Journal Article

Second Set of Recommendations for the 2018-2019 Department of the Treasury and Internal Revenue Service Priority Guidance Plan

Hawkins, Karen L

2018

Overview

AMERICAN BAR ASSOCIATION SECTION OF TAXATION June 15, 2018 The Honorable David Kautter Assistant Secretary (Tax Policy) Department of the Treasury 1500 Pennsylvania Avenue, NW Washington, DC 20220 David Kautter Acting Commissioner Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20024 William M. Paul Acting Chief Counsel Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Re: Second set of Recommendations for 2019[2018]-2019 Priority Guidance Plan Dear Messrs. Kautter and Paul: The American Bar Association Section of Taxation (the \"Section\") welcomes the opportunity to provide a second set of recommendations for inclusion in the 2018-2019 Priority Guidance Plan. Robert J. Neis, Benefits Tax Counsel, Department of the Treasury Douglas Poms, Deputy International Tax Counsel, Department of the Treasury Thomas West, Tax Legislative Counsel, Department of the Treasury Sunita Lough, Commissioner, Tax Exempt & Government Entities Division, Internal Revenue Service Scott K. Dinwiddie, Associate Chief Counsel (Income Tax & Accounting), Internal Revenue Service Helen M. Hubbard, Associate ChiefCounsel (Financial Institutions & Products), Internal Revenue Service Victoria Judson, Associate Chief Counsel (Tax Exempt & Government Entities), Internal Revenue Service Holly Porter, Associate Chief Counsel (Passthroughs & Special Industries), Internal Revenue Service Marjorie A. Rollinson, Associate ChiefCounsel (International), Internal Revenue Service Robert H. Wellen, Associate ChiefCounsel (Corporate), Internal Revenue Service Kathryn Zuba, Associate ChiefCounsel (Procedure & Administration), Internal Revenue Service As requested in Notice 2018-43 (the \"Notice\"),1 the Section of Taxation of the American Bar Association (the \"Section\") has identified the following tax issues that we recommend be addressed through regulations, rulings, or other published guidance in 2018-2019. 4.Definitional and operational guidance regarding the deduction for qualified business income. a. Applying the rule in the calculation of qualified business income when flowing through multiple tiered entities. b. Clarification regarding the ability/requirement to net the computation of losses from more than one trade or business against gains from another business. c. Whether the taxpayer may consider a management company an integral part of the operating trade or business and not a specified business activity if substantially all of the management fee company's income is from a qualifying trade or business. d. How the rules apply to the qualification of real property rental income as qualified business income. e. If grouping is allowed, whether a taxpayer may treat rental of real estate to a related C corporation as trade or business income under the self-rental principals. f. Guidance regarding the determination of items effectively connected with a business (e.g., section 1245 gains and losses, retirement plan contributions for partners and sole proprietors, the section 162(l) deduction, and one-half of self-employment income). g. In determining the unadjusted basis of assets, how are items expensed under section 179 subject to bonus depreciation treated. h. How the unadjusted basis of assets held January 1, 2018 impact the limitation calculation. i. The determination of the unadjusted basis of property subject to section 743(b) basis adjustments and impact on the limitation calculation. j. The effect, if any, on net investment income tax calculations. 5. Guidance regarding Small Business Accounting Method Reform and Simplification. a. Guidance regarding the transition rules for section 263A for taxpayers who meet the $25,000,000 small business definition and required method change. b. Guidance regarding the annual election under section 266 to capitalize taxes and carrying costs in lieu of deducting the interest, for taxpayer's [sic] owning real estate. c. Guidance regarding the transition rules for section 448 for taxpayers who meet the $25,000,000 small business definition and want to change to the cash method of accounting. d. Guidance clarifying that the aggregation of gross receipts under section 448 for affiliated taxpayers is required in calculating any limitations or exceptions to the general rule, for purposes of the $25,000,000 small business definition and required method change. e. Guidance regarding the transition rules for section 460 for taxpayers who meet the $25,000,000 small business definition and required method change. f. Guidance regarding the transition rules for section 471 for taxpayers who meet the $25,000,000 small business definition and required method change. g. Guidance clarifying the accounting for inventory as non-incidental and the costs required to be capitalized.

• Publisher: American Bar Association
• Subject: Accounting / Attorneys / Bar associations / Committees / Controlled foreign corporations / Employee benefits / Income taxes / Limited liability companies / Planning / Regulation / Simplification / Tax administration / Taxable income / Taxation / Unrelated business income tax