Daily Tax Report ®

IRS Issues Four Sets of Pass-Through Deduction Guidance (Corrected)

Jan. 18, 2019, 7:30 PMUpdated: Jan. 18, 2019, 8:29 PM

Pass-through entities like partnerships and S corporations now have more certainty on how to qualify for a new 20 percent tax deduction on certain types of income.

The Internal Revenue Service issued final rules on how pass-through entities can aggregate income with costs to qualify for the new deduction under Section 199A of the tax code, created in the 2017 tax overhaul. Proposed regulations were released in August (REG-107892-18).

The IRS also released proposed regulations (REG-134652-18) on the treatment of previously suspended losses that constitute qualified business income and on determination of the deduction for taxpayers who hold interests in regulated investment companies, charitable remainder trusts, and split-interest trusts.

In another piece of guidance (Notice 2019-07), the agency proposed a revenue procedure providing for a safe harbor where a rental real estate enterprise will be treated as a trade or business for purposes of the 199A deduction.

In a revenue procedure (Rev. Proc. 2019-11) the IRS provided methods for calculating W-2 wages for purposes of the deduction.on how the deduction.

(Corrects number of guidance documents and provides links.)

To contact the reporter on this story: Siri Bulusu in Washington at sbulusu@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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