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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.

KKR Changing Tax Status to Corporation

By:  Amanda Wilson

As I recently discussed on this blog, the recent tax reform has brought new tax rates and deductions, which reopen the question whether your choice of entity is still right under these new rules.  (Prior article discussing this can be found here).  We are starting to see large businesses making this change, as reflected in yesterday’s announcement that the large, publicly traded partnership KKR & Co. will be converting to a corporation effective July 1, 2018.

A Brief Overview of the New Loss Limitation

By:  Amanda Wilson

Here is an article that I wrote explaining the new excess business loss limitation that was added by the Tax Act.  The article can be found here.

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