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Tax Alerts
January 26, 2021
Tax Briefing(s)

Running a business is easy as long as it's not yours.-John Jennings


Final regulations clarify the definition of "real property" that qualifies for a like-kind exchange, including incidental personal property. Under the Tax Cuts and Jobs Act (TCJA, P.L. 115-97), like-kind exchanges occurring after 2017 are limited to real property used in a trade or business or for investment.


The IRS has released rulings concerning deductions for eligible Paycheck Protection Program (PPP) loan expenses.


The IRS has issued final regulations under Code Sec. 274 relating to the elimination of the employer deduction of for transportation and commuting fringe benefits by the Tax Cuts and Jobs Act ( P.L. 115-97), effective for amounts paid or incurred after December 31, 2017. The final regulations address the disallowance of a deduction for the expense of any qualified transportation fringe (QTF) provided to an employee of the taxpayer. Guidance and methodologies are provided to determine the amount of QTF parking expenses that is nondeductible. The final regulations also address the disallowance of the deduction for expenses of transportation and commuting between an employee’s residence and place of employment.


As part of a series of reminders, the IRS has urged taxpayers get ready for the upcoming tax filing season. A special page ( https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes), updated and available on the IRS website, outlines steps taxpayers can take now to make tax filing easier in 2021.


This year marks the 5th Annual National Tax Security Awareness Week-a collaboration by the IRS, state tax agencies and the tax industry. The IRS and the Security Summit partners have issued warnings to all taxpayers and tax professionals to beware of scams and identity theft schemes by criminals taking advantage of the combination of holiday shopping, the approaching tax season and coronavirus concerns. The 5th Annual National Tax Security Awareness Week coincided with Cyber Monday, the traditional start of the online holiday shopping season.


The IRS has issued proposed regulations for the centralized partnership audit regime...


The IRS has issued final regulations with guidance on how a tax-exempt organization can determine whether it has more than one unrelated trade or business, how it should identify its separate trades and businesses, and how to separately calculate unrelated business taxable income (UBTI) for each trade or business – often referred to as "silo" rules. Since 2018, under provisions of the Tax Cuts and Jobs Act (TCJA), the loss from one unrelated trade or business may not offset the income from another, separate trade or business. Congress did not provide detailed methods of determining when unrelated businesses are "separate" for purposes of calculating UBTI.


The IRS has modified Rev. Proc. 2007-32, I.R.B. 2007-22, 1322, to provide that the term of a Gaming Industry Tip Compliance Agreement (GITCA) is generally five years, and the renewal term of a GITCA is extended from three years to a term of up to five years. A GITCA executed under Rev. Proc. 2003-35, 2003-1 CB 919 and Rev. Proc. 2007-32 will remain in effect until the expiration date set forth in that agreement, unless modified by the renewal of a GITCA under section 4.04 of Rev. Proc. 2007-32 (as modified by section 3 of this revenue procedure).


Final regulations issued by the Treasury and IRS coordinate the extraordinary disposition rule that applies with respect to the Code Sec. 245A dividends received deduction and the disqualified basis rule under the Code Sec. 951A global intangible low-taxed income (GILTI) regime. Information reporting rules are also finalized.


The IRS has released the 2020-2021 special per diem rates. Taxpayers use the per diem rates to substantiate the amount of ordinary and necessary business expenses incurred while traveling away from home. These special per diem rates include the special transportation industry meal and incidental expenses (M&IEs) rates, the rate for the incidental expenses only deduction, and the rates and list of high-cost localities for purposes of the high-low substantiation method. Taxpayers using the rates and list of high-cost localities provided in the guidance must comply with Rev. Proc. 2019-48, I.R.B. 2019-51, 1390.


The IRS has reminded taxpayers that the Coronavirus Aid, Relief, and Economic Security (CARES) Act ( P.L. 116-136) can provide favorable tax treatment for withdrawals from retirement plans and Individual Retirement Accounts (IRAs). Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRAs or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRAs, this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.


The much-anticipated regulations (REG-136118-15) implementing the new centralized partnership audit regime under the Bipartisan Budget Act of 2015 (BBA) have finally been released. The BBA regime replaces the current TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) procedures beginning for 2018 tax year audits, with an earlier "opt-in" for electing partnerships. Originally issued on January 19, 2017 but delayed by a January 20, 2017 White House regulatory freeze, these re-proposed regulations carry with them much of the same criticism leveled against them back in January, as well as several modifications. Most importantly, their reach will impact virtually all partnerships.


Taxpayers that plan to operate a business have a variety of choices. A single individual can operate as a C corporation, an S corporation, a limited liability company (LLC), or a sole proprietorship. Two or more individuals can form a partnership, a corporation (C or S), or an LLC.


Los Angeles, CA 91324