Category: Taxation

ADDITIONAL GUIDANCE UNDER THE TCJA EXPECTED BY YEAR’S END

The post under the link below summarizes a statement by the IRS commissioner about IRS plans for extensive additional guidance about the Tax Cuts and Jobs Act of 2017 before the end of this year.  Importantly, the commissioner makes no reference to guidance under section 199A, a provision of tremendous important to every LLC owner and lawyer.  Maybe this means that, at least for a while, no more section 199A guidance will be forthcoming.

Here is the link:   https://www.twrblog.com/2019/11/significant-tcja-guidance-due-before-end-of-year-kautter-says/#page=1

As many of you know, my fields of expertise are (i) complex LLC law and tax; and (ii) section 199A, including, especially, section 199A restructuring.  If you have questions in either of these fields, please feel free to give me a call.

WHEN DOES A BUSINESS BECOME AN ACTIVE TRADE OR BUSINESS FOR START-UP DEDUCTION PURPOSES?

The excellent post under the link below addresses an issue that can be important for many start-up LLCs—namely, the issue of when a business ceases to be a business in formation and becomes an active trade or business for start-up deduction purposes.  The issue was addressed and resolved in a recent Tax Court decision discussed in the post.

Here’s the link:

http://taxblog.dickinson-wright.com/2019/09/recent-case-sheds-light-on-when-a-trade-or-business-begins/

INADVERTENT TERMINATION OF S CORP STATUS

A significant number of single-member and multi-member LLCs are S corporations, and many LLCs ought to be S corporations in order to maximize their IRC section 199A pass-through deductions.  The post under the link below provides a brief but useful discussion of what an entity that ought to be an S corporation can do if it inadvertently allows its S election to terminate.

Here’s the link:  http://taxblog.dickinson-wright.com/2019/07/remedying-the-inadvertent-termination-of-an-s-corporation-election/#page=1

ACCUMULATED EARNINGS TAX

A basic question for section 199A experts is when a business should elect to be a C corporation rather than a pass-through business.  Below in quotes are the title, a listing about the author, and the first couple of paragraphs of an article in Tax Notes about C corporations and the Accumulated Earning Tax.

Now I Am a C Corp: What About the Accumulated Earnings Tax?

Cory J. Stigile

In this article, Stigile provides background on the accumulated earnings tax and explains the steps corporate taxpayers may be able to take if the government begins to more actively audit and litigate the accumulation of profits.

The Tax Cuts and Jobs Act reduced the corporate tax rate from 35 percent to 21 percent, providing an additional significant incentive to conduct business through a corporation. Shareholders may be tempted to keep additional earnings in the corporation, rather than declare a dividend or pay compensation subject to an additional layer of tax at the individual level. The accumulated earnings tax (AET) and other code provisions discussed below may now play a bigger role in curbing excessive accumulation of profits and some types of passive income in corporations without the payment of dividends. There are several steps taxpayers may take to prepare should the government begin more actively auditing and litigating these issues.

LOSSES AND SECTION 199A

Below is a citation for an excellent article about the treatment of losses under section 199A, in the latest issue of the ABA’s Tax Lawyer:

72 Tax Law. 401
Tax Lawyer
Winter, 2019
Report
American Bar Association Section of Taxation
Copyright © 2019 by American Bar Association; American Bar Association Section of Taxation
COMMENTS CONCERNING THE TREATMENT OF LOSSES AND CERTAIN OTHER ISSUES REGARDING THE SECTION 199A DEDUCTION

NEW IRS SECTION 199A PASS-THROUGH DEDUCTION COMPUTATION FORMS

You can access and print out the above forms, as released on April 16, under this link:

https://www.currentfederaltaxdevelopments.com/blog/2019/4/16/irs-releases-drafts-of-forms-to-be-used-to-calculate-199a-deduction-on-2019-income-tax-returns

To access the long form directly from the IRS, click here:

https://www.irs.gov/pub/irs-dft/f8995a–dft.pdf

To obtain the short form, use this link:

https://www.irs.gov/pub/irs-dft/f8995–dft.pdf

JOINT COMMITTEE ON TAXATION-SLIDESHOW OVERVIEW OF SECTION 199A DEDUCTION

Under the link below is an web page from which you can download the overview of the section 199A pass-through deduction provided by the U.S. Congress Joint Committee on Taxation.  Every legal and tax professional who represents owners of closely-held businesses should be familiar with these slides, and many of these professionals may want to provide copies of the slides to their business owner clients.

Here is the link:  https://www.jct.gov/publications.html?func=startdown&id=5171