New 199A Regulations Published
Regulations Published – On August 16, 2018, the Internal Revenue Service (the “IRS”) and the Department of Treasury (“Treasury”) published in the Federal Register proposed regulations under section 199A (the “Proposed Regulations”). The Proposed Regulations provide guidance useful in determining whether and to what extent an individual (including a trust or estate) is entitled to a deduction under (the “Section199A Deduction”) with regard to trade or business income earned through a sole proprietorship, partnership, or S corporation.
Although the Proposed Regulations generally are proposed to be effective when finalized, it is clear that taxpayers may rely on the Proposed Regulations until final regulations are issued. However, certain rules that the IRS and Treasury feel address abuses of section 199A are proposed to be effective retroactive to the date of section 199A’s enactment. For both of these reasons, a basic overview of section 199A and the provisions of the Proposed Regulations are warranted.
In this article, we provide the necessary overview of the statute and the Proposed Regulations and certain implications for taxpayers. We then turn our attention to provisions in the Proposed Regulations that resolve issues raised by the language of section 199A itself. In doing so, we focus on provisions that likely will be welcomed by taxpayers because they favorably resolve certain uncertainties raised by the statutory language. However, we also focus on areas — including the anti-abuse rules mentioned above—that take a less taxpayer-favorable approach
REG-134652-18 contains proposed regulations concerning the deduction for qualified business income under section 199A of the Internal Revenue Code (Code). The proposed regulations will affect certain individuals, partnerships, S corporations, trusts, and estates. The proposed regulations provide guidance on the treatment of previously suspended losses that constitute qualified business income. The proposed regulations also provide guidance on the determination of the section 199A deduction for taxpayers that hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts.
An additional new announcement – contains a proposed revenue procedure that provides for a safe harbor under which a rental real estate enterprise will be treated as a trade or business solely for purposes of section 199A of the Internal Revenue Code (Code) and §§ 1.199A-1 through 1.199A-6 of the Income Tax Regulations (Regulations) (26 CFR Part 1), which are being published contemporaneously with this notice. To qualify for treatment as a trade or business under this safe harbor, the rental real estate enterprise must satisfy the requirements of the proposed revenue procedure. If an enterprise fails to satisfy these requirements, the rental real estate enterprise may still be treated as a trade or business for purposes of section 199A if the enterprise otherwise meets the definition of trade or business in § 1.199A-1(b)(14).
Another provides methods for calculating W-2 wages, as defined in section 199A(b)(4) and § 1.199A-2 of the Income Tax Regulations, (1) for purposes of section 199A(b)(2) of the Internal Revenue Code (Code) which, for certain taxpayers, provides a limitation based on W-2 wages to the amount of the deduction for qualified business income (QBI); and (2) for purposes of section 199A(b)(7), which, for certain specified agricultural and horticultural cooperative patrons, provides a reduction to the section 199A deduction based on W-2 wages
You can visit our IRC Sec. 199A Document Repository at https://shwca.se/IRCSec199A_Qualified_Business_Income_Deduction
New 199A Regulations Published