Current Developments in Partners and Partnerships

Current Developments in Partners and Partnerships

This article reviews and analyzes recent law changes as well as rulings and decisions involving partnerships. The discussion covers developments in the determination of partners and partnerships, gain on disposal of partnership interests, partnership audits, and basis adjustments. During the period of this update (Nov. 1, 2017, through Oct. 31, 2018), Congress enacted the law known as the Tax Cuts and Jobs Act (TCJA),1 which made several changes that affect partners and partnerships, and the Treasury Department and the IRS worked to provide guidance for taxpayers on numerous changes that had been made to Subchapter K over the past few years. This article is quite comprehensive. We’ve printed the Executive summary here and offer the link to the original article below.

EXECUTIVE SUMMARY

  • New partnership audit procedures effective for partnership years beginning in 2018 and after bring many changes. A number of regulations explaining these new procedures were issued in 2018.
  • The law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, added several provisions that affect partners and partnerships, including Sec. 199A, which allows a 20% deduction for qualified business income that applies at the partner level.
  • Recent court and IRS rulings provide insight into issues of partners’ basis in partnership interests and recognition of partnership losses, as well as basis adjustment elections.
  • After being reviewed under Executive Order 13789, a regulation under Sec. 707 on disguised sales was revoked and the prior regulations under that section were reinstated.
  • In the 2017 case Grecian Magnesite, the Tax Court rejected Rev. Rul. 91-32 and held that the entity, not the aggregate, the theory of partnership taxation should apply to the sale of a foreign partner’s partnership interest. The TCJA amended Sec. 864(c) to overturn the Tax Court’s holding.
  • The TCJA amended Sec. 743(d)(1) to expand the definition of “substantial built-in loss” for purposes of determining whether a basis adjustment is required under Sec. 743.

Read the complete Tax Advisor article here

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