Axing De Minimis Rule on Partnership Allocations' Substantiality Proposed

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IRS proposes getting rid of a de minimis rule that allows small partnership allocations to avoid requirements that the allocations have a substantial economic effect to qualify for beneficial passthrough treatment. IRS says in proposed rules (REG-109564-10) that it wants to ax the rule to stop partnerships from structuring their ownership so that the whole entity can sidestep the “substantiality” requirement. “The intent … was to allow partnerships to avoid the complexity of testing the substantiality of insignificant allocations to partners owning very small interests in the partnership,” IRS says.