Page 150 - The TEFRA Partnership Audit Rules Repeal:

ALI CLE Live Video Webcast / “The TEFRA Partnership Audit Rules Repeal: Partnership and Partner Impacts” June 7, 2016, Jerald David August and Terence Floyd Cuff
ordinary income) into account. That concept should be clarified in regulations.
 Passive loss rules and other individual loss limitations apparently will not apply to the calculation of the imputed underpayment amount. We will have to see how this is handled in regulations.
 The imputed underpayment calculated under Section 6225 may be less (perhaps considerably less) than the amount of tax that would be assessed under the TEFRA audit rules.
 The Section 6225 regime apparently avoids the 3.8% tax on investment income. Limitations on deductibility of losses at the individual level apparently do not apply to calculations under Section 6225.
 The rate that we use apparently does not take into account tax on net investment income, Medicare taxes, social security taxes, etc. The rate appears not to take into account tax surcharges if they are in effect.
 The scheme appears to ignore loss limitations applied at the partner level, such as the passive loss rules and the at risk rules. This could be advantageous to the partners.
 The computation appears to ignore personal holding taxes and taxes on prohibited transactions for REITs.
 Adjustments to items of credit result in an increase or decrease, as the case may be, in the figure resulting from this multiplication.
 Any net increase or decrease in loss is treated as a decrease or increase, respectively, in income.
 We nevertheless will not fully understand the computation of the imputed underpayment amount until regulations are released.
d. Determining Imputed Underpayment Amount: Adjustments to Distributive Shares.
Allocations in the partnership agreement may fail to have substantial economic effect or to be in accordance with partners’ interests in the partnership. The reallocation of income or loss is a component in determining
© Terence Floyd Cuff and Jerald David August, 2016
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