Multiple Entities
The proposed regulations also specify that pass-through owners with income from multiple legal entities won’t have to restructure to take advantage of the deduction. Many pass-throughs are comprised of a series of related entities. A common structure is a unit that holds the operating business with another that conducts payroll activities. It had been unclear whether those businesses would have to aggregate to maximize the break.
Treasury plans on coming out with additional rules, including some to address a loophole in the tax law under which highly paid professionals, such as investment managers, doctors and lawyers, could form cooperatives to take advantage of the deduction, according to the officials.
The estimated cost of the pass-through deduction is $415 billion over the coming decade, according to the nonpartisan Joint Committee on Taxation. The tax break could be even more expensive if IRS regulations can’t keep gamesmanship to a minimum.
—With assistance from Ben Steverman.
This article was provided by Bloomberg News.