1. Topics

S Corporation, Partnership & LLC Taxation

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.

Partner’s bonus was not a partnership distribution

A bonus payment to a hedge fund manager was payment for services outside her capacity as a partner.

How the death of a partner could affect a partnership’s year end

Partnerships must reevaluate their current fiscal year when a partner dies, since the estate may have a different year end than the individual partner.

Tax Court allows full meal deduction for NHL team’s away games

Pregame meals provided to Boston Bruins players and personnel before away games qualify as a de minimis fringe benefit.

Allocating S corp. losses to acquiring and terminating shareholders

An S corporation’s election to use specific accounting can alter the allocation of passthrough items in some cases.

The importance of tracking AAA and E&P in transactions involving S corps.

Tracking these accounts is important if an S corporation enters into certain transactions such as redemptions, liquidations, reorganizations, or corporate separations.

New Sec. 987 regulations affect partnerships

The 2016 regulations put partners on notice that Sec. 987 principles generally apply to partnership assets and liabilities.
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