![]() In general, the section 448(c) gross receipts test only applies to corporations and to partnerships with a C corporation partner 4 but, for purposes of the small business exemption, all taxpayers are subject to the section 448(c) gross receipts test. The application of these rules is designed to prevent taxpayers from circumventing the section 448(c) gross receipts test by dividing into multiple related entities that individually could meet the section 448(c) gross receipts test. Generally, the aggregation rules combine the gross receipts of multiple taxpayers if they are treated as a single employer under the controlled group rules of sections 52(a) or 52(b), under the affiliated service group rules of section 414(m), or under the rules of section 414(o) 3. ![]() To determine whether the section 448(c) gross receipts test is met, the aggregation rules under section 448(c)(2) apply. For taxable years beginning in 20, the inflation adjusted average annual gross receipts amount is $26 million. ![]() 1 A taxpayer meets the section 448(c) gross receipts test if the taxpayer has average annual gross receipts for the past three taxable years of not more than $25 million, which is adjusted annually for inflation. A taxpayer qualifies under the small business exemption if the taxpayer is not a tax shelter (as defined in section 448(d)(3)), and meets the section 448(c) gross receipts test. Taxpayers who qualify for the exemption under section 163(j)(3) (small business exemption) are not subject to the section 163(j) limitation. Generally, section 163(j) limits deductions for business interest expense for tax years beginning after Decem(section 163(j) limitation). Please refer to the Code and Income Tax Regulations for the aggregation rules. These FAQs provide an overview of the aggregation rules that apply for purposes of the gross receipts test under Internal Revenue Code (Code) section 448(c) (section 448(c) gross receipts test), and that apply in determining whether a taxpayer meets the small business exemption under section 163(j) of the Code.
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