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Corporate Transparency Act; Self-Employment Tax and Limited Partners; Discharge of Debt; and Grantor Trust Tax Reimbursement

Webinar

 

This course is drawn from Steve Gorin’s 4th quarter 2023 newsletter.

The Corporate Transparency Act requires disclosure of beneficial owners, but how do you decide whether a fiduciary or beneficiary needs to be listed? We will discuss the rules and how to apply them in common trust and estate administration situations. We will review a memo that can be adapted to explain to corporate attorneys what information to gather so that estate planning lawyers can advise them on which fiduciaries and beneficiaries need to provide the required information and identification documentation.

Soroban Capital Partners LP v. Commissioner, 161 T.C. No. 12 (2023), held that a partner could qualify for the limited partner exclusion from self-employment tax only if the partner was a passive investor. At first glance, that means that qualifying for this exception may prevent a partner from avoiding the 3.8% net investment income tax on business income. We will discuss a way to avoid both taxes.

Code § 61(a)(11) includes in income “income from discharge of indebtedness.” But Parker v. Commissioner, T.C. Memo. 2023-104, explains that debt relief can constitute sale proceeds offset in whole or in part by basis instead of being 100% income. A good example of this is partnership income tax, and we turn our attention to how this plays out in partners with “negative capital accounts.” Then we will briefly mention CCA 202352018, which asserts that a beneficiary makes a gift by consenting (or not objecting) to adding to an existing trust a new clause authorizing a trustee to reimburse the grantor for income taxes arising from grantor trust status.

CLE

California: 1.50 general
Illinois: 1.50 general
Missouri: 1.80 general
New York: 1.50 professional practice (experienced and transitional)
Texas: 1.50 general

Presenters:
Steve Gorin

For technical materials supporting the slides, please see Steve's newsletter.

Originally Presented:
January 30, 2024