0
0
Be prepared for the issues affecting S corporations, partnerships and limited liability companies. Learn about the latest law changes, rulings and pronouncements affecting these pass-through entities. Flow-through taxation is one of the most challenging areas of practice and this course will help navigate this complexity. Provide more value to clients incorporating the latest changes into your client engagements.
Objectives:Prerequisite: Familiarity with federal tax issues for flow-through entities
Accepted for PFS and EA credits.
TOC from previous edition. Please check back for updates.
745560
Excerpt from previous edition. Please check back for updates.
Chapter 0 - Introduction
This update will review sections of multiple laws passed since last year's update. They are labeled in the update as follows:
In addition to these laws this course will discuss guidance from both the executive and judicial branches. Given the volume of statutory, administrative and judicial guidance that is issued every year, it is impossible to cover all items. The goal of this course is to provide insight into the areas deemed most likely to affect CPAs who deal with partnerships, LLCs, and S corporations. The table of contents lists the topical coverage of this course.
In addition to formally published guidance, this update includes some cases that are listed as unpublished opinions by the various courts. These cases are not included in the update to be used as precedent. Legal advice should be sought before such use is made. They are included, however, to provide the participant in this course with knowledge of how the courts are interpreting matters of interest. Likewise, private rulings issued by the Service, while only binding with regard to that particular taxpayer, are useful to practitioners in identifying the Service's opinion of various issues for which higher levels of administrative guidance have not been issued.
Throughout the text, references made to the Service should be taken by the reader to mean the Internal Revenue Service (IRS) unless otherwise noted. Similarly, in some cases in which the statutory guidance refers to either the Secretary or Commissioner, the author may have substituted the term Service. This is done for simplicity since the Service is the designee of the Secretary in the case of tax matters. Use of the word Section (at the beginning of sentences or paragraphs) or the § symbol (within sentences) throughout the course should be taken to mean the relevant section of the Internal Revenue Code unless otherwise noted.
It is important to note that as of the time this manual went to print, many expiring provisions have not yet been extended to cover 2008. It will be important that practitioners watch for changes in this area prior to filing 2008 returns. Some of the major provisions not yet extended for 2008 include:
Chapter 1 - General Partnership Update
Partnership Changes in the Mortgage Forgiveness Act of 2007
Failure to File Partnership Return
Section 6698 imposes a penalty that is in addition to the penalty imposed by §7203 (willful failure to file return, supply information, or pay tax), if any partnership required to file a return under §6031, fails to timely file the partnership return, or files one that does not show the information required by §6031. Prior to the change below, the penalty was $50 per month for up to five months if the failure to file was not due to reasonable cause.
The Mortgage Forgiveness Debt Relief Act of 2007 has increased the penalty amount to $85 per month for up to 12 months.
This change applies to returns required to be filed after December 20, 2007.
Disclosure of Partnership Return to Partner
Section 6103(e) allows for partners in a partnership to make a written request for inspection or disclosure of the partnership return.
The Mortgage Forgiveness Debt Relief Act of 2007 added §6103(e)(10), which provides that for this inspection or disclosure requirement regarding the return of a partnership (or S corporation, trust, or an estate), the information inspected or disclosed shall not include any supporting schedule, attachment, or list which includes the taxpayer identity information of a person other than the entity making the return or the person conducting the inspection or to whom the disclosure is made.
In other words, in order to protect the partners' confidential information, if a copy of the Form 1065 for partnership AB is being sent to partner A, the identity information of partner B must be redacted.
This change is effective as of December 20, 2007.
Section 6698 Penalty Increase by $1 for Years Beginning in 2008
The Prevent Taxation of Payments to Virginia Tech Victims and Families Act was signed on December 19, 2007. It includes a revenue offset that affects partnership returns. It increases the penalty of §6698 for failing to file a partnership return as required by §6031 by one dollar for tax years that begin in 2008. This means that the penalty for failing to file is increased from the $85 amount discussed previously to $86 for tax years that Begin in 2008.
Start-up Expenditures New Regulations
TD 9411 provides temporary regulations covering start-up expenditures (§195), organizational expenditures of corporations (§248), and organizational expenses of partnerships (§709), to reflect changes caused by amendments to the Code from the American Jobs Creation Act of 2004 affecting these expenditures if paid or incurred after October 22, 2004. They are effective on July 8, 2008.
Start-up Costs
Section 195(b) allows a deduction in the tax year an active business is begun of the smaller of
If this second bullet governs, the remaining start-up expenditures not immediately deductible are taken ratably over the 180-month period, beginning with the month the business begins.
Section 248 provides a parallel rule with the same dollar amounts for corporate organizational expenditures and §709 does the same for partnership organizational expenditures.
The preamble explains that taxpayers are no longer required to file a separate election statement to deduct these costs. The Service is making this change to facilitate various electronic return filing initiatives. It also noted that most taxpayers with these costs choose to elect to deduct them.
Per Regulation §1.195-1T, a taxpayer can forgo the new deemed election by clearly electing to capitalize its start-up expenditures (per the form instructions) on a timely-filed (including extensions) return for the tax year the business begins. The preamble also notes that an election either to deduct start-up expenditures under §195(b) or to capitalize start-up expenditures is irrevocable. It also applies to all start-up expenditures of the taxpayer that are related to that business. Again, a parallel rule applies in the case of organizational expenditures under §§248 and 709.
The preamble reminds taxpayers that, generally, a change in the characterization of an item as a start-up expenditure, or an organizational expenditure, or a change in the determination of the tax year in which the business begins, is treated as a method change involving a §481 adjustment.
745560
Customer Service
Customer Service
Customer Service
Back to Browsing Products
