For many tax practitioners, the 2019 tax season was a compliance nightmare. The new rules about the deduction for Qualified Business Income (QBI), the new limitations on the deductibility of mortgage interest and the lack of guidance caused much confusion and consternation. Although the IRS issued guidance in February, 2019, several issues related to the application of the QBI rules to partnerships and S corporations remain unclear as we enter into the 2020 tax return filing season.   


Much has been written and discussed about the Tax Cuts and Jobs Act signed by the President on December 22nd, 2017 which made significant changes to deductions for business interest paid or accrued post December 31st, 2017. From the time these changes were first enacted in 2017, to the publication of proposed regulations on December 28th, 2018, professionals had to delve into the myriad of cross references, legislative history and amendments to discern the ultimate meaning of these rules. Throughout most of this time you had the certainty of knowledge of the law as much as shaking a Magic 8 Ball and asking the question “Is this interest ultimately deductible and what is the tax effect?”


For taxable years beginning in 2018, the Tax Cuts and Jobs Act (TCJA) signed by the President last year added a new limitation on the ability of taxpayers other than C corporations to deduct business losses.


The Tax Cuts and Jobs Act signed by the President on December 22, 2017 made a significant change in Code Sec. 163(j) for disqualified business interest paid or accrued. Before January 1, 2018, business interest expense deduction limitation generally was applied to businesses with loans from foreign related parties, such as a parent corporation or related subsidiary.


The recently passed and signed into law Tax Cuts and Jobs Act introduces a totally new concept which will, no doubt, attract much analysis and conjecture from professionals: A deduction of up to 20% of income derived from pass through entities.


The determination of the appropriate UOP is the first step in determining the need to capitalize an expenditure related to real property. Once the UOP is determined, the new improvement standards from the final regulations can be applied. Many real estate businesses will need to file an accounting method change (filing Form 3115) to adopt the new UOP rules as they apply to their buildings.


The Bipartisan Budget Act of 2015 has replaced TEFRA with new partnership audit rules that will apply in 2018. Enacted by congress in 2015, these new rules generally apply starting with the 2018 partnership tax year for returns filed in 2019. Certain small partnerships (100 or fewer  partners) may elect out of the new regime.


Costs incurred to acquire property are required by taxpayers to be capitalized. When a lease is terminated as part of a transaction to purchase a piece of property, taxpayer’s are generally required to capitalize the lease termination payment as part of the purchase price of the property.


When a taxpayer is faced with a pending foreclosure or a deed-in-lieu sale on investment or trade or business property, the taxpayer may be faced with a potential taxable gain when the property is “underwater.”


The IRS on October 5, 2016 published final (TD 9787), temporary (TD 9788), and proposed regulations (REG- 122855-12) providing guidance on the allocation of partnership liabilities under Section 752. The government also reproposed certain Section 752 regulations by introducing a new anti-abuse rule.


Many taxpayers have taken advantage of the like-kind exchange rules under Internal Revenue Code (IRC) section 1031 to defer income tax on the gain realized from the sale of qualified property. If the rules are followed, income tax on any gain realized is deferred until a subsequent sale  f the property.


In June 2016, the IRS promulgated Revenue Ruling 2016-15. Its purpose (within the context of the exclusion of cancellation of debt income as it relates to qualified real property business indebtedness) is to make a keen distinction between real property developed and held for rental and real property developed and held for sale.


Internal Revenue Code Section 708(b)(1)(B) popularly known as technical termination of a partnership is distinguished from actual termination or end of the partnership (§708(b)(1)(A)). Thus, for federal income tax purposes, a partnership may technically terminate even though it actually continues to exist.


Voss involves unmarried domestic partners registered with the State of California who co-owned real property. Bruce Voss and Charles Sophy, the taxpayers, registered domestic partners, jointly purchased two homes in California and title was vested in both as joint tenants.


Rick Kaplan of the New York Real Estate Journal sits down with an interview with Sandy Klein. Sandy is a CPA at  Shanholt Glassman Klein Kramer & CO. A seasoned veteran at the firm and one of its most prominent leaders, Sandy joined SGKK in 1980. Sandy contributes articles regularly to the New York State Real Estate Journal and has done extensive lecturing on tax and business matters impacting the real estate sector.


There have been countless stories in the news over the last year about the deteriorating condition of the U.S. real estate market.