Partnership and LLC Taxation

IRS Proposes Eliminating De Minimis Partner Rule

The IRS issued proposed regulations on October 24 that, if finalized, would remove the de minimis partner rule in Regs. Sec. 1.704-1(b)(2)(iii)(e) (REG-109564-10).

The Targeted Allocations Approach: A Basic Primer

This item discusses a growing trend in the allocation provisions of partnership agreements in which limited partnerships have been adopting a targeted allocation approach through which “tax follows cash.”

Sec. 179D and Passthrough Entities

The Sec. 179D deduction available for building designers has unexpected consequences for design firms structured as passthrough entities.

Final Regs. Govern Election to Deduct Business Start-up Expenses

The IRS issued final regulations (T.D. 9542) governing elections by individual taxpayers, corporations, and partnerships to deduct start-up expenses or organizational expenditures.

Election to Deduct Business Startup Expenses Gets Final Rules

The IRS issued final regulations governing elections by individual taxpayers, corporations and partnerships to deduct startup expenses or organizational expenditures.

Separately Identifiable Intangible Assets: Tax Opportunities and Traps

Treating self-created customer-based intangibles as assets separate from goodwill can result in more favorable tax treatment for these intangibles. This article examines the rules regarding the separate treatment of self-created customer-based intangibles and the situations in which separate treatment may be beneficial.

Partnership Determination of Eligible Basis for Energy Grants

This item discusses whether a partnership should take a partner’s Sec. 743(b) adjustment into account in determining eligible basis of qualified energy property that the partnership has not yet placed in service.

Partners’ Limited Liability and Self-Employment Tax

The decision in Renkemeyer, Campbell & Weaver, LLP, signals that special allocations not supported by a written partnership agreement and without substantial economic effect will not withstand an IRS challenge and that classification of an interest in a partnership as a limited partner interest should not be predicated simply on a partner’s enjoyment of limited liability.

IRS Finalizes Automatic Five-Month Extension for Partnership, Trust and Estate Returns

Final regulations set the time for automatic extensions of partnership, trust and estate income tax returns at five months (T.D. 9531). Under this rule, the extended returns and Schedules K-1 for partners and beneficiaries will generally be due September 15.

Case Addresses the Sec. 752 Anti-Abuse Regs.

The recent decision of the Tax Court in Canal Corp. may provide some insight into when a partner’s potential obligation to pay partnership debts will be disregarded in determining liability allocations.

Discharge of Indebtedness Rules Clarified for Grantor Trusts and Disregarded Entities

The IRS issued proposed regulations that provide rules regarding who is the “taxpayer” for purposes of applying the Sec. 108 discharge of indebtedness rules to a grantor trust or disregarded entity.

Target Allocations

This item discusses what target allocations are and how they determine income allocations during a year. It also examines some special issues with target allocations.

Did Canal Corp. Sink the Leveraged Partnership Transaction?

This item reviews the recent decision by the Tax Court in Canal Corp. and illustrates the limitations of the leveraged partnership exception to the disguised sale rules of Sec. 707(a)(2)(B).

Split Widens as Courts Hold Basis Overstatement Is Not Income Omission

The ongoing controversy over whether a taxpayer’s overstatement of basis triggers a six-year statute of limitation period continues as the Fourth Circuit and Fifth Circuit both held within days of each other that the extended period does not apply. These decisions are at odds with a Seventh Circuit opinion issued in January and with regulations finalized in December.

IRS Wins Again on Annual Exclusion of Gifts of Partnership Interests

In Fisher, the IRS has again won on the issue of whether taxpayers’ transfers of partnership interests were transfers of present interests in property. The court held the transfers did not qualify for the gift tax annual exclusion.

Overstatement of Basis Is Not Omission from Gross Income, Appeals Court Rules

A federal appeals court has handed the IRS another defeat on the issue of whether an overstatement of basis amounts to an omission from gross income for purposes of invoking the longer, six-year limitation period for assessing tax under Sec. 6501(e).

Another Circuit Says Overstatement of Basis Is Not an Omission from Gross Income

The ongoing controversy over whether a taxpayer’s overstatement of basis triggers a six-year statute of limitation period continues as the Fourth Circuit has held that the extended period does not apply.

Current Developments in Partners and Partnerships

This article reviews and analyzes recent rulings and decisions involving partnerships. The discussion covers developments in partnership formation, debt and income allocations, distributions, passive activity losses, and basis adjustments during the period November 1, 2009–October 31, 2010.

Classification of Business Entities That Are Not Corporations

An organization with two or more owners that is an entity separate from the owners and that is not a corporation is an eligible entity that can be classified as a corporation or a partnership. The regulations provide a set of default rules that establish the classification of an eligible entity if no classification election is made.

IRS Maintains Stance on Omissions from Gross Income and Overstatement of Basis

The IRS released final regulations defining an omission from gross income for purposes of the six-year minimum period for assessment of tax attributable to partnership items and the six-year period for assessing tax. The regulations are designed to resolve whether an overstatement of basis in a sold asset results in an omission from gross income.
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