In TAM 201317010, the IRS held that a non-grantor trust can satisfy the passive activity material participation standard only through the activities of its trustees, acting in their fiduciary capacities as trustees of the trust. The IRS rejected Texas district court holding in The Mattie K. Carter Trust, which held that the activities of all… Continue Reading
Category Archives: Deductions
Subscribe to Deductions RSS FeedIRS Removes De Minimis Exception For Testing Partnership Allocations
Posted in Deductions, Joint Venture, Partnership/LLC, Real EstateIn 2008, the IRS published regulations on how to apply the section 704(b) substantiality tests when one or more partners is a “look-through” entity. In general the 2008 regulations required looking through these partners to the ultimate owner to determine if there was an overall net tax savings from partnership special allocations. The 2008 final regulations had included a… Continue Reading
New Tax Provisions: Fiscal Cliff Averted – Sequestration Resumes in Two Months
Posted in Deductions, LegislativeOn January 1, 2013, Congress passed H.R. 8, the American Taxpayer Relief Act of 2012 to avert the immediate tax increase and spending cuts (i.e., the so-called “fiscal cliff”) that was otherwise scheduled to take effect January 1, 2013. The President signed the legislation January 2 and on January 8 the Joint Committee on Taxation… Continue Reading
IRS Updates Effective Date of Recent Repair Regulations
Posted in Deductions, GeneralThe IRS issued an effective date update to the temporary “repair regulations” for determining when to capitalize or expense tangible property costs. The new amendments change the applicability dates of the temporary regulations to taxable years beginning on or after January 1, 2014, while permitting taxpayers to choose to apply the temporary regulations for taxable… Continue Reading
IRS Revokes PLR Allocating Value of Power Purchase Agreement to Wind Facility
Posted in Deductions, Green, Tax CreditsIn new PLR 201249013 the IRS revoked PLR 201214007. The original ruling had allocated acquisition costs for a wind facility that economically related to an underlying Power Purchase Agreement (PPA) to the wind facility itself (resulting in faster tax depreciation). In the new ruling the IRS states that “the Service has determined that Private Letter Ruling… Continue Reading
Final Repair Regs Expected in 2013 with 2014 Effective Date
Posted in Compliance, Deductions, GeneralThe IRS has announced a 2013 publication date and January 1, 2014 effective date for the final regulations relating to when to capitalize or expense payments relating to tangible property (the so-called “Repair Regs”). The IRS Notice contains details as to when taxpayers will be permitted to apply either the final regulations or the temporary regulations… Continue Reading
IRS Allows Five Year Depreciation for Wind-Facility Power Purchase Agreement
Posted in Deductions, Energy, GreenNOTE THE IRS REVOKED THIS RULING IN PLR 201249013. In PLR 201214007, the IRS treated facility-specific power purchase agreements (PPAs) as part of their related energy production facilities, and that such PPAs are therefore eligible for favorable five-year depreciation. In the PLR, the taxpayer acquired both a wind facility and the related PPA and the… Continue Reading
IRS Issues Guidance on Capitalization vs. Repair Expense Including Automatic Accounting Method Changes
Posted in Compliance, DeductionsThe IRS released two revenue procedures that describe how taxpayers can obtain automatic consent to change their accounting methods to comply with the recent temporary tangible property capitalization vs. repair regulations. Revenue Procedure 2012-19 details repair and maintenance, materials and supplies, and related method changes resulting from the temporary regulations. Revenue Procedure 2012-20 addresses depreciation,… Continue Reading
Court Rules Taxpayer Not a “Trader” – Losses Suspended
Posted in Deductions, SecuritiesIn a Tax Court Memorandum decision, the court denied a taxpayer’s “trader” status, suspending over $2 million in loss deductions from stock trades and imposing penalties. The court found that the taxpayer did not meet the definition of a “trader” who is engaged in the trade or business of selling securities for their own account…. Continue Reading
Tax Court Finds Ordinary Bad Debt Loss on Loan Related to Venture Capital Business
Posted in Deductions, Funds, GeneralThe Tax Court held that a Venture Capitalist was entitled to an ordinary loss on a failed loan to a business associate, finding that the loan was related to the lender’s VC business. The Venture Capitalist made the loans to an individual who agreed to provide business leads. The court concluded that business nexus required… Continue Reading
IRS Guidance on 100% Bonus Depreciation
Posted in Deductions, General, Real EstateThe IRS issued detailed guidance on the application of recent statutory changes that (1) temporarily allowed a 100-percent additional first year depreciation deduction for certain new property and (2) extended the placed-in-service date for property to qualify for the 50-percent first-year bonus depreciation. The guidance clarifies when property must be acquired to qualify for 100%… Continue Reading
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