HWH Tax Alerts

On December 9, the IRS issued Notice 2019-66 in response to heavy criticism of certain partnership tax reporting requirements that it had proposed in the Fall of 2019. In particular, the IRS had sought to mandate partnerships’ reporting of partners’ “tax basis capital,” “net unrecognized Section 704(c) gain or loss,” and “Section 465 At Risk Activities,” which various practitioners argued were ambiguous terms of art and/or would require more time to determine than the IRS had allowed for. This article provides background regarding the changes to partnership tax reporting on Schedule K-1 that were previously proposed and discusses the IRS’s recent decision to hold off on implementing them until 2020, as well as other modifications to the Service’s original proposals.

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On September 13, 2019, the Treasury Department and the IRS released final regulations under Code Section 168(k), adopting (with some modifications) previously proposed regulations regarding revisions to the bonus depreciation regime made by The Tax Cuts and Jobs Act of 2017 (“TCJA”). The final regulations consider, among other things, certain implications of the new rules for the application of bonus depreciation in the partnership context. 

The discussion that follows summarizes aspects of the final regulations that address the extent to which partnership special basis adjustments (under Code Sections 734(b) and 743(b)) and remedial allocations (under Code Section 704(c)) will be eligible for bonus depreciation following enactment of the TCJA.  In addition, the material below discusses special rules that govern application of additional first-year depreciation in situations where property is acquired, placed in service, and contributed to a partnership, all in the same taxable year.

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The Tax Cuts Jobs Act of 2017 made numerous changes to the federal income tax law which have a significant impact on the taxation of partnerships and their partners. One area of particular importance which has yet to be fully clarified is the manner in which the business interest limitation of Code Section 163(j) is applied in the partnership context. The Treasury Department has issued proposed regulations under Code Section 163(j) which, while providing much needed guidance, also leave several key issues unresolved. The following article provides a detailed analysis of the business interest limitation of Code Section 163(j) and its application in the partnership context.

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On August 4th, the Treasury Department and IRS released temporary and proposed regulations addressing the manner in which partnerships may make an early election to apply the new partnership audit rules created by the Bypartisan Budget Act of 2015 ("BBA") to partnership tax years beginning after November 2, 2015 (the date the BBA was enacted) and before January 1, 2018. For partnerships not making the early election, the new audit regime will generally apply only to tax returns for partnership tax years beginning after December 31, 2017.

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