Partnership and LLC Taxation

Draft instructions for reporting partnership capital accounts are issued

The IRS released draft instructions for Form 1065 to calculate partner capital accounts using the tax-basis method.

Rules issued on transfers of partnership interests and effectively connected income

The IRS finalized proposed regulations on withholding from transfers of partnership interests to foreign persons and the definition of effectively connected income for those purposes.

Centralized partnership audit regime changes proposed

The IRS issued rules on two special enforcement matters for purposes of the unified partnership audit rules.

Partnerships and S corps. can deduct state and local taxes

The IRS said it would issue proposed regulations allowing S corporations and partnerships to deduct “specified income tax payments” paid to state and local governments above the line and not as passthrough items for partners and shareholders.

Settlement offers for pending litigation of syndicated conservation easements

The IRS announced time-limited settlement offers, requiring tax benefit concessions and assessing penalties, to eligible taxpayers with pending cases.

IRS proposes rules on carried interests

The IRS issued proposed regulations under Sec. 1061, enacted by the TCJA, which requires owners of certain partnership interests to hold them for three years to be eligible for capital gain treatment.

Draft instructions for partnership capital account reporting released

The IRS released draft instructions for Form 1065, U.S. Return of Partnership Income, to calculate partner capital accounts using the tax-basis method.

Rules govern withholding on transfers of partnership interests and ECI

The IRS finalized proposed regulations on withholding from transfers of partnership interests to foreign persons and the definition of effectively connected income for those purposes.

Divorce settlement payments do not increase LLC basis

Payments to ex-wife and divorce lawyer do not increase taxpayer’s basis in an LLC.

Economic issues when forming an LLC

A number of issues must be considered when reviewing the organizational documents for a limited liability company, including member compensation, allocation of income and loss, and when distributions will be made.

Upcoming deadline to amend certain BBA partnership returns

While the ability to temporarily file amended returns is welcome by many BBA partnerships, some unanswered questions remain about the consequences of doing so, and in some circumstances filing an AAR could be preferable.

Proposed rules govern carried interests

The IRS issued proposed regulations under Sec. 1061, enacted by the law known as the Tax Cuts and Jobs Act, which requires owners of certain partnership interests to hold them for three years to be eligible for capital gain treatment.

The CARES Act and opportunities to implement changes on previously filed returns

The following discussion mostly focuses on the ability of partnerships to file amended returns and the QIP technical correction under the guidance issued in Rev. Procs. 2020-23 and 2020-25, respectively.

Partnership allocations lacking substantial economic effect

If a partnership’s allocations are not respected, the IRS or the courts can reallocate items of income or loss and assess underpayment or accuracy-related penalties.

Partnership form being redesigned for 2021

The IRS proposes modifying the partnership form (Form 1065) to help standardize the format of international tax items.

Sec. 743(b) adjustments: Shortcuts and surprises

This discussion considers reasons the purchaser of a partnership may want to rethink the use of such shortcuts when estimating the federal income tax consequences associated with a Sec. 743(b) adjustment in an acquired partnership interest.

Tax savings opportunities from the CARES Act

This article summarizes business and individual tax provisions of the CARES Act, emergency legislation designed to speed relief to employers and individuals who are struggling due to the COVID- 19 pandemic.

Partnerships, a pandemic, and Rev. Proc. 2020-23

Partnerships must weigh the benefits of amending returns now that administrative hurdles have been removed.

LLC mergers

When advising on a merger of LLCs, tax advisers must consider the application of state merger law, the continuity of the merged entities, and whether the merger constitutes an assets-over or assets-up transaction.

Administrative adjustment requests under the BBA

This item briefly summarizes the BBA rules, discusses the requirements for filing an AAR under Sec. 6227, and addresses the effects of filing an AAR on certain types of partners.
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