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TAX CUTS AND JOBS ACT

I’m in the process of reviewing the Tax Cuts and Jobs Act (the “Act”).  The best source I’ve found thus far for understanding the act as a whole and for obtaining basic explanations of its individual provisions is the KPMG study under this link:  https://home.kpmg.com/content/dam/kpmg/us/pdf/2017/12/tnf-conference-agreement-dec18-2017.pdf   However, if any readers of this post know of any better resources for the above purpose, please let me know by e-mail.

However, my main focus in studying the Act is on identifying and understanding the provisions of the Act that affect the federal taxation of single- and multi-member LLCs and their members.  The best source I have found so far for that purpose is Lou Vlahos’s posts in his website entitled  Tax Law for the Closely Held Business.  The link for that website is  https://www.taxlawforchb.com/

Again, however, if anyone knows of a better source concerning the impact of the Act on LLCs and their members, please send me an email about it.

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THE 2017 TAX ACT: OTHER “PASS-THROUGH” TAX PROVISIONS

Below is a link to the latest in the series of excellent summaries of the pass-through provisions of the Trump tax reform act by Lou Vlahos of the FarrellFritz law firm:

https://www.taxlawforchb.com/2018/01/the-2017-tax-act-other-pass-through-tax-provisions-part-ii/

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THE NEW DEDUCTION FOR QUALIFIED BUSINESS INCOME

Under the link below is an excellent explanation of the above new deduction.

Here’s the link:

https://www.taxlawforchb.com/2017/12/the-new-deduction-for-qualified-business-income-tax-simplification-gone-awry/#

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THE TRUMP TAX REFORM ACT AND PASS-THROUGH ENTITIES

Under the link below is a brief but excellent post about the impact of the Trump Act on pass-through entities and their owners.

Here’s the link:  http://blog.williamsparker.com/businessandtax/2017/12/18/reform-business-tax-reform/

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NEW PROPOSED REGULATIONS UNDER BBA PARTNERSHIP AUDIT RULES

On December 15, 2017, the U.S. Treasury Department issued proposed regs that permit partnerships to “push out” IRS audit adjustments to partners who are themselves partnerships in “tiered” partnerships.  Tiered partnerships are partnerships in which one or more partners in one or more levels of partners are themselves partnerships—i.e., partnerships whose partners are partnerships.  This is, of course, very good news for tiered partnerships.  We can only hope that the Treasury will also issue rules that permit partnerships to be BBA “electing partnerships” even though one or more of their members are revocable trusts or single-member LLCs whose members are individuals.

The new proposed regs are REG-120232-17 and REG-120233-17.

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DEBT VS. EQUITY IN CLOSELY HELD ENTITIES

Under the link below is a superb post from FarrellFritz on the issue of when an investor’s transfer of cash to a closely held entity is debt and when it is equity for federal tax purposes.  In my LLC practice, this issue arises often.  Perhaps also in yours.  In any event, you should know the rules and advise your clients about them—they have to characterize these transfers clearly in proper documents and comply with the terms of the documents.

Here’s the link:  http://www.taxlawforchb.com/2017/09/debt-vs-equity-form-substance-matter/

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BBA PARTNERSHIP AUDIT DEVELOPMENTS

On November 15, Treasury officials made the following important public statements relevant to the BBA partnership audit rules:

  • They said that the development and publication of Treasury regs about the partnership audit rules are the Treasury’s top regulatory priority.
  • They strongly implied that the pending BBA proposed regs will be issued as final regs on a date significantly in advance of the January 1, 2018 BBA effective date for 2018 partnership years.
  • Key BBA issues that the Treasury intends to address soon are the conditions that partnerships must meet in order to elect out of the BBA rules.
  • Treasury also implied that in the relatively near future, it will issue new proposed regs about the BBA rules.
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LLC LIQUIDATIONS

From time to time, LLC lawyers are asked by their clients to handle LLC liquidations.  If the LLCs in question are multi-member LLCs taxable as partnerships, there can be major federal income tax traps in these liquidations.  One such trap is described succinctly but with great clarity in the post by Lou Vlahos of the FarrellFritz law firm under the following link:

http://www.taxlawforchb.com/2017/09/liquidating-a-partnership-interest-beware-the-effects-of-partnership-indebtedness/

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REMINDER! SEMINAR FOR NH ACCOUNTANTS ON LLC AUDITS

On January 1, 2018, radical and draconian new IRS partnership audit rules will become effective for multi-member LLCs and other entities taxable as partnerships. Any failure to advise clients about the new rules could have disastrous consequences.

From 10 AM to noon on Thursday, November 9, 2017, John Cunningham, attorney of counsel to McLane Middleton, P.A., will teach a free two-hour CPE-credit seminar about these rules at the Manchester Chamber of Commerce, 54 Hanover Street, Manchester, N.H. John chaired the committee that drafted the New Hampshire LLC Act.

To enroll in John’s seminar, e-mail Amanda Nelson at anelson_law@yahoo.com. For more information, call John at (603) 856-7172. If you can’t attend the seminar but would like a copy of the seminar outline, request the outline from John at lawjmc@comcast.net.

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SEMINAR FOR NH ACCOUNTANTS ON LLC AUDITS

On January 1, 2018, radical and draconian new IRS partnership audit rules will become effective for multi-member LLCs and other entities taxable as partnerships. Any failure to advise clients about the new rules could have disastrous consequences.

From 10 AM to noon on Thursday, November 9, 2017, John Cunningham, attorney of counsel to McLane Middleton, P.A., will teach a free two-hour CPE-credit seminar about these rules at the Manchester Chamber of Commerce, 54 Hanover Street, Manchester, N.H. John chaired the committee that drafted the New Hampshire LLC Act.

To enroll in John’s seminar, e-mail Amanda Nelson at anelson_law@yahoo.com. For more information, call John at (603) 856-7172. If you can’t attend the seminar but would like a copy of the seminar outline, request the outline from John at lawjmc@comcast.net.

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