IRS Corrects Final Regs on Qualified Business Income Deduction

Qualified Business Income Deduction; Correction

[4830-01-p]

DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1

Treasury Decision 9847

RIN 1545-BO71

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Correcting amendments.

SUMMARY: This document contains corrections to final regulations (TD 9847) that were published in the Federal Register on Friday, February 8, 2019. The final regulations are concerning the deduction for qualified business income under section 199A of the Internal Revenue Code.

DATES: This correction is effective on April 17, 2019, and is applicable on or after February 8, 2019.

FOR FURTHER INFORMATION CONTACT: Vishal R. Amin or Sonia K. Kothari at (202) 317-6850 or Robert D. Alinsky, Margaret Burow, or Wendy L. Kribell at (202) 317-5279.

SUPPLEMENTARY INFORMATION:

Background

The final regulations (TD 9847), published on February 8, 2019 (84 FR 2952), that are the subject of this correction are issued under section 199A of the Internal Revenue Code.

Need for Correction

As published, the final regulations (TD 9847) contain errors that need to be corrected.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Correction of Publication

Accordingly, 26 CFR part 1 is corrected by making the following correcting amendments:

PART 1 — INCOME TAXES

Paragraph 1. The authority citation for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. Section 1.199A-0 is amended by revising the entry for § 1.199A-1(a)(16) and adding an entry for § 1.199A-2(b)(2)(iv) to read as follows:

§ 1.199A-0 Table of contents.

* * * * *

§ 1.199A-1 Operational rules.

(a) * * *

(16) W-2 wages.

* * * * *

§ 1.199A-2 Determination of W-2 Wages and unadjusted basis immediately after acquisition of qualified property.

* * * * *

(b) * * *

(2) * * *

(iv) Methods for calculating W-2 wages.

* * * * *

Par. 3. Section 1.199A-1 is amended by revising the second sentence of paragraph (b)(10) and the seventh sentence of paragraph (d)(4)(xi)(B) to read as follows:

§ 1.199A-1 Operational rules.

* * * * *

(b) * * *

(10) * * * Other passthrough entities including common trust funds as described in §1.6032-1T and religious or apostolic organizations described in section 501(d) are also treated as RPEs if the entity files a Form 1065, U.S. Return of Partnership Income, and is owned, directly or indirectly, by at least one individual, estate, or trust. * * *

* * * * *

(d) * * *

(4) * * *

(xi) * * *

(B) * * * Thus, F has overall net QBI of $80,000 when all trades or businesses are taken together ($200,000) plus $150,000 minus $120,000 minus the carryover loss of ($150,000). * * *

* * * * *

Par. 4. Section 1.199A-2 is amended by revising the fifth sentence of paragraph (b)(2)(iii)(A) to read as follows:

§ 1.199A-2 Determination of W-2 wages and unadjusted basis immediately after acquisition of qualified properly.

* * * * *

(b) * * *

(2) * * *

(iii) * * *

(A) * * * Section 6071(c) provides that Forms W-2 and W-3 must be filed on or before January 31 of the year following the calendar year to which such returns relate (but see the special rule in §31.6071(a)-1T(a)(3)(i) of this chapter for monthly returns filed under §31.6011(a)-5(a) of this chapter). * * *

* * * * *

Par. 5. Section 1.199A-4 is amended by revising the fourth sentence of paragraph (c)(3), the first sentence of paragraph (c)(4)(ii), and the third sentence of paragraph (d)(15)(ii) to read as follows:

§ 1.199A-4 Aggregation.

* * * * *

(c) * * *

(3) * * * However, an RPE may add a newly created or newly acquired (including through non-recognition transfers) trade or business to an existing aggregated trade or business (including the aggregated trade or business of a lower-tier RPE) if the requirements of paragraph (b)(1) of this section are satisfied. * * *

(4) * * *

(ii) * * * If an RPE fails to attach the statement required in paragraph (c)(4)(i) of this section, the Commissioner may disaggregate the RPE's trades or businesses. * * *

(d) * * *

(15) * * *

(ii) * * * If PRS2 does aggregate the two businesses, PRS1 may not aggregate its food service business with PRS2's aggregated trades or businesses. * * *

* * * * *

Par. 6. Section 1.199A-5 is amended by revising the sixth sentence of paragraph (b)(3)(xiv) and the eighth sentence of paragraph (d)(3)(iii)((B) to read as follows:

§ 1.199A-5 Specified service trades or businesses and the trade or business of performing services as an employee.

* * * * *

(b) * * *

(3) * * *

(xiv) * * * Several of the employees and K have worked in the bicycle business for many years, and have acquired substantial skill and reputation in the field. * * *

* * * * *

(d) * * *

(3) * * *

(iii) * * *

(B) * * * Unless the presumption is rebutted with a showing that, under Federal tax law, regulations, and principles (including common-law employee classification rules), C is not an employee, C's distributive share of Law Firm 2 income (including any guaranteed payments) will not be QBI for purposes of section 199A. * * *

* * * * *

Martin V. Franks,
Chief,
Publications and Regulations Branch,
Legal Processing Division,
Associate Chief Counsel
(Procedure and Administration).

[FR Doc. 2019-07652 Filed: 4/16/2019 8:45 am; Publication Date: 4/17/2019]