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PUBLICLY TRADED PARTNERSHIPS

Even if you’re unlikely to ever have any involvement with an LLC whose interests are publicly traded, you should have at least a basic understanding about them and the tax rules that govern publicly traded LLCs taxable as partnerships.  Here is a good, brief article about pending U.S. Treasury regulations governing publicly traded partnerships:

http://www.lexology.com/library/detail.aspx?g=0af9fa15-9a54-40ea-ad4d-ae780edfe247&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2015-06-25&utm_term=

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NEW ARTICLE ON CAPITAL ACCOUNTS

The capital account provisions in the operating agreements of LLCs taxable as partnerships are critical both in defining the economic deal among the members and in defending this deal if challenged by the IRS upon audit.  Donald J. Weidner, Dean and Alumni Centennial Professor, Florida State University College of Law, has just published an article in Florida State U. Business. Rev. 1 (Spring 2014), entitled CAPITAL ACCOUNTS IN LLCs AND IN PARTNERSHIPS: POWERFUL DEFAULT RULES AND POTENTIAL TAX SIGNIFICANCE.  It’s an excellent article; I recommend it for anyone who wants to expand their understanding of capital accounts.  Part VI of the article, entitled “Conclusion,” provides a succinct summary of the article’s content.  Here is that conclusion:

VI.  Conclusion

In the financial crisis that started to unfold in 2007, it became widely known that investment bankers, and their lawyers and accountants, had drafted documents for financial instruments so complex as to be beyond comprehension. However impenetrable, language and structures migrated and became widely accepted once they passed muster. Former Federal Reserve Chairman Allan Greenspan quipped that, even with more than 100 economists at his disposal, he could not *29 untangle the agreements or structures behind billions of dollars of collateralized debt obligations. Unfortunately, something similar, although perhaps not quite as extreme, has happened within the more modest arena of LLCs and partnerships. Despite the fact that these are two premier vehicles for small businesses with two or more owners, they are often governed by agreements that are very difficult to understand. Operating and partnership agreements are often drafted by generalists who incorporate standard form language that attempts to validate special allocations of tax benefits that might be made, even if implausible. Although the relevant federal income tax regulations focus heavily on capital accounts, those capital accounts are often misunderstood and can have significant and unintended economic consequences.

My thesis is twofold. First, even apart from federal income tax law, attorneys must have at least a rudimentary understanding of what capital accounts are and are not, as well as any state default rules regulating them. The accounting profession typically is generating individual capital accounts for each owner, even if those accounts are not required either by the owners’ agreement or by law. In the world of small business, often characterized by incomplete or vague agreements and by poor record-keeping, those accounts provide at least some standardized measure of an owner’s net equity in the firm. Second, capital account analysis is a useful analytical device. Walking the standard range of anticipated transactions through a capital accounts analysis can raise with great clarity and precision basic economic decisions that might otherwise be overlooked, particularly decisions regarding the sharing of different kinds of losses among the owners.

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CHECK THE BOX REGULATIONS

As most of you will know, the U.S. Treasury Department Check-the-Box Regulations are the core document in the field of the federal income taxation of LLCs and their members.  I recently taught a three-CLE-credit seminar on these regs for New Hampshire accountants, and I distributed to them an extensive seminar outline.  The outline is too data-rich to send in this e-mail, but if you’d like to look at it, you can do so by clicking on the hyperlink “here” at the end of the fourth paragraph of Section I of a LLC seminars website I maintain.  Here’s the link to the website:  http://www.cunninghamllcseminars.com/.

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REMINDER! FREE THREE-CLE HOUR SEMINAR FOR NEW HAMPSHIRE ACCOUNTANTS ON PROTECTING LLC MEMBERS FROM THE SELF-EMPLOYMENT TAX AND FROM THE I&D TAX

On Tuesday, July 7, 2015, from 9 AM to noon at the Manchester Chamber of Commerce, John Cunningham will present a free, three-CLE-credit seminar for New Hampshire accountants on how to protect LLC members from the Self-Employment Tax and from the I&D Tax. Seating is limited. For further information and to enroll, please email Amanda Nelson at anelson_law@yahoo.com.

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VALUATION DATES OF BUY-OUTS

Peter Mahler’s blog post under the link below deals with valuation dates in court-ordered buy-outs, but many of the principles in the post apply to buy-out provisions in LLC operating agreements.

Here’s the link:  http://www.nybusinessdivorce.com/2015/06/articles/llcs/court-ordered-llc-buy-outs-whats-the-valuation-date/

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TRUST DECANTING

Here is a very interesting article about the federal income taxation of trust decanting.

http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=2604267

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REMINDER! FREE THREE-CLE HOUR SEMINAR FOR NEW HAMPSHIRE ACCOUNTANTS ON PROTECTING LLC MEMBERS FROM THE SELF-EMPLOYMENT TAX AND FROM THE I&D TAX

On Tuesday, July 7, 2015, from 9 AM to noon at the Manchester Chamber of Commerce, John Cunningham will present a free, three-CLE-credit seminar for New Hampshire accountants on how to protect LLC members from the Self-Employment Tax and from the I&D Tax. Seating is limited. For further information and to enroll, please email Amanda Nelson at anelson_law@yahoo.com.

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SAME SEX MARRIAGES

Under the link below is a brief but useful New York Times article about the tax and estate planning implications if the US Supreme Court blesses same-sex marriages.

http://taxprof.typepad.com/taxprof_blog/2015/06/ny-times-tax-and-estate-planning-implications-of-a-supreme-court-decision-legalizing-same-sex-marria.html

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IMPORTANT NEW HAMPSHIRE STATE TAX DEVELOPMENT

This message is for LLC lawyers and accountants and other readers who, at least from time to time, deal with New Hampshire tax issues.  The following notice, from today’s issue of State Tax Notes, a publication of Tax Analysts, may be of interest to you:

New Hampshire Clarifies Definition, Exemptions From Real Estate Transfer Tax

New Hampshire HB 180, signed into law as Chapter 133, clarifies that the definition of “price consideration” under the real estate transfer tax exclusively applies to contractual transfers and exempts transfers by devise or other testamentary disposition from the real estate transfer tax.

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HISTORY OF THE ESTATE TAX

I subscribe to Tax Notes.  It’s the best daily federal and state tax news service I know of.  I’m not an estate planner, but Tax Notes recently published the excellent article under the link below on the subject of FDR and the estate tax.  I found the article fascinating.  Perhaps it will also interest you.

Here’s the link:

http://www.taxnotes.com/tax-notes-today/tax-history/tax-history-roosevelts-and-their-war-swollen-fortunes/2015/06/15/14668501

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