Partnership and LLC Taxation

State tax considerations around the sale of a partnership interest

This item discusses how owners selling partnership interests should address which states may attempt to tax the entire gain, how taxation of the gain may be divided among the states where the partnership does business, compliance considerations, and technical developments and trends that may affect the transaction.

Deferred compensation not deductible in year basketball franchise sold

No deduction is allowed in the year of sale of a basketball team for deferred compensation owed to two of the team’s players.

More Schedule K-2 and K-3 FAQs posted

In eight new FAQs on its website, the IRS covers some special issues, including several that it says will be added to the forms’ instructions.

BBA partnership audits show high no-change rate, TIGTA says

The Treasury Inspector General for Tax Administration recommends setting goals and benchmarks for the centralized audit regime under the Bipartisan Budget Act.

AICPA again asks IRS to delay K-2/K-3 reporting

Comment letters from the AICPA and state CPA societies also offer further recommendations.

IRS offers further K-2/K-3 relief

The new schedules for returns of passthrough entities with international items have been greeted with antipathy by practitioners. The IRS provided relief Wednesday for eligible entities for tax year 2021.

Complying with new schedules K-2 and K-3

What partnerships, S corporations, and others with foreign partnership interests need to know for tax year 2021 and beyond.

Reporting aspects of Sec. 743(b) adjustments

Partnerships and their partners need to work closely to maintain strong communications to overcome challenges to information sharing and, ultimately, to computational matters and information reporting.

Current developments in partners and partnerships

The discussion covers developments in the determination of partners and partnerships, gain on disposal of partnership interests, partnership audits, and basis adjustments.

IRS rules on cancellation of debt of a disregarded entity

Taxpayers should strongly consider these letter rulings when trying to determine whether they want to structure a borrowing with a regarded entity as the legal borrower or whether they prefer to have a DRE be the legal borrower of the debt.

Outside basis of an LLC interest acquired by purchase, gift, or bequest

When an LLC interest is transferred, the transferee’s basis depends on the transferor’s basis and numerous other potential factors.

What’s new for 2022 in federal taxes

A law change and some regulations take effect while an array of provisions expire.

Further guidance issued on tax treatment of PPP loan forgiveness

Forgiveness amounts are excluded from gross income but included in gross receipts for purposes including determining “small business taxpayer” status under Sec. 448(c).

Carried interest reporting FAQs and guidance posted

The IRS posted FAQs with sample worksheets and instructions for taxpayers to use when calculating and reporting certain net long-term capital gains from partnership interests held in connection with the performance of services that must be recharacterized as short-term capital gains.

Beware of IRS initiatives against microcaptive insurance arrangements

Microcaptive insurance arrangements have been vigorously scrutinized recently by the IRS.

Guidance issued for LLCs seeking tax-exempt recognition

The IRS clarified the standards that an LLC must satisfy to obtain a determination letter that it is exempt from taxation under Sec. 501(c)(3).

Unvested partnership interests as compensation

This item focuses on the use of unvested capital interests as compensation.

Navigating the new Schedules K-2 and K-3

Schedule K-2 will report the partnership/S corporation–level activity attached to a flowthrough return, while Schedule K-3 will be provided to each partner or shareholder and report its proportionate amount for each item.

Illinois PTE tax would provide SALT cap workaround

This item discusses Illinois Legislature’s S.B. 2531, which includes a PTE tax that allows a workaround to the federal $10,000 limitation for state and local tax deductions.

The potential for lost benefits of Up-Cs in a Sec. 280E environment

This item summarizes the traditional Up-C/TRA arrangement and addresses the impact of Sec. 280E on the Up-C/TRA structure.
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