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04/02/2018

More New Business and Investor Tax Rules Released

The rules to calculate how new tax laws will impact business and investors are now being publicly released.  The Treasury Department and the Internal Revenue Service have announced updated guidance is ready for businesses and investors reflecting tax changes under the Tax Cuts and Jobs Act. 

Specifically, 2018 guidance on computing business interest expense limitations as well as withholding guidance on the transfer of non-publicly traded partnership interests will be released April 16th.  More updates are also expected in the weeks ahead as the changes and effects of tax reform are being confirmed and quantified.  Accountants and tax professionals now already have access to the information in order to help taxpayers determine the best tax planning strategies. Investor Business Manager working

A preliminary news release regarding business interest expense says the new tax law imposes a limitation on deductions for business interest incurred by certain large businesses.  For most large businesses, business interest expense is limited to any business interest income plus 30 percent of the business’ adjusted taxable income.

The IRS update will list new regulations that the Treasury Department and the IRS intend to enforce, including rules addressing how the business interest expense limitation is calculated at the level of a consolidated group of corporations as well as other rules. A notice on the new guidance makes it clear that partners in partnerships and S corporation shareholders cannot interpret newly amended sections inappropriately to “double count” the business interest income of a partnership or S corporation.

The announcement says that tax reform now interprets a foreign taxpayer’s gain or loss on the sale or exchange of a partnership interest as part of the conduct of a trade or business in the U.S. if the partnership sold all of its assets.  That means there is a tax due on the sale.  New guidance imposes a withholding tax on the disposition of a partnership interest by a foreign taxpayer.

Also, tax enforcement and collections authorities announce that they intend to issue more rules and procedures soon detailing how a business or individual may qualify for withholding exemptions or reductions in the amount of withholding under this section of the new tax law.  In addition, the notice suspends secondary partnership level withholding requirements.  See also our recent blog on the effects of the new "transition tax" affecting investors.

McRuer CPAs business tax planning experts will have the latest information about IRS guidance on these more complicated new business and investor-related tax laws.   If these provisions apply to you, or if you have questions about how the new tax act may affect you please contact us to schedule a meeting to review your tax plan to make certain it is updated to best benefit from the tax reform.  Call us for your appointment at 816.741.7882 or contact us online.

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