Internal Revenue Bulletin: 2025-34 Internal Revenue Service
In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same. Revenue rulings represent the conclusions of the Service on the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying details and information of a confidential nature are deleted to prevent unwarranted invasions of privacy and to comply with statutory requirements. Grant Thornton International Limited (GTIL) and the member firms, including Grant Thornton LLP and Grant Thornton Advisors LLC, are not a worldwide partnership.
In resulting litigation, the taxpayer was awarded damages for the value of interests in the joint ventures and punitive damages. While the case was on appeal, a settlement was reached, and the real estate corporation paid the taxpayer a lump sum for relinquishing whatever rights it had in the joint ventures. The amount paid was based partly on the estimated anticipated revenue stream of the joint ventures.
The instructions specifically state that Sec. 743(b) basis adjustments are not taken into account in calculating a partner’s capital account under the tax-basis method. The revised method is the IRS’s attempt to improve the quality of the information reported by partnerships to the IRS and furnished to partners, to facilitate increased compliance. A review of the stoichiometric material consumption equation and other information in the petition shows that the taxable chemicals propylene, chlorine, sodium hydroxide, ethylene, and methane constitute more than 20 percent by weight of the materials used in the production of propylene glycol n-propyl ether, based on the predominant method of production. To promote compliance with using the tax basis method described in the revised instructions, the Treasury Department and the IRS intend to issue a notice providing additional penalty relief for the transition in tax year 2020. This penalty relief will be in addition to the reasonable cause exception to penalties for any incorrect reporting of a beginning capital account balance. The Treasury Department and the IRS anticipate that the forthcoming proposed regulations will modify proposed § 1.56A-5 consistent with the guidance provided in this section 5 to allow partnerships to use any reasonable method to determine a CAMT entity partner’s distributive share.
If a CAMT entity partner sells or exchanges all or a portion of its partnership investment (including a sale or exchange under § 731(a)) in a recognition transaction, the CAMT entity partner determines the attributable AFSI using CAMT basis and includes such amount in its AFSI for the taxable year of the sale or exchange. In a tiered-partnership structure, the CAMT proposed regulations would require each partnership, starting with the lowest-tier partnership and continuing up the chain of ownership, to use the applicable method Irs Issues Revised Instructions On 1065 Parter Tax Basis Capital Reporting to determine the distributive share amounts of each CAMT entity partner in the tiered-partnership chain. The IRS argued that, under state law, the LLC’s members were not personally liable for its debts.
The notice will specify that only for tax year 2020 (for partnership returns due in 2021), the IRS won’t assess a partnership a penalty for any errors in reporting its partners’ beginning capital account balances on Schedules K-1 if the partnership takes “ordinary and prudent business care” in following the form instructions to calculate and report the beginning capital account balances. The penalty relief will be in addition to the reasonable cause exception to penalties for any incorrect reporting of a starting capital account balance. The amount to report as a partner’s beginning capital account under the Section 704(b) method is equal to the partner’s Section 704(b) capital account, minus the partner’s share of Section 704(c) built-in gain in the partnership’s assets, plus the partner’s share of Section 704(c) built-in loss in the partnership’s assets. Property contributed to a partnership is Section 704(c) property if, at the time of the contribution, its fair market value differs from its adjusted tax basis.
The revision, the IRS says, is part of its larger effort to improve the quality of the information reported by partnerships to the agency and furnished to partners to encourage increased compliance. The draft instructions aim to offer tax practitioners a preview of the changes and software providers the information they will need to update their systems before the final version of the updated instructions is released in December. The IRS announced plans to partially withdraw and revise CAMT regulations for partnerships, offering interim guidance to simplify compliance and reduce costs.
1 A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin 2025–52, dated December 22, 2025. Suspended is used in rare situations to show that the previous published rulings will not be applied pending some future action such as the issuance of new or amended regulations, the outcome of cases in litigation, or the outcome of a Service study. (ii) After the production of methanol from syngas, methanol is reacted with CO to produce acetic acid. The reaction is typically catalyzed by either a rhodium or iridium-based catalyst and involves iodomethane as a key intermediate. (B) Methoxytriglycol-alkoxide + methanol → methoxytriglycol + methoxide (goes back to participate in the reaction above). (iii) The last major mechanism step of the hydrolytic polymerization of nylon 6 is the condensation of primary amine and carboxylic acid chain-ends to form an amide linkage in the now higher molecular weight polyamide with the simultaneous loss of a water molecule.
The taxpayer treated this payment as being in exchange for a partnership interest and reported it as a capital gain. The IRS claimed the payment was ordinary income because it represented estimates of future income or was attributable to punitive damages awarded in the litigation. Sec. 741 provides that in the case of a sale or exchange of an interest in a partnership, gain or loss is recognized to the transferor partner. This gain or loss is considered to be from the sale or exchange of a capital asset, except as otherwise provided in Sec. 751 (relating to unrealized receivables and inventory items).
A review of the stoichiometric material consumption equation and other information in the petition shows that the taxable chemicals methane and propylene constitute more than 20 percent by weight of the materials used in the production of iso-butanol, based on the predominant method of production. A review of the stoichiometric material consumption equation and other information in the petition shows that the taxable chemicals ammonia and butylene constitute more than 20 percent by weight of the materials used in the production of methyl ethyl ketoxime, based on the predominant method of production. A review of the stoichiometric material consumption equation and other information in the petition shows that the taxable chemicals benzene, propylene, ammonia, and methane constitute more than 20 percent by weight of the materials used in the production of caprolactam, based on the predominant method of production.
Generally, income allocated to a carried interest is treated as a short-term capital gain instead of a long-term capital gain. Thus, the court allowed the taxpayer the loss deduction on the worthlessness of the LLC interest and rejected the IRS’s argument that the LLC’s interest had potential future value until foreclosure occurred with respect to each real property interest subject to a recourse mortgage held by the LLC’s project entities. The court also found that, contrary to the IRS’s arguments, the LLC was not required to provide expert testimony to prove worthlessness and the LLC’s loss was bona fide, despite the involvement of related parties. Under Sec. 168(k)(2)(D), any real property trade or business that makes this election was not able to take advantage of bonus depreciation under Sec. 168(k) with respect to QIP.
