10 Questions: New Concerns in Partnership Taxation
In the January 23, 2019 installment of the CohnReznick National Tax Webinar Series, members of our National Tax Practice reviewed fundamental tax law changes affecting partnerships started in 2018, including limitations on the deductibility of business interest expense under section 163(j), new procedures governing partnership audits and amended returns, the 20-percent deduction for qualified business income under section 199A, and qualified opportunity zone funds.
A. Proposed regulations provide that gain is eligible for deferral under Section 1400Z-2(a), if the gain:
- Is treated as a capital gain for federal income tax purposes;
- Would be recognized for federal income tax purposes before Jan. 1, 2027, if Section 1400Z-2(a)(1) did not apply to defer recognition of the gain; and
- Does not arise from a sale or exchange with a person that is related to the taxpayer.
Therefore, a Section 1231 gain can generally be deferred if it would be treated as capital gain by the taxpayer and would be recognized before 2027 if not deferred under these rules.
A. For purposes of Section 199A, “services performed in the field of consulting” means the provision of professional advice and counsel to clients to assist the client in achieving goals and solving problems. Consulting includes providing advice and counsel regarding advocacy with the intention of influencing decisions made by a government or governmental agency and all attempts to influence legislators and other government officials on behalf of a client by lobbyists and other similar professionals performing services in their capacity as such.
The performance of services in the field of consulting does not include the performance of services other than advice and counsel, such as sales (or economically similar services) or the provision of training and educational courses. For purposes of the preceding sentence, the determination of whether a person’s services are sales or economically similar services will be based on all the facts and circumstances of that person’s business. Such facts and circumstances include, for example, the way the taxpayer is compensated for the services provided. Performance of services in the field of consulting does not include the performance of consulting services embedded in, or ancillary to, the sale of goods or performance of services on behalf of a trade or business that is otherwise not an SSTB (such as typical services provided by a building contractor) if there is no separate payment for the consulting services. Services within the fields of architecture and engineering are not treated as consulting services.
Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.