2018 Form 1065 K Form 1065 K 1

Transcription

1 2018 Form 1065 K Form 1065 K 1 New

2 2018 Form 1065 K 1 Centralized Partnership Audit Regime

3 Final regulations on elections out of the centralized partnership audit rules were issued on January 2, 2018, February 2, 2018, proposed regulations on adjusting tax attributes, including basis and property inside the partnership, as well as capital accounts

4 Consolidated Appropriations Act of 2018 (March 23, 2018) PL Centralized Partnership Audit Regime Mandatory In 2018

5 Aimed at large partnerships (over 100 ptrs; Up from the TEFRA 10 or fewer ) and Tiered PSPs 9 Mandatory for tax years beginning on or after January 1,

6 Annual Small Partnership Election Out Entirely (Sec. 6221(b)) Requirements for Electing Out 1) 100 or fewer K-1s; 2) All partners must be eligible partners. 3) Elect on a timely filed return of the PSP; 4) Disclose the name and TIN of each partner; 5) Notify each partner within 30 days.

7 Eligible Partners: Individuals C Corps (RIC or REIT OK) Foreign Partners taxed as a C Corp. S Corps Estates (Sec. 6221(b)) Can Elect Out (Annual determination) C A 60% B 39% 1% LLC/Partnership

8 A No Election Out 60% B 39% C Grantor Trust 1% LLC/Partnership No Election Out C A 60% B 39% LLC 1% LLC/Partnership

9 AB is not eligible to elect out. C CD can Elect Out D A 60% B 39% CD PSP 1% AB LLC/P t hi Elect on Timely Filed Return New Schedule B, Line 25 Question Total # of K-1s

10 Who Elects Out? The partner who signs the Form Per the Form 1065 Draft Instructions: If no election out, then enter the PSP Rep.:

11 Electing Out Form 1065 New Schedule B 2 21 New Schedule B 2 Instructions Match 1065 Inst. 22

12 New Schedule B 2 Instructions Deemed Affirmation 23 Partnership Representative 24

13 Part III Designations and/or Appointments 25 Part III Designation if Individual PSP Rep. 26

14 Part IV Signature 27 Two Broad Options for A Partnership Facing a Centralized Regime IRS Audit (TYBOA 1/1/2018) 28

15 1)Accept the IRS s partnership level imputed underpayment (Sec. 6225). The default! 29 Form 1065 First Page Not relevant on 2018 returns unless the PSP elected into the CPAR in prior years. 30

16 Amended Returns Payments made with amended returns of the reviewed year partners reduce the imputed underpayment. (Sec. 6225(c)(2)) 2) Elect to push-out the adjustment to the reviewed year partners within 45 days of the NFPA (See Prop. Reg ) 32

17 A partnership making a valid push out election is no longer liable for the imputed underpayment. (Prop Reg (a)) AB is not eligible to elect out. C CD Elects Out D A 60% B 39% AB LLC/Partnership CD PSP 1%

18 See Reg (b)-1(d)(2), Example 2. CD elects out but AB cannot. AB is audited and pushes out the adjustment to CD. CD must provide its partners with a statement per section 6226, despite electing out. 35 The tax (plus interest and penalties) on the adjustments are reported by the reviewed year partners in the tax year the statement is received. (Prop Reg (a)) (but taxed as if reported in the reviewed year)

19 June 2017 Prop. Regs were unclear if an upper tiered partnership could push the adjustment out to its partners. Prop. Reg (e) Pass-Through Partners [reserved] C A 60% B 39% PSP 1% LLC/Partnership

20 Per Prop. Regs. published 12/15/2017, each upper-tier partner in an ownership chain would be given a choice to either push the adjustments to its partners, shareholders, or beneficiaries or pay tax with respect to the adjustments. Interest on underpayment is calculated at the fed. short-term rate (FSR) + 5% (instead of 3%). 40