Free Trial: TheSiteFactory.com

Need to report Sec 199A partnership passthrough detail?

Technical topics regarding tax preparation.
#1
CarlCPA  
Posts:
16
Joined:
20-Aug-2014 12:31pm
Location:
Los Angeles
The Sec 199A info reported on several K-1s that my clients receive from their partnership interests report not only the the total amounts for the various Sec 199A boxes, but they also report the detail for each underlying partnership in which the partnership holds interests.

Do we need to report the detail from each underlying partnership, or is it sufficient to report only the cumulative totals shown on the K-1s?
 

#2
JAD  
Posts:
1764
Joined:
21-Apr-2014 8:58am
Location:
California
If the activities meet the aggregation rules, you may aggregate at your partnership level. If not, separately disclose each activity.
 

#3
CarlCPA  
Posts:
16
Joined:
20-Aug-2014 12:31pm
Location:
Los Angeles
K-1s don't provide info as to whether they met aggregation rules, so I guess I need to report each activity separately. Thanks for your quick response...much appreciated!
 

#4
jon  
Posts:
852
Joined:
3-May-2014 11:11am
Location:
minnesota
If they show totals use totals!! If they separate with reason they will let you know.
 

#5
Lmaris  
Posts:
141
Joined:
20-Jun-2017 8:00am
Location:
Texas
jon wrote:If they show totals use totals!! If they separate with reason they will let you know.


Very few RPEs with multiple S-Corps & Partnerships flowing through them give any evidence of what the Trade or Business of the flow-throughs were, or whether they're even eligible for aggregation. No mention of type of real estate activity (if RE is in the flow-through's name), just if the T&B is an SSTB. Not enough info for the taxpayer to use to add together.
 

#6
Posts:
38
Joined:
10-Apr-2019 4:35pm
Location:
ID
Isn't one of the rules for aggregation that the taxpayer owns at least 50% of the activity? This rules out the ability to aggregate for many of my clients. I'm receiving Schedule K-1s with 15-20 activities each with many small (<$20 of QBI) that aren't worth reporting. What's our requirement to report the small amounts or the negative amounts that would carry forward to the following year?
 

#7
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
IDunnoItDepends wrote:Isn't one of the rules for aggregation that the taxpayer owns at least 50% of the activity?

No. It is only that someone (including an entity) must own a certain minimum percent. It does not have to be the taxpayer.
 

#8
Doug M  
Posts:
3084
Joined:
22-Apr-2014 1:09pm
Location:
Oregon
makbo is wrong about his 50% statement. The taxpayer has to have some ownership to aggregate. Here are the five requirements:

1. The same person or group of persons directly or indirectly owns 50% or more of each trade or business to be aggregated.

2. The preceding 50% ownership structure exists for a majority of the tax year in which the items attributable to each trade or business to be aggregated

3. All the tax items attributable to each trade or business to be aggregated are reported on returns with the same tax year end.

4. None of trades or businesses to be aggregated is a specified service trade or business.

5. The trades or businesses to be aggregated must satisfy at least two of the following three requirements.
*Provide products and services that are the same or customarily offered together (i.e. restaurant and catering business)
*Share facilities or significant centralized business elements
*Be operated in coordination with or in reliance on each other (supply chain)
 

#9
Doug M  
Posts:
3084
Joined:
22-Apr-2014 1:09pm
Location:
Oregon
And don't use totals, input each activity separately if not aggregated. You can't lump sum everything into one pot.
 

#10
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
Doug M wrote:makbo is wrong about his 50% statement. The taxpayer has to have some ownership to aggregate. Here are the five requirements:

What I asserted stands, and is not contradicted by any of the five requirements you posted. Of course the taxpayer has to have "some ownership" of the income to even be reporting the activities on their return in the first place (duh), but nowhere does it state that to aggregate, the taxpayer has to own 50% or more. If you could ever find such a requirement in the code or regs, please feel free to share it with us.

Let me try to make it easier for you to understand. Suppose there are two separate RPEs that meet requirements 4 and 5 in the list you posted. Suppose taxpayer A owns 99% of each business, and taxpayer B owns 1% of each business, all year, and both businesses file tax returns for the same period (In other words, requirements 2 and 3 are also met). Is it your claim, Doug M, that taxpayer A can aggregate QBI from these two RPEs but taxpayer B cannot?
 

#11
Doug M  
Posts:
3084
Joined:
22-Apr-2014 1:09pm
Location:
Oregon
Makbo, as to your question, no.

As to your assertion, what did you mean by this sentence?

.....must own a certain minimum percent. It does not have to be the taxpayer.
 

#12
Posts:
392
Joined:
22-Apr-2014 12:02am
Location:
Lower 48
If the partnership provides a schedule of pass-through activities, we'd need to know which activities the partnership owned at least a 50% interest in. Moreover, without further information we'd couldn't know whether they met the 2 of 3 requirement as required.
 

#13
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
Doug M wrote:As to your assertion, what did you mean by this sentence?
.....must own a certain minimum percent. It does not have to be the taxpayer.

I meant that in the phrase you pasted above "1. The same person or group of persons directly or indirectly owns 50%", the "same person or group of persons" does not need to be the taxpayer who is claiming the QBI deduction. This is at least the second time we've had this same discussion in this forum.
 

#14
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
Taxalmancer wrote:If the partnership provides a schedule of pass-through activities, we'd need to know which activities the partnership owned at least a 50% interest in.

No, you'd need to know which activities "the same person or group of persons" owned at least a 50% interest in.
 

#15
Wiles  
Posts:
3093
Joined:
21-Apr-2014 9:42am
Location:
Bay Area - CA
How big is this group allowed to be?
 

#16
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
Wiles wrote:How big is this group allowed to be?

Oh, now you ask? :lol:
 

#17
Wiles  
Posts:
3093
Joined:
21-Apr-2014 9:42am
Location:
Bay Area - CA
Todo el mundo?
 

#18
makbo  
Posts:
6636
Joined:
23-Apr-2014 3:44pm
Location:
In The Counting House
From the reg summary of comments:

"The preamble to the proposed regulations requested comments on whether the aggregation method described in §1.199A-4 would be an appropriate grouping method for purposes of sections 469 and 1411, in addition to section 199A. One commenter suggested that the section 199A aggregation method would not be an appropriate method for sections 469 and 1411 because the primary focus of grouping under those sections is based on the taxpayer’s level of participation. Another commenter, noting that the standard for aggregation under the proposed regulations is narrower than the section 469 grouping requirements, recommended that taxpayers be permitted to adopt their section 199A aggregation for purposes of section 469. The commenter stated that this would provide taxpayers with an option to mitigate the administrative burden of multiple grouping rules. The Treasury Department and the IRS continue to study this issue and request additional comments.

B. General Rules - The proposed regulations provide rules that allow a taxpayer to aggregate trades or businesses based on a 50-percent ownership test, which must be maintained for a majority of the taxable year. The final regulations clarify that majority of the taxable year must include the last day of the taxable year. One commenter requested guidance on whether each individual included in making the ownership determination must own an interest in each trade or business to be aggregated. Another commenter suggested that to avoid abuse in situations where actual overlapping ownership is low, anyone who owns less than 10 percent of the value of an enterprise could be excluded from the group of owners whose ownership is considered in testing. The commenter suggested clarification or modification of the overlapping ownership requirement including by requiring a minimum ownership threshold of the trades or businesses, or that the 50 percent test use each owner’s lowest interest in the RPE. The ownership rule in the proposed regulations does not require that every person involved in the ownership determination own an interest in every trade or business. The rule is satisfied so long as one person or group of persons holds a 50 percent or more ownership interest in each trade or business. The Treasury Department and the IRS decline to require a minimum ownership threshold for purposes of the ownership test as the abuse potential is outweighed by the administrative complexity such a rule would create. The Treasury Department and the IRS note that trades or businesses to be aggregated must meet all of the requirements of §1.199A-4, not just the ownership requirement.

Other commenters suggested that aggregation should be allowed for trades or businesses that do not meet the common ownership test if the general partner or managing member is the same for each entity. The Treasury Department and the IRS decline to adopt this recommendation. The aggregation rules are intended to allow aggregation of what is commonly thought of as a single trade or business where the business is spread across multiple entities. Common ownership is an essential element of a single trade or business.

Several commenters noted that the family attribution rules under section 199A do not include grandparents, siblings, or adopted children. One commenter requested clarification that the family attribution rules would not cause an aggregated trade or business to cease to qualify for aggregation when children and grandchildren reached adulthood. A few commenters requested guidance on the manner in which beneficial interests in trusts are considered for purposes of the common ownership rule. Other commenters suggested that the attribution rules in sections 267 and 707 should be used in place of the family attribution rule. Another commenter suggested that final regulations provide a specific attribution rule that treats owners of entities as owning a pro rata share of any business owned by the entity for purposes of the 50 percent ownership test. Another commenter recommended defining “directly or indirectly” as used in the proposed regulations by reference to a specific ownership rule. The final regulations address these recommendations by requiring that the same person or group of persons, directly or by attribution through sections 267(b) or 707(b), own 50 percent or more of each trade or business. A C corporation may constitute part of this group. "
 


Return to Taxation



Who is online

Users browsing this forum: j3cpa, Majestic-12 [Bot], swgordon and 68 guests