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IRC 1231 UPDATE

Final regulations under § 4944 on program-related investments.§§ 49 regarding reliance standards for making equivalency determinations. (Proposed regulations were published on September 24, 2009). §§ 5 regarding the new requirements for supporting organizations as added by § 1241 of the Pension Protection Act. (Proposed regulations were published on June 26, 2012).

§§ 501(r) and 6033 on additional requirements for charitable hospitals as added by § 9007 of the ACA. § 501(r) on requirement for community health needs assessments by charitable hospitals as added by § 9007 of the ACA.

IRC 1231 UPDATE

Revenue Procedure to update Revenue Procedure 2011-33 for EO Select Check.

Revenue Procedures updating grantor and contributor reliance criteria under I.R.C.

Thirteen of the guidance projects described in the PGP are focused on exempt organizations: We’ll keep you updated as we continue to navigate the new rules and regulations of the recent tax reform.įor more information on how Henry+Horne can help you get the most out of your taxes, learn more about our services.On November 19, the Treasury Department and the Internal Revenue Service released their 2012-2013 Priority Guidance Plan ("PGP"), which lists the 317 guidance projects that will be priorities for the allocation of resources during the fiscal year ending in June 2013. 1231 gains do not qualify for the 20% deduction, but losses will reduce the taxpayer’s income eligible for the 20% deduction.Įven more complexity and uncertainty can arise when a taxpayer has 1231 gains and losses stemming from multiple business activities, but if you weren’t dozing off a few paragraphs ago, you probably would be shortly.įor more information regarding the 199A deduction, be sure to consult your trusted Henry+Horne tax advisor. This appears to place the taxpayer in a no-win situation. The regs are inconsistent when it comes to the treatment of 1231 losses treated as ordinary – such losses will reduce a taxpayer’s QBI. The regs state that a 1231 gain treated as capital is excluded from the calculation of QBI, meaning that such gains are not eligible for the 20% deduction. Unfortunately, the proposed regulations recently issued by the IRS arrive at a different conclusion. So, while 1231 gains may be taxed as long-term capital gains, they are not gains arising from the sale of a capital asset, which would seem to imply that they should not be considered investment income for QBI purposes.

Section 1231 assets, however, are specifically excluded from the definition of a capital asset. There are various rules and limitations and the actual calculation can be quite complicated, but for our purposes here, let’s assume 20%.ĭon’t miss: QBI implications and the impact on your deductionįor purposes of QBI, investment income, such as long-term capital gains, is not considered to be part of a taxpayer’s QBI. So, now you’re probably wondering what all this has to do with the 199A deduction? Well, at its core, the 199A deduction is a 20% deduction of all qualified business income (known as QBI) reported by a taxpayer. At that point, the individual is required to net all 1231 gains and losses – a resulting net gain is reported as a long-term capital gain and a net loss is reported as an ordinary loss. When pass-through entities such as partnerships or S Corporations sell a 1231 asset, the resulting gain or loss is passed on to the individual partners or shareholders to be reported on their individual tax returns. Such assets could include manufacturing machinery, computers, a storage warehouse, etc.

There are many complex and confusing aspects to the rules regarding the new 199A deduction, and the treatment of 1231 gains and losses are no exception.īefore we dive into these transactions as related to 199A, let’s begin at the beginning – what’s a 1231 gain or loss, anyway? In general, a Section 1231 asset is a depreciable asset or piece of real estate used in a trade or business for more than one year. Section 1231 gains and losses and Section 199A