S Corporation, Partnership & LLC Taxation
Proposed Rules Would Require Terminating Partnerships to Amortize Startup Expenditures
The IRS issued proposed regulations aimed at preventing partnerships from using technical terminations to accelerate their deductions of startup and organizational expenses.Supreme Court Resolves Circuit Split on 40% Gross Valuation Misstatement Penalty
The Supreme Court held that the 40% penalty for a gross valuation misstatement applied when the partnerships at issue had been determined to be shams that lacked economic substance, and, as a result, the partners’ outside basis in the partnerships was zero.The New Five-Year Built-In Gain Recognition Period
ATRA extended the five-year recognition period for the BIG tax to 2012 and 2013 and also changed the BIG tax treatment of installment sales and carryovers of built-in gain not taxed in the year recognized because of the taxable income limitation.Electing S Corporation Status for a Limited Liability Company
In some situations, business owners have state-law reasons for wanting their business to be formed as a limited liability company, but for tax purposes they would prefer S corporation (rather than partnership) tax treatment.Collaboration Agreement Gives Rise to Partnership Treatment
The IRS ruled that a joint collaboration between two corporations was a partnership for U.S. federal tax purposes and the entity could not elect out of the application of subchapter K of the Code.S Corp. Members Are Not Subject to Controlled Group Sec. 179 Limitations
The IRS ruled that S corporation members of a controlled group may use the Sec. 179 election up to the maximum election amount as if they were separate entities, and are not subject to the controlled group’s overall limit.Partners as Employees? Properly Reporting Partner Compensation
How do partnerships treat (former) employees once they receive an equity interest in a partnership?Controlled Groups and the Sec. 179 Election for S Corporations
The exclusion of S corporations from component membership in controlled groups of corporations multiplies the planning opportunities for businesses under common control but calls for vigilance by tax professionals to use this deduction wisely.Reasonable Compensation for S Corporation Shareholder-Employees
Two recent Tax Court opinions focusing on reasonable compensation for S corporation shareholder-employees provide important takeaways for owners and practitioners by addressing common issues surrounding distributions and loan repayments in the context of reasonable compensation.Sec. 754 and Ground Leases
A partnership making an optional Sec. 754 basis adjustment for land subject to a long-term ground lease is permitted to adjust the basis of the land but may not allocate the basis adjustment to buildings or other depreciable assets the lessee constructed.Chief Counsel Disregards Indemnification Agreements Under Anti-Abuse Rules in Transactions That Result in Disguised Sales
The Office of Chief Counsel advised that an indemnification agreement should be disregarded and, accordingly, the underlying partner contribution and distribution should be treated as a disguised sale.Debt and Proving Basis in Flowthrough Entities
A taxpayer’s basis is often scrutinized by the IRS, particularly when basis is claimed based upon debts incurred by a flowthrough entity.Current Developments in S Corporations
This article discusses major changes and developments that directly affect S corporations and their tax advisers during the period of this update (July 10, 2012–July 9, 2013).Sec. 179 Deduction Limitation Applied to S Corps. in a Controlled Group
The IRS recently released an information letter to clarify the treatment of the Sec. 179 limitations applied to members of a controlled group, in which certain members had made an election to be treated as an S corporation.Rough Sailing for TEFRA Partnerships
Several recent cases illustrate the need for taxpayers to be extremely careful when involved in a Taxpayer Equity and Fiscal Responsibility Act audit.Revenue Procedure Provides Liberal Relief for Late S Corp. Elections
The IRS provided a simplified method for taxpayers to apply for relief for various late S electionsTiered Partnerships: Will Net Investment Income Tax and Proposals to Change Taxation of Carried Interests Wreak Havoc?
Tiered partnerships could become subject to ordinary income tax treatment on many forms of revenue that had previously enjoyed a lower capital gain tax rate.2012 Best Article Award
Winners of The Tax Adviser’s 2012 Best Article Award.Sale of Unrealized Receivables Not Eligible for Installment Method
The Tax Court held that the taxpayers could not report the portion of a sale of a partnership interest that was attributable to unrealized receivables using the installment method.Understanding the Tax Consequences of S Corporation Redemptions to a Shareholder
While an analysis of the tax consequences of a redemption to the shareholder usually begins with whether the transaction qualifies for sale or exchange treatment, another starting point is whether the S corporation has accumulated earnings and profits.
