On February 16, the IRS issued additional relief for certain pass-through entities required to file new Schedules K-2 and K-3, along with a set of “Frequently Asked Questions.” The relief is outlined in News Release IR-2022-38 and Schedules K-2 and K-3 Frequently Asked Questions (Forms 1065, 1120S, and 8865). This additional relief was in response to the widespread commentary among tax return preparers and taxpayers in the current filing season. Under the new relief, certain taxpayers will not need to file the new Schedules K-2 and K-3 relating to partnerships and S corporations.
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Topics:
IRS,
pass-through entities,
Private Equity & Venture Capital,
PE/VC,
Schedule K-3,
Schedule K-2
It is somewhat common for private equity and venture capital firms to distribute stock held in a pass-through entity (PTE) to their partners. The tax rules around PTE distributions are complex, however. There are an array of issues that may impact the presumption of a tax-free transaction. This article outlines some of the general rules around distributions of stock by a PTE and highlights particular rules and issues surrounding distributions of marketable securities from private equity (PE) and venture capital (VC) firms.
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Topics:
pass-through entities,
Private Equity & Venture Capital,
PE/VC,
PTE,
stock distribution,
PE,
VC,
Investment Partnerships,
Section 731(c)(3)
Private equity (PE) and venture capital (VC) firms face numerous tax reporting requirements when it comes to their business interests. The structure of many PE/VC investments often involve pass-through entities, and as such, capital gains subject to Section 1061. Elements of reporting requirements for Section 1061 – which originated from the tax reform law commonly known as the Tax Cuts and Jobs Act (TCJA) – begin to take effect for tax years beginning after Jan. 19, 2021. Following the release of additional guidance from the IRS on Section 1061, our team recently compiled the following information to help PE/VC firms understand and better manage their obligations.
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Topics:
Partnership Audit Regulations,
pass-through entities,
Private Equity & Venture Capital,
PE/VC,
section 1061,
PTE
An increasing number of states are embracing the creation of elective taxes on pass-through entities (PTEs) to help business owners pay state and local income taxes (SALT) at the entity level rather than through personal income tax returns. The workaround is becoming a popular way for states to avoid the negative repercussions of the $10,000 limit on individuals’ deductions for state and local taxes, which was part of the tax reform law commonly known as the Tax Cut and Job Act (TCJA).
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Topics:
pass-through,
pass-through entities,
Private Equity & Venture Capital,
PE/VC,
PTE
The 2017 tax reform law commonly known as the Tax Cuts and Jobs Act (TCJA) caught states off-guard. The speed at which the federal legislation moved did not allow much time for states to react before the calendar year 2017 ended and the 2018 calendar year began, particularly for states that follow a “fixed date conformity” to the Internal Revenue Code (IRC). Even states that follow "rolling conformity” may have been forced to follow the change to the IRC, unless they already de-coupled from certain IRC provisions.
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Topics:
pass-through,
pass-through entities,
Private Equity & Venture Capital,
PE/VC,
PTE
