Axing De Minimis Rule on Partnership Allocations' Substantiality Proposed

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

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.

Request Daily Tax Report