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IRS Announces New Real Estate Safe Harbor for 20% QBI Deduction

By:  Amanda Wilson

Section 199A introduced a new 20% deduction for qualified business income (previously discussed here).  To qualify for the deduction, income must be from a trade or business.  Whether rental activity rises to the level of a trade or business can often be a difficult question to answer.  In Notice 2019-07 (found here), the IRS announces a safe harbor under which a rental real estate enterprise will constitute trade or business for Section 199A purposes if the enterprise performs 250 or more hours of rental services during the year.  Any enterprise wishing to fall within this safe harbor must maintain records such as a time log or calendar documenting the services.  If the real estate is rented under a triple net lease, the safe harbor is not available.

The IRS notice provides a helpful safe harbor, but it is important to note that it is only a safe harbor.  The fact that a real estate business cannot satisfy the safe harbor does not mean that it might not otherwise qualify as a trade or business for Section 199A purposes.

IRS Re-Releases Partnership Audit Regulations

By:  Amanda Wilson

The IRS has released proposed regulations implementing the new centralized partnership audit rules.  These regulations are virtually identical to the regulations that were released and then pulled in January of this year.  A slide presentation that I previously posted discussing these regulations (as well as other developments) can be found here.

Tax Reform Pushing Ahead

By:  Amanda Wilson

Despite the political controversy swirling around the firing of James Comey and the appointment of a special prosecutor, the White House and Republicans are determined to push forward with tax reform.  Later this week, Treasury Secretary Steven Mnuchin will testify on Trump’s Budget Proposal before the House Ways and Means Committee, the committee drafting the House of Representatives tax reform bill.  The House Ways and Means Committee also held a hearing last week on “How Tax Reform Will Grow Our Economy and Create Jobs.”

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