Partnership and LLC Taxation

IRS rules that conversion of LLC not a debt modification

A recent letter ruling addresses whether a limited liability company’s change to a corporation results in a deemed exchange of new debt for old.

A look at revised Form 8308

The newly expanded form can help transferors of partnership interests meet reporting requirements involving Sec. 751(a) “hot assets” gain or loss, collectibles gain, and unrecaptured Sec. 1250 gain.

IRS scrutinizes use of the SECA limited partner exception

In a compliance campaign and litigation, the IRS challenges partners’ claims of the Sec. 11402(a)(13) exception from Self-Employed Contributions Act employment tax liability.

A $10.7 million compensation deduction miss

The recent Hoops decision by the Seventh Circuit, affirming the Tax Court, highlights potential problems for accrual-basis employers of claiming a deduction of nondeferred compensation following mergers and acquisitions.

Current developments in partners and partnerships

This annual update reviews court rulings and guidance on issues including debt and income allocations, distributions, and basis adjustments.

Converting a sole proprietorship to an LLC

The conversion affords the advantage of limited liability, often with minimal changes in federal tax treatment.

Digital asset question added to more forms for 2023 tax returns

IRS adds a question about digital assets to forms covering partnerships, corporations, S corporations, and estates and trusts.

Missed Sec. 83(b) elections: Partnership and LLC special issues

This discussion focuses on grants of profits interests in a partnership or LLC and the relevance of Sec. 83(b) elections.

Prop. regs. issued on conservation easement deduction disallowance

The IRS on Friday issued proposed regulations providing guidance on the new rule that disallows charitable contribution deductions for certain conservation easement contributions by partnerships and other passthrough entities.

Penalties against LLC approved by IRS supervisor, Tax Court holds

In Salacoa Stone Quarry, LLC, the Tax Court held that penalties for misstatement of a charitable conservation easement’s value were properly approved by an IRS supervisor, despite a discrepancy in dates on the penalty approval documents.

LLC distributions that liquidate a member’s interest

Factors potentially causing taxable gain (or loss) from a liquidating distribution include the member’s outside basis and the nature of any property the member contributed to the LLC.

Beneficial ownership information reporting: Right around the corner

Clients should start developing procedures and policies to comply with the new reporting requirement and begin to gather the data that will be necessary.

Massachusetts state tax implications for sales of PTE interests

When the sale of an interest in a PTE is contemplated, planning for state sourcing and taxability of the gain should both be considered so the owners avoid a large — and sometimes unexpected — state income tax liability.

Proposed PFIC regulations could complicate elections and reporting

Proposed regulations would extend to PFICs the aggregate treatment of U.S. partnerships and S corporations for Subpart F income.

Disguised sale of a QOZ partnership interest

Several structural issues arise when a QOZ project involves using both private developer capital and third-party investor equity.

Passthrough-entity treatment of foreign subsidiary income

Entities such as S corporations and partnerships, as well as sole proprietorships, should carefully consider the U.S. tax treatment of foreign subsidiaries.

Partnership extraordinary-item treatment for accounting method adjustments

The regulations under Secs. 481(a) and 706 set forth rules governing a partnership’s treatment of accounting method changes and partner allocations but do not provide clear guidance on how income from an unfavorable Sec. 481(a) adjustment should be allocated among partners with varying interests during the four-year recognition period.

Single-member LLCs

A single-member limited liability company can adopt a variety of tax classifications to fulfill desired business purposes, besides conferring limited liability protection on its owner.

Ninth Circuit again addresses return filing

Faxing a return copy to an IRS agent or mailing it to an IRS attorney is not ‘filing’ the return.

Transfers of PTP interests: Options for foreign intermediaries

This item summarizes the options available to foreign intermediaries for transfers of PTP interests under current guidance and comments on some practical benefits and burdens of each.
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