On January 25, 2019, Elizabeth Stieff was quoted in Tax Notes about the passthrough deductions under the IRS and Treasury’s recently released final rules, which will not be reduced for a taxpayer if they contribute property to a business.
Ms. Stieff said that under the proposed rules from August, if a taxpayer purchased property for $100, depreciated it down to $50, and then contributed it to a partnership, that partnership would take a carryover basis of $50 for income tax purposes and also for unadjusted basis purposes under section 199A. By using that lower depreciated amount for unadjusted basis purposes under the proposed rules, the taxpayer’s passthrough deduction may have been reduced.
She continued to say that the government reversed course in response to comments, and under the final rules would allow that partnership to use the initial $100 cost for 199A unadjusted basis purposes.