Tax Court holds microcaptive insurance company was not a bona fide insurer

Tax Court held that amounts passthrough business entities paid to a purported insurance company they owned were not premiums paid for insurance contracts and not deductible.

Proposed regulations would allow Sec. 754 election without partner’s signature

To ease the regulatory burden on partnerships, the IRS announced that it is eliminating the requirement that partnership elections under Sec. 754 be signed by a partner.

Items and factors to consider in setting reasonable compensation

All companies should maintain supporting documentation for payments.

IRS will not acquiesce to ruling on non-safe-harbor reverse Sec. 1031 exchange

IRS announced it will not acquiesce to a Tax Court ruling in which it held that a taxpayer’s disposition and acquisition of property was not a self-exchange and qualified for Sec. 1031 nonrecognition treatment.

Lack of economic substance dooms loss deductions

A taxpayer was not entitled to a passthrough loss from the dissolution of an S corporation because the dissolution was part of a tax structure that did not have economic substance.

Developing a uniform state approach to the new federal partnership audit regime

This column, the first of two parts, discusses issues states must consider and steps some have taken to align partnership audit rules with new federal rules.

Current developments in S corporations

The AICPA S Corporation Taxation Technical Resource Panel offers a summary of recent court decisions and IRS guidance.

Using qualified Subchapter S trusts (QSSTs)

The QSST may be useful for estate planning purposes and for holding S stock for the benefit of a minor or incompetent.

Structuring loans for S corp. shareholder basis planning opportunities

An understanding of S corporation basis rules enables practitioners to assist clients in taking advantage of planning opportunities aimed at maximizing deductible passthrough losses.

Tax Court denies ordinary abandonment losses in taxpayers’ disposition of partnership interests

Tax Court affirmed the IRS’s decision to recharacterize loss of a partnership disposition from ordinary to capital when the taxpayers failed to provide evidence of abandonment.

Charitable contribution substantiation procedures in statute not available in absence of regulations

A taxpayer’s substantiation requirements for a charitable contribution deduction were not met by information reported on the donee organization’s tax return.

Liability for payment of employment taxes when using a PEO

Chief Counsel Advice was issued regarding who is ultimately liable for payment of employment taxes when using a professional employment organization.

IRS permits partnership basis election without partner’s signature

To ease the regulatory burden on partnerships, the IRS announced that it is eliminating the requirement that partnership elections under Sec. 754 be signed by a partner.

Dissolution of an LLC

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

Practitioner’s incorrect change to passive status costly

A preparer’s improper change of status of income from active to passive is costly for taxpayers.

IRS reissues centralized partnership audit rules

The IRS reissued proposed regulations governing the centralized audit rules, which assess and collect tax at the partnership level.
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