scholarly journals Selected US Tax Developments: New Proposed Regulations Under the Section 1061 Carried Interest Rules

2021 ◽  
Vol 68 (4) ◽  
pp. 1159-1172
Author(s):  
Peter A. Glicklich ◽  
Gregg M. Benson
Keyword(s):  
Capital Gain ◽  
Internal Revenue Service ◽  
Internal Revenue ◽  
Fund Managers ◽  
Holding Period ◽  
Jobs Act ◽  
Tax Cuts

The Tax Cuts and Jobs Act of 2017 added new section 1061 to the Internal Revenue Code. That provision added a three-year holding period for fund managers holding "carried interests" to qualify for long-term capital gain treatment. On August 14, 2020, the Internal Revenue Service published proposed regulations that provide much-needed guidance. As proposed, however, the new rules are quite complex and include a number of traps for the unwary. We discuss some of the key provisions of the proposed regulations and consider their impact for Canadian funds and their Canadian and US managers.

scholarly journals Discussion of Initial Operational Changes by Small and Medium Size Businesses in Response to the Tax Cuts and Jobs Act (TCJA) 2017

2018 ◽  
Vol 8 (3) ◽  
pp. 212
Author(s):  
Micah Frankel ◽  
John Tan
Keyword(s):  
Physical Therapist ◽  
The United States ◽  
Internal Revenue Service ◽  
Medium Size ◽  
Tax Law ◽  
Field Observations ◽  
Apartment Complexes ◽  
Jobs Act ◽  
The U.S ◽  
Tax Cuts

Congress and the president enacted the landmark Tax Cuts and Jobs Act (TCJA) on December 22, 2017, the most sweeping change to the tax law since 1986. Tax laws such as this have a major impact on how business is conducted in the United States. This study does not attempt a comprehensive analysis of the changes in the U.S. tax code, but instead focuses on some key areas that affect most small and medium size business operators. Specifically this study examines how TCJA (2017) affects business operators in areas such as depreciation, net interest expenses, and entertainment. The Internal Revenue Service (IRS) has been continuously issuing facts sheets and statements in regards to the TCJA (2017). The first half of this study is a brief literature review on the landmark changes to the U.S. tax for corporations in regards to depreciation, net interest expenses, and entertainment. The second half of this study is a report of field observations and discussions with business operators such as a landlord of apartment complexes, a hotel operator, and a physical therapist. Though this study does not provide macro or archival data to explain how business operators responded to the TCJA (2017), field observations and discussions suggest that the three business operators are renovating in response to full depreciation write off, reducing net interest expenses, and limiting entertainment expenses.

Congress Finally Passes Carried Interest Legislation, But is it Enough?

2019 ◽  
Vol 17 (1) ◽  
pp. 9-24
Author(s):  
Hughlene A. Burton ◽  
Noel Brock
Keyword(s):  
Tax Policy ◽  
Capital Gains ◽  
Capital Gain ◽  
Short Term ◽  
Minimal Impact ◽  
Self Employment ◽  
Interest Income ◽  
Jobs Act ◽  
Unlimited Amount

ABSTRACT After numerous failed previous attempts to enact legislation taxing “carried interest” income attributable to services as compensation income versus capital gains, Congress enacted Section 1061 as part of the Tax Cuts and Jobs Act. Unlike previous proposals, which would tax carried interest income attributable to services as compensation income, Section 1061 simply reclassifies some carried interest income attributable to services as short-term capital gain. By choosing to treat carried interest income attributable to services as short-term capital gain instead of as compensation income, Section 1061 exempts such income from self-employment tax and allows taxpayers to offset such income with an unlimited amount of short-term capital losses. This paper reviews the requirements under Section 1061 and explains several ambiguities created by the new law. In addition, this paper examines whether Section 1061 follows sound tax policy. The authors find that Section 1061 does not follow the tax policy concepts of equity and fairness, economic efficiency, neutrality, simplicity, or certainty. In addition, the authors find that Section 1061 will have minimal impact, as most carried interest is held longer than the required period to qualify as long-term capital gain.

Tax Practitioner Credentials and the Incidence of IRS Audit Adjustments

2003 ◽  
Vol 17 (1) ◽  
pp. 1-14 ◽  
Author(s):  
Peggy A. Hite ◽  
John Hasseldine
Keyword(s):  
Random Selection ◽  
Internal Revenue Service ◽  
Internal Revenue ◽  
Tax Returns ◽  
Selection Of

This study analyzes a random selection of Internal Revenue Service (IRS) office audits from October 1997 to July 1998, the type of audit that concerns most taxpayers. Taxpayers engage paid preparers in order to avoid this type of audit and to avoid any resulting tax adjustments. The study examines whether there are more audit adjustments and penalty assessments on tax returns with paid-preparer assistance than on tax returns without paid-preparer assistance. By comparing the frequency of adjustments on IRS office audits, the study finds that there are significantly fewer tax adjustments on paid-preparer returns than on self-prepared returns. Moreover, CPA-prepared returns resulted in fewer audit adjustments than non CPA-prepared returns.

The Effects of Capital Campaigns on Local Nonprofit Ecologies

2018 ◽  
Vol 47 (3) ◽  
pp. 645-656 ◽  
Author(s):  
Joanna Woronkowicz
Keyword(s):  
Nonprofit Organizations ◽  
Internal Revenue Service ◽  
Arts Organizations ◽  
Natural Distribution ◽  
Capital Campaign ◽  
Internal Revenue ◽  
Capital Campaigns ◽  
Short Period ◽  
Distribution Of Resources ◽  
Nonprofit Arts

When charities launch capital campaigns, they hope to attract large amounts of resources in a relatively short period of time; however, other charities in the area are likely to see such campaigns as disruptive to the natural distribution of resources to area nonprofits by disproportionately directing area donations to a single organization. This study seeks to understand the effects capital campaigns have on both the fundraising performance of other nonprofits and the makeup of a local nonprofit ecology. The analysis uses data from a randomly sampled set of nonprofit arts organizations that had capital campaigns for facilities projects between 1994 and 2007 and Internal Revenue Service Form 990 data on 501 (c) (3) nonprofit organizations in each county. The results illustrate that a capital campaign positively affects the fundraising performance of other charities in a local nonprofit ecology, but that campaigns decrease the size of a local nonprofit ecology.

scholarly journals Measuring the Effects of Corporate Tax Cuts

2018 ◽  
Vol 32 (4) ◽  
pp. 97-120 ◽  
Author(s):  
Alan J. Auerbach
Keyword(s):  
Multinational Corporations ◽  
Income Tax ◽  
Capital Investment ◽  
Corporate Income Tax ◽  
Tax Law ◽  
Corporate Tax ◽  
The Law ◽  
Jobs Act ◽  
The Impact ◽  
Tax Cuts

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (TCJA), the most sweeping revision of US tax law since the Tax Reform Act of 1986. The law introduced many significant changes. However, perhaps none was as important as the changes in the treatment of traditional “C” corporations—those corporations subject to a separate corporate income tax. Beginning in 2018, the federal corporate tax rate fell from 35 percent to 21 percent, some investment qualified for immediate deduction as an expense, and multinational corporations faced a substantially modified treatment of their activities. This paper seeks to evaluate the impact of the Tax Cuts and Jobs Act to understand its effects on resource allocation and distribution. It compares US corporate tax rates to other countries before the 2017 tax law, and describes ways in which the US corporate sector has evolved that are especially relevant to tax policy. The discussion then turns the main changes of the Tax Cuts and Jobs Act of 2017 for the corporate income tax. A range of estimates suggests that the law is likely to contribute to increased US capital investment and, through that, an increase in US wages. The magnitude of these increases is extremely difficult to predict. Indeed, the public debate about the benefits of the new corporate tax provisions enacted (and the alternatives not adopted) has highlighted the limitations of standard approaches in distributional analysis to assigning corporate tax burdens.

The Tax Cuts and Jobs Act of 2017 and the Pharmaceutical Industry

2018 ◽  
Vol 46 (3) ◽  
pp. 806-808
Author(s):  
Michael S. Sinha ◽  
Aaron S. Kesselheim
Keyword(s):  
Pharmaceutical Industry ◽  
Jobs Act ◽  
Tax Cuts
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