Can an LLC that has a member that is a living trust opt out of entity taxation?
As most know, there was a huge tax bill passed recently. One part of it has to do with auditing partnerships and a change that, if there is a negative adjustment to the partnership, rather than amending the K-1s and getting the partners to pay their share at their rate, the IRS will collect directly from the partnership at the highest individual rate.
Under certain regulations, the partnership may opt-out of this treatment. There is a required election the partnership can make to have the partnership be treated as it is under previous law.
I just got a blast email from an adviser warning that if even a single member of the LLC (I know I said partnership, but the email uses both interchangeably in this instance.) is a trust, living trust, another LLC or even a single member LLC, the election cannot be made.
Does anyone have support for this? Much of the writing on the new law only includes bits and pieces and preliminary impressions. Yet, time is getting short to change entity ownership if partners or members don't want an extra plus tax penalty on partnership and LLC audits. Historically, partnership and LLC audits are not often done. In part, I assume, because of the difficulty of getting a new K-1 issued and the money obtained from the pass-through. This and some other changes have me believe the historical percentage of LLC/Partnership audits is going to look quaint in the years to come.
As most know, there was a huge tax bill passed recently. One part of it has to do with auditing partnerships and a change that, if there is a negative adjustment to the partnership, rather than amending the K-1s and getting the partners to pay their share at their rate, the IRS will collect directly from the partnership at the highest individual rate.
Under certain regulations, the partnership may opt-out of this treatment. There is a required election the partnership can make to have the partnership be treated as it is under previous law.
I just got a blast email from an adviser warning that if even a single member of the LLC (I know I said partnership, but the email uses both interchangeably in this instance.) is a trust, living trust, another LLC or even a single member LLC, the election cannot be made.
Does anyone have support for this? Much of the writing on the new law only includes bits and pieces and preliminary impressions. Yet, time is getting short to change entity ownership if partners or members don't want an extra plus tax penalty on partnership and LLC audits. Historically, partnership and LLC audits are not often done. In part, I assume, because of the difficulty of getting a new K-1 issued and the money obtained from the pass-through. This and some other changes have me believe the historical percentage of LLC/Partnership audits is going to look quaint in the years to come.
