This revenue ruling provides various prescribed rates for federal income tax purposes for December 2023 (the current month). Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b). Table 3 sets forth the adjusted federal long-term rate and the long-term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(1) for buildings placed in service during the current month.
Proposed §1.170A-14(j)(3)(xii) would provide that the term “upper-tier S corporation” means an S corporation that receives an allocated portion. Section 605(c) of the SECURE 2.0 Act provides that the amendments made by section 605 of the SECURE 2.0 Act apply to contributions made after December 29, 2022, and that no inference is intended as to the appropriate treatment of contributions made in taxable years ending on or before that date, or as to any contribution for which a deduction is not disallowed by reason of section 170(h)(7). Section 6621(b)(1) provides that the Secretary will determine the federal short-term rate for the first month in each calendar quarter. Section 6621(b)(2)(A) provides that the federal short-term rate determined under section 6621(b)(1) for any month applies during the first calendar quarter beginning after that month. Section 6621(b)(3) provides that the federal short-term rate for any month is the federal short-term rate determined during that month by the Secretary in accordance with section 1274(d), rounded to the nearest full percent (or, if a multiple of 1/2 of 1 percent, the rate is increased to the next highest full percent).
- They’re based on data from market yields of marketable debts, such as U.S.
- This determination must be done in accordance with the principles of paragraph (m)(2) of this section, and the formula provided in paragraph (m)(4)(ii)(B) of this section.
- (2) Facts and circumstances tending to show that a fund or account is separately identified.
- In the case of an ultimate member holding a direct interest in an S corporation, the ultimate member’s modified basis would be determined by such S corporation in the manner described in §1.170A-14(l)(3).
EF Inc. and UTP Partnership each hold a 50 percent interest in the profits and capital of LTP Partnership. On July 5, 2024, LTP Partnership distributes half of the acres of its real property to EF Inc., and the remaining acres to UTP Partnership. On October 21, 2024, EF Inc., makes a qualified conservation contribution on the real property it received from LTP Partnership. Since 2017, LTP Partnership’s partners have been UTP Partnership, a partnership for Federal income tax purposes, and FG Inc., an S corporation.
Assume the same facts as in paragraph (b)(4)(i) of this section (Example 1), except that Y appoints G, a donor; H, G’s donor-advisor; and I, an attorney currently employed by G to serve on Fund O’s 5-person selection committee. The committee is indirectly controlled by G, and thus the fund does not meet the exception for certain funds or accounts that grant scholarships under paragraph (b) of this section. A sponsoring organization may substitute another single identified organization if the substitution is conditioned upon the occurrence of a loss of exemption, substantial failure or abandonment of operations, or a dissolution or reorganization that results in the named single identified organization ceasing to exist, and the event is beyond the direct or indirect control of donor(s), donor-advisor(s), or related persons.
The term ultimate member means, with respect to any partnership or S corporation, any partner (that is not itself a partnership or S corporation) or S corporation shareholder that receives a distributive share or pro rata share, directly or indirectly, of a qualified conservation contribution. Thus, ultimate members will either be partners holding a direct interest in a partnership, which may be the contributing partnership or an upper-tier partnership, or shareholders holding a direct interest in an S corporation, which may be the contributing S corporation or an upper-tier S corporation. Upper-tier S corporations and upper-tier partnerships themselves are not considered ultimate members. (j) Disallowance of certain deductions for contributions by partnerships and S corporations that exceed 2.5 times the sum of relevant bases—(1) In general. See paragraph (j)(3) of this section for definitions of terms used in this paragraph (j) and paragraphs (k) through (n) of this section.
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The proposed regulations contain an example illustrating the application of this rule. The Treasury Department and the IRS considered alternatives to this rule. In particular, the Treasury Department and the IRS considered simply cross-referencing the rules under section 755. Under that alternative approach, the amount of each partner’s modified basis would be treated for purposes of the computation of relevant basis as a special basis adjustment under section 734(b) or section 743(b); relevant basis would be the portion of modified basis that would be allocated under the rules of section 755 to the portion of the real property with respect to which the contribution was made. Such an approach would be less consistent with the purposes of the Disallowance Rule. As noted previously, basis allocations under section 755 are sometimes made in a way to reduce or eliminate built-in gain or loss in partnership property.
Deletions From Cumulative List of Organizations, Contributions to Which are Deductible Under Section 170 of the Code
It would also provide that, if the contributing partnership or contributing S corporation files an amended return or administrative adjustment request under section 6227 of the Code claiming a different amount with respect to the qualified conservation contribution, the rules of §1.170A-14 must be re-applied with respect to such different amount to determine the application of section 170(h)(7) and §1.170A-14. Since the determination of the existence of a qualified disaster under section 139 is not controlled by the sponsoring organization or the fund or account’s advisory committee, the proposed regulations would exempt a non-employment based disaster relief fund. Thus, the proposed regulations would provide that both an employer-sponsored disaster relief fund and a disaster relief fund outside of the employment context are not DAFs, as long as the requirements of section 139 are met. In contrast, since the determination of the existence of an emergency hardship is controlled by the sponsoring organization or the fund or account’s advisory committee, the proposed regulations would not extend the exception to emergency hardship funds. Consistent with section 4966(d)(2)(A)(iii), the proposed regulations would define donor-advisor as a person appointed or designated by a donor to have advisory privileges regarding the distribution or investment of assets held in a fund or account of a sponsoring organization.
§1.170A-14 Qualified conservation contributions.
Proposed §1.170A-14(j)(3)(x) would provide that the term “ultimate member” means, with respect to any partnership or S corporation, any partner (that is not itself a partnership or S corporation) or S corporation shareholder that receives a distributive share or pro rata share, directly or indirectly, of a qualified conservation contribution. Thus, ultimate members would either be partners holding a direct interest in a partnership, which may be the contributing partnership or an upper-tier partnership, or shareholders holding a direct interest in an S corporation, which may be the contributing S corporation or an upper-tier S corporation. Proposed §1.170A-14(j)(3)(x) would provide that upper-tier S corporations and upper-tier partnerships themselves are not considered ultimate members. Sponsoring organization Y has established Fund P, which is dedicated to the relief of poverty in City Z. Fund P is advised by a 5-member committee selected by Y from residents of City Z, potentially including donors to Fund P. The committee is comprised of community leaders and other persons with special knowledge or experience in the relief of poverty. Each committee member serves for a term of three years and cannot serve more than two terms. No committee member is related to another committee member and no committee member is (together with related persons with respect to any committee member) a significant contributor to Fund P. Over 100 citizens of City Z have contributed to Fund P. Y maintains a formal record of donors to Fund P and amounts contributed, and thus Fund P is separately identified by reference to contributions of donors.
The Treasury Department and the IRS request comments on whether these definitions of “substantially all of the interests” in the contributing partnership or contributing S corporation are appropriate and sufficient to ensure the intended application of the family pass-through entity exception. Proposed §1.170A-14(n)(2)(iii) would define an acquisition of any interest in an S corporation as any transfer, issuance, redemption, or other disposition of stock in the S corporation; however, an acquisition would not include any issuance or redemption involving all shareholders that does not affect the proportionate ownership of any shareholder (for example, a stock split). The Treasury Department and the IRS considered alternatives to this rule, including defining acquisition as any acquisition by purchase, contribution, or gift. However, because certain what are applicable federal rates other transactions such as redemptions and abandonments may reach results that are substantively similar to an acquisition by purchase, contribution, or gift, the Treasury Department and the IRS determined that the proposed rule would be more appropriate in this context. Proposed §1.170A-14(j)(3)(viii) would provide that the term “indirect interest” refers to an ownership interest in a contributing partnership, contributing S corporation, upper-tier partnership, or upper-tier S corporation held through an upper-tier S corporation or one or more upper-tier partnerships. Section 170(h)(1) provides that, in general, for purposes of section 170(f)(3)(B)(iii), the term “qualified conservation contribution” means a contribution (1) of a qualified real property interest, (2) to a qualified organization, (3) exclusively for conservation purposes.
(iv) The sponsoring organization generally solicits advice from a donor or donor-advisor regarding the distribution or investment of amounts held in a fund or account. For each taxable distribution, the excise tax imposed by section 4966(a)(1) is equal to 20 percent of the amount of the taxable distribution from a donor advised fund. The tax imposed by section 4966(a)(1) (20-percent section 4966 tax) is paid by the sponsoring organization of the donor advised fund. The term donor means any person described in section 7701(a)(1) of the Code that makes a contribution to a fund or account of a sponsoring organization, other than a contributor that is a governmental unit described in section 170(c)(1) of the Code or an organization described in section 509(a)(1), (2), or (3) that is not a disqualified supporting organization.
For purposes of this special rule for transactions involving DAFs, the excess benefit includes the entire amount of the grant, loan, compensation, or other similar payment. The PPA also amended section 4958 to treat as a disqualified person with respect to a transaction involving a sponsoring https://turbo-tax.org/ organization an investment advisor (or a family member or a 35-percent controlled entity of such person). The rules of paragraph (c)(3) of this section apply for taxable years of partnerships other than existing publicly traded partnerships that begin on or after August 3, 2015.
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Rules for allocating an ultimate member’s modified basis in a contributing partnership are provided in paragraph (m)(2) of this section. Rules for allocating an ultimate member’s modified basis in a contributing S corporation are provided in paragraph (m)(3) of this section. Rules for allocating an ultimate member’s modified basis in an upper-tier partnership are provided in paragraph (m)(4) of this section. Rules for allocating an ultimate member’s modified basis in an upper-tier S corporation are provided in paragraph (m)(5) of this section. Records must be kept in accordance with paragraph (m)(6) of this section. For purposes of this section, the term relevant basis means, with respect to any ultimate member, the portion of such ultimate member’s modified basis (as determined under paragraph (l) of this section) that is allocable (under the rules of paragraph (m) of this section) to the portion of the real property with respect to which the qualified conservation contribution is made.
Generally, the Code characterizes interests in a partnership as comprising the “capital interests” in the partnership and the “profits interests” in the partnership. The Treasury Department and the IRS propose limiting the family pass-through entity exception to situations in which an individual and the family members of such individual own at least 90 percent of both the capital and profits interests in the contributing partnership. Doing so would help to ensure that the family pass-through entity exception does not apply in situations in which persons outside an individual’s family own a substantial economic interest in the partnership. Accordingly, proposed §1.170A-14(n)(3)(ii)(A) would provide that, in the case of a contributing partnership, at least 90 percent of the interests in the contributing partnership are held by an individual and members of the family of such individual if, at the time of the qualified conservation contribution, at least 90 percent of the interests in capital and profits in such partnership are held, directly or indirectly, by an individual and members of the family of such individual. Section 170(h)(7)(B)(i) provides that, for purposes of section 170(h)(7), the term “relevant basis” means, with respect to any partner, the portion of such partner’s modified basis in the partnership that is allocable (under rules similar to the rules of section 755 of the Code for allocating certain special basis adjustments to partnership property) to the portion of the real property with respect to which the contribution described in section 170(h)(7)(A) is made. Because a fund or account that falls within the single identified organization exception is not subject to the rules applicable to DAFs, the proposed regulations would provide that distributions to the single identified organization may not be used to administer DAFs or to make grants.