1. Topics

S Corporation, Partnership & LLC Taxation

Proposed Regulations Would Change Treatment of Sec. 751 Property

The IRS issued proposed regulations under Sec. 751 that would amend the rules governing how a partner measures its interest in a partnership’s unrealized receivables and inventory items and the tax consequences of a distribution to a partner reducing that interest.

Procedures for Withholding Foreign Partnerships and Withholding Foreign Trusts Coordinated With FATCA

The IRS issued updated procedures in Rev. Proc. 2014-47 for "withholding foreign partnerships" and "withholding foreign trusts" that elect to assume certain U.S. withholding tax responsibilities.

Active Members of an Investment Adviser LLC Are Subject to Self-Employment Tax

The IRS Office of Chief Counsel determined that actively working members of an investment management company formed as a limited liability company were not limited partners within the meaning of Sec. 1402(a)(13), and, thus, their net distributive shares of management fee income were subject to self-employment tax.

The Transfer of Loss Property Between an S Corporation and Its Shareholders

S corporations and their shareholders often engage in transactions in which they transfer property with a basis greater than its FMV. This article examines the tax effects on both shareholders and the corporation.

Transfers of Installment Obligations Would Trigger Gain or Loss Under Proposed Rules

The IRS issued proposed regulations relating to the nonrecognition of gain or loss on certain dispositions of an installment obligation.

Valuing Partnership Interests Acquired in Exchange for Services

This column addresses the rules that currently govern the receipt of a partnership interest in exchange for services. Practitioners should be aware that proposed regulations and Notice 2005-43 provide new rules and new safe-harbor provisions that will apply to the receipt of a partnership interest by a service partner when the regulations are finalized.

S Corp. Shareholder Basis and Debt

The IRS issued final regulations addressing the basis of indebtedness of S corporations to their shareholders.

Making a Trust an Eligible S Corp. Shareholder: QSST and ESBT Elections

This item describes eligible shareholder trusts and the elections they must make.

Proposed Rules Would Change Partners’ Treatment of Unrealized Receivables and Inventory Items

The IRS issued proposed regulations under Sec. 751 that would amend the rules governing how a partner measures its interest in a partnership’s unrealized receivables and inventory items and the tax consequences of a distribution to a partner reducing that interest.

Navigating the Net Investment Income Tax: Key Issues for Investment Funds and Their Partners

This item summarizes the aspects of the net investment income tax that are most relevant to hedge fund investors and general partners.

Proposed Partnership Liability Regulations Under Sec. 752

Treasury and the IRS issued comprehensive and particularly adverse proposed regulations regarding the allocation of partnership recourse and nonrecourse liabilities under Sec. 752.

The Limited Liability Company Basis Limitation

Under Sec. 704(d), a member’s allocable share of loss from a limited liability company (LLC) taxed as a partnership is deductible only to the extent of the member’s outside basis in his or her LLC interest at the end of the LLC year. In determining a member’s outside basis at year end, adjustments for increases and decreases are made in a specific order according to Regs. Sec. 1.704-1(d)(2).

Target Capital Allocations: Up to Code?

Target capital allocations attempt to have the allocations of profit and loss follow the cash by making partner capital accounts equal what the partner would receive if the partnership actually liquidated at the end of the year.

Computing the Domestic Production Activities Deduction for Passthrough Entities

Some unique issues can arise when computing the domestic production activities deduction for a passthrough entity.

Revisiting the Vainisi Decision: Why S Corporation Banks Are Not Completely in the Clear

While the Seventh Circuit’s decision in Vainisi was favorable for S corporation banks investing in tax-exempt obligations, those banks nonetheless must pay close attention to the specific type of tax-exempt obligations they purchase if they expect to reap the benefits of that decision.

QSST Not Necessarily Required to Pay All Income to Beneficiary

If a qualified subchapter S trust (QSST) owns both S corporation stock and other assets, determining whether the income from the other assets must be distributed to the beneficiary depends on the terms of the trust document.

Installment Sale Rules and S Corp. Asset Sales: Planning for Better Results

When consulting on S corporation asset sales or sales treated as asset sales from a tax perspective, tax practitioners need to be aware that different tax consequences than expected can sometimes result under the installment sale rules of Sec. 453.

Proposed Disguised-Sale Regs. Offer Clarification and Issues for Real Estate

The Treasury Department issued new proposed regulations intended to clarify the disguised-sale rules under Sec. 707 and the allocation of partnership liabilities under Sec. 752.

Using a Buy/Sell Agreement to Restrict Transfers of Partnership Interests

A buy/sell agreement is a popular way to establish some parameters for the disposition of a partnership interest while establishing a method that can be used to value the interest and the terms of a potential payout.

Final Rules Issued on Bona Fide Indebtedness and Terminating Partnership’s Startup Expenses

Final regulations were issued on S corporation shareholder basis of indebtedness of the S corporation to the shareholder only if the indebtedness is bona fide and on the deductibility of startup expenditures and organizational expenses for partnerships following a termination of a partnership.
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