Section 199A Guidance to be Here by the 4th?
The IRS announced late last week that guidance on Section 199A should be issued by the end of this month (likely means sometime in July). We have been eagerly awaiting this guidance we hope it may provide needed answers to some of the following questions:
- What is a trade or business? Does rent income paid by a farmer to his/her LLC/LP, etc. qualify for the 20% deduction?
- How does an entity treat one or more qualifying businesses? Are they combined and separately allocated?
- Will they provide more details on what wages qualify?
- Will they provide details on how reasonable compensation applies to S corporations and partnerships (hopefully the dreaded 70/30 does not rear its head)?
- How will they treat bulk sales of property for purposes of the limitation on Section 199A?
There are likely several other questions that need to be addressed but these are some of the most important ones to myself and most of our readers. We will keep you posted when we get the guidance.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Paul,
I own a small CPA practice in Ohio and we do tax and audit work for 3 small grain cooperatives that have summer fiscal year ends. We did not accelerate any DPAD deductions before the end of the year. So my question is since we will still be filing on the 2017 Form 1120-C tax do we still handle the DPAD allocation out to the farmers the same way as in the past. Without any guidance this is tough to know what to due. In one of the Co-op’s we used a netting method to reduce the patronage paid and therefore did not allocate much DAPD. I assume under the new rules we will not want to do that. If you can provide any guidance I would appreciate it. It is tough to find any info on this.