Irc 267
The final regulations confirm that individual taxpayers may aggregate QTBs, subject to certain rules, for purposes of applying the limitations on the Section 199A deduction. Instead, the IRS developed new aggregation rules specific to Section 199A. The aggregation rules do not incorporate existing law, such as the Section 469 grouping rules. For more information on the final regulations under Section 199A, see Tax Flash 2019-05.Īggregating activities for the wage and asset test A taxpayer’s ability to aggregate multiple QTBs for purposes of applying Section 199A can become complicated when a taxpayer conducts business activities through several flow-through entities, such as partnerships or S corporations. This Private Company Insights article explains these “aggregation rules” and their impact. Private companies and their owners should evaluate whether aggregation is possible for any separate trades or businesses, and model whether it will be beneficial. The most significant change allows the aggregation election to be made at the entity level. The final Section 199A regulations (TD 9847) were published in early 2019, and expand on rules in the proposed regulations (REG-107892-18) allowing the aggregation of multiple Qualified Trades or Businesses (QTBs) for purposes of calculating the Section 199A deduction. The ability to aggregate separate trades or businesses can help private companies with tiered structures or those that use separate entities for the purpose of holding property or employing workers. However, the deduction may be limited if the underlying business does not pay sufficient wages or invest in sufficient tangible depreciable property. Section 199A was added by the Tax Cuts and Jobs Act and provides a deduction of up to 20% for qualifying pass-through income. The final regulations under IRC Section 199A expand the rules for aggregating separate trades or businesses, offering private companies and their owners opportunities to mitigate the impact of the pass-through deduction’s limits.