AICPA wants IRS to clarify S corp issues from new tax law

The American Institute of CPAs requested immediate guidance Monday from the Internal Revenue Service and the Treasury Department on various provisions of the Tax Cuts and Jobs Act related to S corporations.

AICPA Tax Executive Committee chair Annette Nellen sent a letter to IRS and Treasury officials asking for guidance on a range of issues, including the application of the new laws on loss carryforwards, and to clarify how to coordinate various loss and deduction limitations with section 199A of the tax code on qualified business income carryover losses.

The letter includes both the AICPA priority issues and the institute’s recommendations for resolve the issues. Nellen asked the Treasury and the IRS to clarify that the carryforward rule under section 163(j)(2) applies to S corporations despite section 1371(b)(2), and to clarify the definition of real property trades or businesses beyond section 469(c)(7)(C) for purposes of the disallowed business interest deduction under section 163(j).

“Taxpayers and practitioners need clarity on S corporation issues in order to comply with their 2018 tax obligations and to make informed decisions regarding cash-flow, entity structure, and tax planning issues,” Nellen wrote.

Some of the other requests included guidance on certain provisions in the new tax law relating to the post-termination transition period and the eligible terminated S corporation period under section 1371(f) of the tax code. The AICPA also asked for guidance on the treatment of deferred foreign income upon transition to participation exemption system of taxation under section 965 of the tax code for S corporation trust shareholders, what trust transactions are section 965 triggering events, and how a transferee of S corporation stock held in trust might assume the liability for the section 965 transition tax.

AICPA Tax Executive Committee chair Annette Nellen

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