Resources (News)

We Stay Up-To-Date on Flow-Through Tax News and Precedents So You Don't Have To.

Below you will find recent rulings and updates affecting flow-through taxes and closely-held business structures. If you have any questons on these, or about any updates on other sites, please do not hesitate to reach out to us for further insights.

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New §83(b) Election Form

11/18/2024
News

First, we at TAX FORUMS wish you a happy and healthy Thanksgiving and holiday season.

“Surk’s” up basis

11/13/2024
News

On October 29, 2024, the Tax Court issued its opinion in the case of Surk LLC v. Commissioner, T.C. Memo 2024-99, a case involving the impact on basis of a partnership interest when an LLC member improperly deducted losses for which the taxpayer had no basis. The taxpayer improperly deducted pass-through losses from an LLC in 2014 and 2015, violating the basis limitation rules of §704(d), which limits a partner’s ability to deduct losses only to the extent the partner has basis in the partnership interest at the end of the tax year in which the loss occurred. The IRS did not challenge these “excess losses,” deducted in tax years that were closed by the statute of limitations, nor did the IRS dispute the amount of the excess losses at trial. Rather, the IRS asserted that the taxpayer must decrease the basis in its LLC interest for 2017, the year under examination and before the Tax Court, to “account for the excess loss.”

New Developments in the §1402(a)(13) Limited Partner SE Tax Exclusion Arena

08/19/2024
News

Last Monday, the taxpayer filed its briefs to the Fifth Circuit in Sirius Solutions v. Commissioner, No. 24-60240, which, as discussed in a prior email blast, essentially is an appeal of the Tax Court’s holding in Soroban Capital Partners LP v. Commissioner, 161 TC No. 12 (Nov. 28, 2023). These two cases, together with Denham Capital Management LP v. Commissioner, No. 9973-23, and Point72 Asset Management LP v. Commissioner, No. 12752-23, all deal with the applicability of the §1402(a)(13) limited partner exclusion from SE tax in the situation where the limited partner is providing services on a full-time basis either directly or indirectly to an operating partnership.

Disproportionate Distributions Won’t Automatically Terminate S Status

08/15/2024
News

On August 7, 2024, the Tax Court held that the S status of a corporation is not automatically terminated because of disproportionate distributions made to its shareholders. In Maggard v. Commissioner, TC Memo 2024-77, two of the three shareholders were embezzling funds by making unauthorized disproportionate distributions to themselves.

The Decision Is In: §751(a) is a Recharacterization Statute

08/06/2024
News

On July 24, 2024, the D.C. Circuit Court of Appeals sided with the taxpayer and reversed the Tax Court decision in Rawat v. Commissioner, No. 23-1142. The relevant question presented in the case for purposes of this email is whether §751(a) deems the “inventory gain” to be from the sale of inventory or simply recharacterizes as ordinary income the portion of the overall gain on the sale of the partnership interest that relates to the inventory.

The Loper Bright Holding Could Impact the Tribune Media Case

07/19/2024
News

On June 28, 2024, the US Supreme Court overturned its 40-year-old precedent concerning deference (often referred to as “Chevron deference”) given to a federal agency’s interpretation of a statute in Loper Bright Enterprises, et. al., v. Gina Raimondo, No. 22-451 (S. Ct. 2024). Since the issuance of the Loper Bright opinion, tax professionals have been speculating as to the impact of the opinion. For example, see our email blast on July 2, 2024.

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None of the authors is rendering legal, accounting or other professional advice. If such advice is required, it is strongly recommended that a professional advisor be engaged.