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Section 965 Statutes of Limitations for Partnerships

On May 26, 2020, the Internal Revenue Service (IRS) issued PMTA 2020-08 to provide guidance on the period of limitations for Internal Revenue Code (IRC) section 965, transition tax-related adjustments of partnerships. Typically, pursuant to IRC section 6501, the IRS has three years to assess a tax liability for a tax year. However, IRC section 6501(e)(1)(C) states that if the taxpayer omits from gross income an amount properly includible in income under IRC section 951(a), the tax may be assessed at any time within six years after the return was filed. Moreover, this special six-year limitation on assessment applies to the entire tax liability reportable on that return. Because special assessment and adjustment rules apply to partnerships, the IRS issued guidance on how the rules are applicable to certain partnerships and partners with section 965-related items. For a deferred foreign income corporation’s (DFIC) last taxable year beginning before January 1,...

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Weekly IRS Roundup October 22 – 26, 2018

Presented below is our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for the week of October 22 – 26, 2018: October 23, 2018: The IRS released an updated Form 1040 Schedule B for reporting interest and ordinary dividends and draft Form 1120 Schedule D instructions for reporting capital gains and losses. Both documents include changes made to reflect the Tax Cuts and Jobs Act. October 25, 2018: The IRS released IRS Tax Reform Tax Tip 2018-166, which advises business owners of the basics regarding potential deductions under Internal Revenue Code Section 199A for domestic businesses operated as sole proprietorships or through partnerships, S corporations, trusts and estates. October 25, 2018: The IRS released Internal Revenue Bulletin 2018-44, dated October 29, 2018, which includes REG-104872-18, Notice 2018-82 and Revenue Procedure 2018-51. October 26, 2018: The IRS released its weekly list of written determinations...

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M&A Tax Aspects of Republican Tax Reform Framework

The outline of pending tax reform provisions remain vague, but a significant impact on M&A activity is expected by way of corporate tax cuts, interest deductibility, changes to the expensing of capital investments, a reduction of the pass-through tax rate and changes to our international (territorial) tax system. Continue Reading

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Do Partnerships Now Need to Reserve for Taxes?

The Bipartisan Budget Act of 2015, P.L. 114-74, added new partnership audit rules, which are generally effective for tax years beginning in 2018. These new rules will allow the Internal Revenue Service (IRS) to assess and collect tax due on partnership adjustments at the entity level. Some partnerships will be able to elect out of these rules. For partnerships that cannot elect out, practitioners are pondering whether the new audit rules will cause partnerships, historically pass through entities for tax purposes, to now be required to make a tax provision/reserve on their financial statements. In a tiered partnership context, even if an upper-tier partnership has elected out of the regime, practitioners are wondering whether the upper-tier partnership may still need to make a tax provision/reserve if a lower-tier partnership elects to push out adjustments to its partners, resulting in an entity level tax for the upper-tier partnership. See our prior...

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